Sale of Goods Act -1930

Introduction
The Sale of Goods Act 1930 deals with the law relating
to sale of Goods in India.

This act is mainly based on the English Sale of Goods
Act , 1893.

The Term Goods means every kind of moveable property
other than money or actionable claims

Before the introduction of the Indian Sale of Goods Act,
The law relating to Sale of goods was contained in the
Indian Contract Act (Chapter VII)
Contract Of Sale
It was in 1
st
July ,1930 , that an Independent Sale of
Goods Act was passed
It Contains 66 sections & is applicable to the whole of
India except the state of J&K .


Contract Of Sale:
Sec 4 of the Sale of Goods Act defines a Contract of Sale
as Follows:
A Contract of Sale is a contract whereby the seller
transfers or agrees to transfer the property in goods to
a buyer for a price.

1. Sale (Absolute Sale)
2. Agreement to sell ( or Conditional Sale)

Sale:
The property or ownership in goods is immediately transferred
from the seller to the buyer.
There is nothing more to be done by the seller.
Ex: Counter Sales

Agreement to sell:
The transfer of ownership is to take place in future.
Certain conditions are to be fulfilled.
The completion of the contract depends on the completion of the
conditions.

Agreement to sell becomes a Sale
In stage I Every contract of sale is an agreement to
sell.

When the seller & buyer agree to sell/buy some goods at
a price there is an agreement between the two for the
sale of goods.

In Stage II transfer of ownership of goods from
Seller to buyer.
If ownership is transferred immediately- it results in
Sale.
If transfer is subject to certain conditions it remains
agreement to sell ( until such conditions are fulfilled).

Case Laws
State of Gujrat Vs Ramanlal & Co -1965
A partnership firm was dissolved.
The Surplus assets were divided among the partners
Tax officer wanted to tax this as sale
Held: It was not a sale as the partners were themselves
joint owners of the goods
They could not be both sellers & buyers.
No money consideration was also passed.
Essentials of Contract of sale
1. A valid Contract:
All essentials of a valid contract like valid offer, valid
acceptance , free consent , lawful consideration,
competent to contract, lawful object.

2. Two parties :
There must be a transfer / agreement to transfer the
property in goods by the seller to the buyer.
That is , there must be 2 parties A seller & a
Buyer.
They must be 2 different persons.
Case Law: State of Gujrat Vs Ramanlal & Co -1965.


Exceptions
Exceptions to the rule that the same person cant be a
seller & a buyer.

A part owner can sell his share to the other part owner
so as to make the other owner the sole owner of the
goods.

A partner may buy goods from the firm in which he is a
partner.

In case of sale by auction , the seller may reserve the
right to make a bid at the auction & purchase his own
goods.

Essentials of a valid contract (continued)
3. Agreement for the transfer of ownership:
A valid contract of sale requires an immediate transfer
or an agreement to transfer the property in goods sold
or agreed to be sold.

The transfer of goods is essential. It may happen with
/ without physical possession of the goods.

4. Goods:
The subject matter of transfer should be goods.
Goods may be of any kind except immovable goods.
Even money & actionable claims are disallowed.
The seller must be the owner of the goods.
Elements of sale of Goods
Price: To constitute a valid contract of sale ,
consideration for transfer must be either money
paid or promised.
Ex: A refrigerator company supplied a new
refrigerator of Rs 9000/- in exchange of an old
fridge & rs 6000/- in cash .It is a sale under
the Sale of Goods Act.
Sale & Agreement to Sell - Distinction
The main points of distinction are :
1. Nature of Contract:
Agreement to Sell : Executory contract
Here no property passes.

Sale: Executed Contract.

2.Transfer of Property:
Sale: The property in goods passes from the seller to the
buyer immediately.
Buyer becomes the owner of the goods immediately.

Agreement to sell: Property in goods passes at a future
point in time subject to the fulfillment of certain
conditions.
Distinction between sale & Agreement to Sell
3. Risk of Loss:
Sale: If the goods are destroyed , the risk of loss falls on
the buyer even if the goods are in the possession of the
seller.
This is because the risk of loss passes with ownership.
Agreement to sell:
If the goods are destroyed , the risk of loss falls on
the seller even if the goods are with the buyer as the
ownership has not yet passed from the seller to the
buyer.
Risk passes with ownership

Distinction --Continued
4.Consequence of Breach: If seller commits a breach of
agreement , the buyer has only a personal remedy.
But if after the sale, the seller breaks the contract (ex:
resells the goods) buyer may sue for delivery of goods or
for damages.
Similarly , in an agreement, if the buyer fails to accept
the goods , the seller may sue for damages only (not
for the price).
If the buyer commits breach after the sale , the seller
can sue him for the price.

5.General & particular property:
An agreement to sell creates a right in personam.
Sale creates a right in rem.

Distinction
Right of re-sale:
In a sale, the seller cannot resell goods even if he is in
possession of the goods after sale.
If he does so , the new buyer does not get the good title
& the first buyer can recover the goods.
In an agreement to sell: the seller may sell the goods ,
since the ownership is still with the seller.
The seller could be liable for breach of agreement , but
the new buyer gets good title.

Difference between Hire purchase & contract
of Sale
1.Nature of agreement:
Sale:
An executed contract
Ownership is transferred immediately as soon as
the contract is entered into.
Hire purchase agreement:
Here the ownership is transferred only after a
certain agreed number of installments is paid .
Until then the hire purchaser stands in the position
of a bailee.

Distinction between Sale of Goods & Hire purchase
2. Termination of the contract:
Sale: The buyer cannot terminate the contract & as such is
bound to pay the price of the goods.
The Hire purchaser is at liberty to terminate the contract
at any stage & cannot be forced to pay the remaining
installments.

3. Insolvency of the buyer / risk of loss:
In a sale , the seller takes the risk of any loss resulting
from the insolvency of the buyer.
In a hire purchase , the owner is not at any risk .
If the hirer fails to pay the installments , the seller can
take back the goods.

Implied conditions & warrants :
A sale is subject to implied warrants
& conditions under the provisions of
the Sale of Goods Act .
A hire purchase is not subject to such
implied warranties & conditions.

Difference between a Sale & a Bailment
1. In a Sale , Property in goods is transferred from Seller to Buyer
for a price.
Whereas in a bailment , there is only transfer of possession from
the Bailor to the Bailee

2. In a sale , the buyer can treat the goods the way he likes.
The Bailee can only deal with the goods as per the directions of the
Bailor.
3. The Consideration for a sale is the price , in terms of money.
The Charges for Bailment may be money Or in Kind.

4. The Buyer gets ownership of the Goods.
The Bailee only gets possession.


Distinction between Sale & Bailment
5.In a Sale , the goods cannot be returned unless there is
a breach of a condition.
In a Bailment, The goods are returnable after a
specified period or when a Specific purpose is achieved.

6.The Purpose of Sale is transfer of ownership of goods
for a price.
The purpose of Bailment is transfer of possession for any
one of the following reasons:
Safe Custody
Use
Carriage from one place to another etc.,

Subject Matter of Contract of Sale of Goods
Goods form the subject matter of Contract of Sale Of
Goods.

According to Sec 2(7), Goods means every kind of
moveable property other than actionable claims & money.

The term Goods Includes stocks ,shares ,growing crops,
Grass & Things forming part of land which are agreed to
be severed before sale or under the contract of sale.
Conditions & Warranties
A stipulation or a representation in a contract of sale
with reference to goods , which is the subject matter
thereof , may be a condition or a warranty.
If the parties consider the representation or stipulation
as vital & essential for the very existence of the
contract , it is a condition.

In other words , a condition is a stipulation essential to
the very existence of the contract. It is necessary to
the main purpose of the contract. It forms the very
basis of the contract.
If there is a breach of the condition , the aggrieved
party can treat the contract as repudiated.
Condition & warranty
Warranty:
A warranty is a stipulation which is subsidiary or collateral
to the main purpose of the contract.
If there is a breach of warranty , the aggrieved party can
only claim damages but has no right to reject the goods
& treat the contract as repudiated.
Whether a stipulation is a condition or a warranty depends
in each case on the construction of the contract as a
whole.
The court is not guided by the terminology of the parties.
A stipulation may be a condition though called warranty in
the contract.
Difference between Warranty & Condition
Difference as to value.
Condition is essential to the main purpose of the contract
The fulfillment of the main purpose depends upon the
fulfillment of this stipulation.
Warranty is a stipulation which is collateral (subsidiary) to
the main purpose of the contract.

Difference as to breach:
The breach of a condition gives the aggrieved party the
right of repudiation of the contract.
The breach of a warranty does not give rise to right of
repudiation of the contract.
It gives the right to damages only.



Differences between Condition & warranty
Difference as to intention:
Whether a stipulation is a condition or a warranty depends
upon the intention of the parties & construction of the
contract.

Difference as to treatment: Breach of condition may be
treated as breach of warranty. This will happen if the
parties concerned (aggrieved parties) are satisfied with
damages only.
But the Breach of warranty cannot be treated as a
breach of condition.
Condition & Warranty
Breach of condition will affect the legality
of the contract.
Breach of warranty will not affect the
legality of the contract.
Discharge on breach :
In case of a condition , the aggrieved
party is free to discharge his promise.
In case of a warranty, the aggrieved party
is not free to discharge his promise.
When conditions are treated as warranties
There are 2 cases where conditions can be
treated as warranties.
1. Waiver of a condition:
When the contract of Sale is subject to the
fulfillment of a condition by the seller.
Here the buyer may-
1. Waive the condition
2. Elect to treat the breach of a condition as
a breach of warranty & not a ground for
repudiating the contract.
These cases are voluntary & are dependant on
the will of the buyer.
Implied conditions in every Sale
1. Conditions as to title Sec -14( a)
2. Conditions in case of sale by description (Sec-15)
3. Condition in case of sale by sample (sec -17)
4. Condition in case of sale by description & sample (Sec
15)
5. Condition as to quality & fitness Sec16(2)
6. Condition as to merchantable quality sec 16(2)
7. Condition as to wholesomeness
Implied Warranties
Warranty as to quiet possession
Warranty of freedom from encumbrances
Warranty as to quality or fitness for a
particular purpose.
Case Laws
Condition as to quality & fitness

Priest Vs Last (1903)
P, purchased a hot water bottle from a retail
chemist . P asked the chemist if the bottle could
withstand boiling water. The chemist said that the
bottle was meant to hold hot water. The bottle
burst when hot water was poured into it thereby
injuring his wife. It was held that the chemist was
liable to pay damages to P, as he knew the purpose
for which the bottle was purchased (i.e. Being
used as a hot water bottle)
Case Laws (continued)
Condition as to merchantability:
Goods should be reasonably saleable.
If they are purchased for personal use, they must be
reasonably fit for the purpose for which they are
purchased.

Morelli Vs Fitch Gibbons (1928)
Morelli asked for stone ginger wine in a restaurant .
When he was trying to open the cork, the bottle broke &
he was injured.
The court held that since the bottle was un merchantable ,
Morelli was entitled to damages.


Case laws -Conditions as to wholesomeness


Chaperoniere Vs Mason (1905) C bought a bread from a
store. It contained a stone which broke one of Cs
teeth. Court held , C could recover damages.

Frost Vs Aylsbury Dairy Company Ltd (1905)
F purchased milk from A , a dairy owner. The milk was
contaminated with germs of typhoid fever.
F s wife , on consuming the milk got infected with typhoid
& died.
The Court held that F was entitled to damages.

Doctrine of Caveat Emptor
The term Caveat Emptor is a latin word which means Let the
Buyer Beware.
A buyer purchases at his own risk provided the seller is acting
within the law.
The Doctrine of Caveat Emptor is contained in Sec 16 of the Sale
of Goods Act.
Sec 16 reads as follows:
Subject to the provisions of the act, and any other law for the time
being in force, there is no implied warranty or condition as to the
quality or fitness for any particular purpose of goods supplied under
a contract of sale.
That means The buyer must take his own care while purchasing the
goods.
It is his duty to purchase the goods of his requirement & not that
of the seller.
If the buyer makes a wrong choice of the product , he cannot blame
the seller if the goods do not serve his purpose.
Exceptions to the Doctrine
In case of misrepresentation by the seller.
In case of concealment of defects by the seller.
In case of sale by description -Sec 15
In case of sale by sample - Sec 17
In case of sale by description & sample -Sec 15
In case of fitness for a particular purpose Sec 16(1)
Merchantable quality Sec 16 (2)
Consent to the sale obtained by fraud

Rights of an unpaid seller
According to Sec 45 , a seller is deemed to be an
unpaid seller
1. When the whole of the price has not been paid or
tendered.
2. When a bill of exchange or other negotiable instrument
has been received as conditional payment , and the
condition on which it was received has not been
fulfilled by reason of the dishonor of the instrument or
otherwise

Rights of an unpaid Seller:
1. Against the Goods. Sec 45 to sec 54
2. Against the Buyer personally. Sec 55 & 56

Rights against the Goods
1. Right of lien Sec 47 to 49
2. A right of lien may be described as a right of retaining
possession of property or goods until payment or
tender of the price.
3. The lien depends on actual possession & not on title.
4. It is not affected even if the seller has parted with
the documents capable of transferring title.
5. When an unpaid seller has made part delivery of the
goods , he may exercise his right of lien against the
remainder .Sec 48.
6. (unless such part delivery has been made under
circumstances as to show an agreement to waive the
lien.)

Rights of unpaid seller- (Continued)
2. Right of stoppage in transit:
(Sec 50 to Sec 52)
When the buyer of the goods becomes insolvent , the unpaid
seller , who has parted with the possession of the goods has
the right of stopping them in transit , that is to say, he may
resume position of the goods as long as they are in course of
transit & retain them until payment or tender of price.
Sec 50.
The following conditions must be fulfilled:
1.The Seller must be unpaid
2.The buyer must be insolvent
3.The property in the goods must have passed to the buyer.
4.The goods must be in transit. The seller has parted with the
goods but the buyer has not acquired it.

Rights of unpaid seller- (Continued)
The goods should neither be in the custody of the seller
nor buyer or his agent.
They should be in the custody of a middleman.
The right of stoppage in transit is an extension of the
right of lien , but it arises only on the following
conditions :

1.Insolvency of the buyer.
Lien: (It may be noted that the right of lien can be
exercised even where the buyer is able to pay but does
not pay).
2. When the goods are in transit.
Lien: (Right of lien can be exercised only on goods which
are in actual or constructive possession of the seller)
3. Right of lien is to retain possession but the right of
stoppage is to regain possession.
Rights of unpaid seller- (Continued)
3.Right of Re-Sale -- Sec 54:
The unpaid seller can re-sell the goods under the following
circumstances:
a. The goods are of perishable nature.
b. Where the seller has exercised his right of right of
stoppage of goods in transit, & has given notice to the
buyer of his intention to re-sell the goods .The buyer
has not , within reasonable time , paid or tendered the
price.
c. Where the seller expressly reserves a right of re-sale
in case the buyer should make default.


Rights of unpaid seller- (Continued)
Rights against the Buyer personally
1.Suit for the price: ( Sec 55)
When the buyer wrongfully neglects to pay the price
for the goods, the seller may sue him for the
price of the goods.

2.Suit for damages for non acceptance: Sec 56