Sale of Goods Act 1930

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Introduction

In India the contract of sale of goods act 1930 deals with sale of goods.

This act came into force on 1st July 1930. It extends to whole part of India except J & K. it deals with all contracts of sale of goods,but does not deals with contract of Sale of Services or Pledge of goods, Mortgage of property or Barter of goods. A contract of sale of goods is a contract whereby the Seller transfers or offers to transfer the property in goods to the Buyer for a specific Price (Section 4(1))

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Essentials of Contract of SaleTwo parties: -

A contract of sale is made between two parties. They are known as seller and buyer. (Sec 2 (2) A buyer means a person who buys or agrees to buy the goods. (Sec 2 (12). A seller means a person who sells or agrees to sell goods. Goods: - In order to make a contract of sale, there must be some goods. Goods must be every kind of Movable property but other than actionable claims, and money.

It includes shares, patents rights, copyrights, trademarks, growing crops, grass, fruits, minerals, water, electricity etc. But Immovable property cannot be a subject matter of sales of goods under this law.

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Price Sec. 2 (10): - Price means the money consideration for a sale of goods. Generally it is a consideration paid or agreed to be paid by a buyer to the seller. However price may be paid partly in cash or in goods. .Transfer of goods: - In a contract of sale, the seller must transfer or agree to transfer the goods to the buyer.

Free consent: - A contract of sale must be by the free consent of the parties. Free consent means the consent should not be caused by fraud, misrepresentation, undue influence, coercion, and mistake.

All essential elements of contract are needed.

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SALE OR AGREEMENT TO SALE

Sale Sec. 4 (3) : - Under a contract of sale the property in the goods is transferred from seller to the buyer, the contract is called sale.

According to Blackstone: - Sale is a transformation of property from one man to another in consideration of some prices.

Agreement to sale Sec. 4 (3): -Where the transfer of the property in the goods is to take place at a future time or subject to some conditions thereafter to be fulfilled, the contract is called an agreement to sell.

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Difference between sale and agreement to sale*

BasisSaleAgreement to saleType of contractExecuted contractExecutory contract.ownership of the goods transferred Immediatelytransfer at a future time or on fulfillment of some conditionssubject matter existing and specific goods uncertain or contingent based on future

riskpasses with the ownershipLies always with sellerUnpaid sellersue the buyer for price,.can sue the buyer for damages.

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BasisSaleAgreement to sale

Rights of seller against buyers breachSeller can sue the buyer for the price even though the goods are in his possessionSeller can sue the buyer for damages even though the goods are in buyers possessionEffect of insolvency of seller having possession of goodsBuyer can claim the goods from the official receiver Buyer cannot claim the goods even when he has paid the price because ownership has not transferred to the buyer. Can claim only ratable dividend.Effect of insolvency of buyer before paying the priceSeller must deliver the goods to the official receiver because ownership has been transferred.Seller can refuse to deliver the goods unless he is paid full price.

Definition and Meaning of goods

According to section 2(7) of this act, Goods means every kind of movable property other than actionable claims and money, and it includes share, stock and growing crops, grass, and things attached to the land.

Following things are Not included: -

Actionable claimMoneyImmovable property

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Classification of Goods

1. Existing goods: - It is those which are possessed by the seller at the time of contract of sale. It have following categories: Specific goods, Ascertained goods

2.Future goods: - It is those which will be manufactured or produced or acquired by the seller after making of the contract of sale.

3.Contingent goods: - It is that quality of goods, where there acquisition is depends on some happening or non happening of some contingency.

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Conditions and WarrantiesIt is matter of common experience that a sales person while dealing with a prospective buyer makes a number of statements and representations with reference to his goods in order to induce the prospective buyer. Similarly a prospective buyer may also make certain requirements and expectations from the goods he intends to buy. Out of these some are puffing statements and have no value. But some statements and representations are very important and both the parties intend to make them part of the contract of sale. The statements and representations which are made part of contract of sale are known as stipulations.

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ConditionSec. 12 (2) A condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to a right to treat the contract as repudiated. Remedies for Breach of Conditions Buyer can repudiate the contract.

The buyer has an option to waive/ surrender the conditions.

The buyer can reject the goods.

Options to treat conditions as warranty and claim for damages.

No remedy when the seller is excused by law.

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Remedies for Breach of ConditionsBuyer can repudiate the contract.

The buyer has an option to waive/ surrender the conditions.

The buyer can reject the goods.

Options to treat conditions as warranty and claim for damages.

No remedy when the seller is excused by law.*

Warranty Sec. 12 (3) A warranty is a stipulation collateral to the main purpose of the contract, the breach of which gives rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated.

An analysis of the definition revels the following: -A warrant is a stipulation in a contract.

The stipulation is collateral to the main purpose of the contract.

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Remedies for Breach of WarrantyBuyer can sue or claim for damages.

Buyer can refuse to pay the price.

The buyer may diminish or reduce the price of goods by the amount of damages.

In case where the loss exceeds the price of goods, the buyer can sue for excess prices against the seller.

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Difference between Conditions and Warranties

A condition is a stipulation which is essential to the main purpose of the contract. On the other side warranty is a stipulation which is collateral to the main purpose of the contract.

Condition is essential to the purpose of the contract, its not performance may be considered as failure to perform the contract. On the side of warranty, it is not so essential that a failure to perform it cannot be considered as failure to perform the contract.

A breach of conditions may be treated as breach of warranty, but breach of warranty cannot be treated as breach of conditions.

In the case of breach of condition, the aggrieved party may treat the contract as repudiated. But in the case of breach of warranty the aggrieved party cannot repudiate the contract, but they can claim for claim.

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When condition to be treated as warrantyWhere the buyer waives a condition, once the buyer waives a condition ,he cannot insist on its fulfillment.Where the buyer elects to treat breach of the condition as a breach of warranty.Where the contract is not severable and the buyer has accepted the goods or part thereof , the breach of any condition by the seller can only be treated as a breach of warranty. Thus, where the buyer after purchasing the goods finds that some condition is not fulfilled, he cannot reject the goods.*

Types of Implied Conditions

Following points may be assumed as Implied Conditions in case of Sale of Goods act 1930: -

Implied Conditions as to titleSale by DescriptionSale by sampleCondition as to quality or fitnessCondition as to merchantable qualityConditions as to wholesomeness

1. Condition as to TitleAccording to section 14(a) of sale of goods act 1930, that this is an implied condition on that part of the seller that, buyer can assume :-

Seller has the right to sell the goods.

In the case of agreement to sell, seller will have a right to sell the goods at the time when the property is to pass.

2. Sale by DescriptionAccording to sec 15 of Indian sale of goods act 1930, where some sale is made by description, in that case buyer has the right to assume it that the sale quantity will definitely match with the description which was earlier given by seller, and even he will properly get chance to match the goods.

3. Sale by SampleSec. 17 of Indian sale of goods act simplifies that, in case of sale when it is done on the basis of some sample, buyer has the right to assume the implied condition that the bulk which is purchased by him is definitely according to quality and description of sample, which was earlier shown to him.

5. Conditions of Merchantable qualitySection 16(2) of Indian sale of goods act deals that this is implied condition to buyer that whatsoever he is going to buy he will get surely merchantable quality of goods from seller. The expression merchantable quality means that the quality and conditions of the goods must be such that a man of ordinary prudence would accept them as the goods of that description and it has purely some resale value.

6. Conditions as to WholesomenessIn case of eatables or provisions or foodstuffs, there is an implied condition as to wholesomeness. It means that the goods shall be fit for human consumption.

Implied Warranties

1. Warrant as to quiet possession

According to section 14(b), there is an implied warranty that the buyer shall have and enjoy quiet possession of the goods. The reach of this warranty gives a right to claim damages from the seller. Example: - S sold a second hand radio to Y who spends Rs 100 on the repairs of this radio. This Radio was seized by the police as it was a stolen one. Y filed a suit against X for the recovery of damages for breach of warranty of quite possession including the cost of repairs. It was held that Y was entitled to recover the same.

2. Warranty of Freedom from EncumbrancesSection 14(c) simplifies that there is an implied warranty that the goods are free from any charge or encumbrance in favor of any third person if the buyer is not aware of such charge or encumbrance, the breach of this warrant gives buyer a right to claim damages from the seller.

Example: - X borrowed Rs 500 from Y and hypothecated his Radio with y as security. Later on X sold this Radio to Z who bought in good faith. Here Z can claim for damages from X because his possession is disturbed by Y having a charge.

Unpaid Seller and his Rights

Meaning of Unpaid SellerA seller will be deemed as unpaid seller, in the following given conditions: -

When the whole sale price has not paid to him, in the case of cash sale.When the sale was made on the basis of credit for a specific tenure and that period has been completed, still amount is unpaid to seller.When the sale has been made on the basis of some negotiable instruments like bill of exchange, cheque etc, and the main condition of these instruments has not been fulfilled by the buyer, so here also seller will deemed as unpaid.

Various Rights of Unpaid SellerGenerally in that case where seller is deemed or actually unpaid he has following two categories of rights: -

Against the Goods

Against the Buyer

Right of Unpaid Seller against the Goods

1. Right of Lien (Section 47, 48 & 49)

It is the right to retain the possession of goods until the full price is received, where: -

The goods have been sold without any stipulation as to credit sale.

Where the goods have been sold on credit, but the term of credit has expired.

The right of lien is always based on the possession of the goods not even with the title of the goods. This right will not be affected if the title has been transferred to buyer but still goods are in the possession of the unpaid seller.

Termination of Right of LienIn following cases unpaid seller will lose the right of lien

When he delivers the goods to a carrier or transport for transmission to the buyer.

Where the buyer or buyers agent has lawfully obtains the possession of the goods.

Where buyer has paid the remaining price to unpaid seller.

2. Right of Stoppage of Goods in TransitIt means the right of stopping the goods while they are in transit to regain the possession and to retain them till the full price is paid. Generally this right occurs when unpaid seller has shifted his goods to some carrier or transportation for the purpose of delivery to buyer, and now he need to retain back the goods under his possession. Commonly this right is available when buyer becomes insolvent or bankrupt and still seller is unpaid.According to section 50 of Indian sales of goods act, following conditions should be fulfilled if unpaid seller wants to exercise this right: -

The seller must have parted with the possession of goods, i.e. the goods must not be in the possession of seller.

The goods must be in the course of transit.

The buyer must have become insolvent.

Difference between Right of Lien & Right of stoppages in transitIn case if right of lien, it can be exercise, when goods are in actual possession of the unpaid seller. But on the side of stoppage of goods in transit, the goods should be in the possession of carrier or transportation.In case of right of lien, this is not required that buyer should declared himself as an insolvent, but in case of right of stoppage of goods in transit, insolvency of the buyer is the main criteria.The purpose of the right of lien is to retain the possession of goods. But in case of right of stoppage of goods in transit, purpose is to regain the possession of goods from the carrier or transport.

3. Right of Resale the GoodsSection 54 of Indian sale of goods act is entitled unpaid seller to resell the goods in following given conditions: -

When the goods are of perishable nature, there seller can resale it without giving any notice to buyer.In case of other goods, after giving a notice of reasonable times to the buyer for intention of resale the goods.Where the seller has expressly received the right of resale in contract, in that cases no notice is required to deliver to buyer.In case of finder of lost goods the finder can resale it, if he has tried his hard to locate the original owner.

Suit for price: - According to section 55(1), where buyer wrongfully neglects to pay the price to seller, and already goods has been transferred by the seller to him, in that case seller can make a suit against the buyer for the price of goods.

2. Suit for damages for non-acceptance: - According to section 56, where the buyer has wrongfully neglects or refuses to accept the goods and pay for the goods, the seller may sue him for damages for non acceptance of the goods.

Right of Unpaid Seller against the Buyer

3. Suit for damages for repudiation of contract: - Section 60 of Indian sale of goods act, simplifies that where buyer repudiates the contract before the date of delivery, in that case seller may also the right to repudiate from contract, and even he can make a claim against the buyer for specific damages.

4. Suit for interest: - According to section 60, unpaid seller has also a right to make a claim against buyer for special damages regarding interest on amount of unpaid sales.

Transfer of propertyTransfer of possession of goodsTransfer of ownership of goods Transfer of property means the transfer of ownership of the goods from the seller to buyer. Ownership passes fro the seller to buyer is important for the following reasons:Risk of lossOnly owner can sueInsolvency of buyer or sellerSuit for price

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Time when property passesIt is open to the parties to fix any time when property may pass from seller to buyer. When the parties express their intention clearly no problem arises. Certain rules are laid down in the Act for determining when property passes in a contract of sale.In case of unascertained goodsIn case of ascertained goods*

In the case of unascertained goodsSection 18 provides that where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained. A contract to sell unascertained goods is not a complete sale, but agreement to sell.An agreement to sell 50 kgs out of a large quantity of rice in a godown does not make the buyer the owner of anything. He can become owner of 50 kgs of rice only after this quantity of rice has been separated out from other rice in the godown. *

In the case of ascertained goodsWhere there is a contract for sale of specific or ascertained goods, the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred.*

Rules as regards passing of propertyIn many cases, the intention of parties cannot be judged as to pass the property, so the rules for that are:Specific goods in deliverable state: In it the property passes to the buyer when the contract is made. Deliverable state means they are in such a state that the buyer would under the contract be bound to take delivery of them.B offers sell A his horse for Rs. 1000.A accepts the offer. The horse becomes Bs property as soon as the offer is accepted.*

Specific goods not in a deliverable stateSection 21 lays down that where there is a contract for the sale of specific goods and the seller is bound to do something to the goods for the purpose of putting them into a deliverable state, the property does not pass until such thing is done and the buyer has notice thereof." Something means Collecting, packing, loading or filling in containers etc.There was a contract for the sale of machine. A part of machine was destroyed while being removed. It was held that the buyer was entitled to refuse to take the machine as it was not in deliverable state.*

When the goods have to be measured, tested etc. Section 22 lays down that where there is a contract for the sale of specific goods in a deliverable state but the seller is bound to weigh, measure ,test or do some other act or thing with reference to the goods for the purpose of ascertaining the price, the property does not pass until such act or thing is done(some act requires to be done by the seller for ascertaining the price, such as weighing, measuring etc.Eg. A the owner of a wagon of hay contracts to sell it to B. It was to be weighted and delivered at Rs 1000 per ton. B agrees to it. A part is weighted and delivered to B, the ownership of the residue is not transferred to B until it has been weighted.*

Unascertained goods and its appropriationSection 23 lays down with the question of passing of property in the case of a contract for sale of unascertained goods by descripation.*