MOD3-1Indian Sales of Goods Act 1930

8/2/2019 MOD3-1Indian Sales of Goods Act 1930

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Indian sales of goods act 1930


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Sale of Goods is one of the special types of Contract.

Initially, this was part of Indian Contract Act itself in

chapter VII (sections 76 to 123). Later these sections

in Contract Act were deleted, and separate Sale ofGoods Act was passed in 1930.

Basic requirements of contract i.e. offer and

acceptance, legally enforceable agreement, mutual

consent, parties competent to contract, free consent,

lawful object, consideration etc. apply to contract of

Sale of Goods also.


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Contract of Sale- A contract of sale ofgoods is a contract whereby the sellertransfers or agrees to transfer the property

in goods to the buyer for a price.

There may be a contract of sale betweenone part-owner and another. [section 4(1)].

A contract of sale may be absolute orconditional. [section 4(2)].


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Thus, following are essentials of contract of sale

* It is contract, i.e. all requirements of contract

must be fulfilled * It is of goods

* Transfer of property is required

* Contract is between buyer and seller

* Sale should be for price

* A part owner can sale his part to another part-owner

* Contract may be absolute or conditional.


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How Contract of sale is made- A contract ofsale is made by an offer to buy or sell goods fora price and the acceptance of such offer.

The contract may provide for the immediatedelivery of the goods or immediate payment ofthe price or both, or for the delivery or paymentby installments, or that the delivery or payment

or both shall be postponed. [section 5(1)].


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Subject to the provisions of any law for the timebeing in force, a contract of sale may be made inwriting or by word of mouth, or partly in writing

and partly by word of mouth or may be impliedfrom the conduct of the parties. [section 5(2)].

Thus, credit sale is also a sale. A verbalcontract or contract by conduct of parties is

valid. e.g. putting goods in basket in supermarket or taking food in a hotel.


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Two parties to contract- Two parties arerequired for contract. - - Buyer means a personwho buys or agrees to buy goods. [section 2(1)].Seller means a person who sells or agrees tosell goods. [section 2(13)].

A part owner can sale his part to another part-owner.

However, if joint owners distribute propertyamong themselves as per mutual agreement, itis not sale as there are no two parties.


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Contract of Sale includes agreement tosale- Where under a contract of sale theproperty in the goods is transferred from

the seller to the buyer, the contract iscalled a sale, but where the transfer of theproperty in the goods is to take place at a

future time or subject to some conditionthereafter to be fulfilled, the contract iscalled an agreement to sell. [section 4(3)].


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Transfer of property- Property means thegeneral property in goods, and not merely aspecial property. [section 2(11)]. In laymans

terms property means ownership. GeneralProperty means full ownership.

Thus, transfer of general property is requiredto constitute a sale. If goods are given for hire,

lease, hire purchase or pledge, generalproperty is not transferred and hence it is not a

sale.


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Goods- Goods means every kind ofmovable property other than actionableclaims and money; and includes stock and

shares, growing crops, grass, and thingsattached to or forming part of the landwhich are agreed to be severed before

sale or under the contract of sale. [section2(7)].


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CLASSIFICATION OF GOODS

Goods may be classified into: 1. Existing Goods - Existing goods are those,

which are owned or possessed by the seller atthe time of the contract. Instances of sale of

goods possessed but not owned by the sellersfire sales by agents and pledges.

Existing goods may be either: (a) Specific andAscertained - goods identified and agreed upon

at the time a contract of sale is made; or (b)Generic and Unascertained goods are goodsindicated by description and not specificallyidentified.


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CLASSIFICATION OF GOODS

2. Future Goods - Future goods quot; means goods to be

manufactured or produced or acquired by the seller after

making the contract of sale. Eg- X agrees to sell future crop of

particular agricultural field in next season.

3. Contingent Goods - Contingent goods are the goods the

acquisition of which by the seller depends upon a contingency

which mayor may not happen. Contingent goods are a part of

future goods. Eg- X agrees to sell Y a certain good only if Z its

present owner sells it to X. this good is classified as contingent


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PRICE

'Price' means the money consideration for sale of thegoods. 'Price' is an integral part of a contract of sale. If itis not fixed or is not capable of being fixed, the wholecontract is void ab-initio.

The Act provides that the price may be fixed (I) either by the contract or (II) may be agreed to be fixed in a manner provided by

the contract, e.g., by a valuer, or (III) it may be determined by the course of dealings

between the parties. (IV) in case, price is not capable of being fixed in any ofthe above ways, the buyer is bound to pay reasonableprice.


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Conditions and Warranties

SALE OF GOODS ACT [Sections 11-17]

In a contract of sale, parties make certainstipulations, i.e., agree to certain terms. Some of

them may be intended by the parties to be of afundamental nature, e.g., quality of the goods tobe supplied.

The stipulation essential to the main purpose of

the contract, the breach of which gives rise to aright to treat the contract as repudiated. Suchstipulations are known as `Conditions`. Section12(2)


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These are termed as conditions. Other

stipulations, which are not essential are termedas warranty.

These are collateral to contract of sale of goods. Contract cannot be avoided for breach of

warranty, but aggrieved party can claimdamages.

A breach of condition can be treated as breachof warranty, but vice versa is not permissible.


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A stipulation in a contract of sale with reference to goods which arethe subject thereof may be a condition or a warranty. [section 12(1)].

A condition is a stipulation essential to the main purpose of thecontract, the breach of which gives rise to a right to treat the contractas repudiated. [section 12(2)].

A warranty is a stipulation collateral to the main purpose of thecontract, the breach of which gives rise to a claim for damages butnot to a right to reject the goods and treat the contract asrepudiated. [section 12(3)]. Whether a stipulation in a contract ofsale is a condition or a warranty depends in each case on theconstruction of the contract.

A stipulation may be a condition, though called a warranty in the

contract. [section 12(4)].


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DISTINCTION BETWEEN'CONDITION' AND 'WARRANTY'

1. A condition is a stipulation (in acontract)

1. A warranty is a stipulation, which is onlycollateral or essential to the main purposeof the contract. subsidiary to the mainpurpose of the contract.

S C


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Section 12. Condition andWarranty

1. A stipulation in a contract of sale with reference to goods

which are subject thereof may be a condition or a warranty.2. A condition is a stipulation essential to the main purpose of

the contract, the breach of which gives rise to a right to treatthe contract as repudiated.

3. A warranty is a stipulation collateral to the main purpose of

the contract, the breach of which gives rise to a claim fordamages but not to a right to reject the goods and treat thecontract as repudiated.

4. Whether a stipulation in a contract of sale is a condition or awarranty depends in each case on the construction of thecontract. A stipulation may be a condition, though called awarranty in the contract.

Synopsis

1. Conditions and warranties 2. Express Conditions

3. Express Warranties 4. Representations

5. Implied conditions and warranties 6. Puffs


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Section 13 : When condition to

be treated as warranty,1. Where a contract of sale is subject to any condition to be

fulfilled by the seller, the buyer may waive the condition orelect to treat the breach of the condition as a breach ofwarranty an not as a ground for treating the contract asrepudiate.

2. Where a contract of sale is not severable and the buyer hasaccepted a goods or part thereof, or where the contract is forspecific goods, the property in which has passed to the buyer,the breach of any condition to be fulfilled by the seller canonly be treated as s breach of warranty and not as ground for

rejecting the goods and treating the contract as repudiatedunless, there is a term of a contract, expressed or implied tothat effect

3. Nothing in this section shall affect the case of any conditionor warranty fulfilment of which is excused by law, by reason

of impossibility or otherwise.


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Caveat Emptor

The principle termed as caveat emptormeansbuyer be aware.

Generally, buyer is expected to be careful whilepurchasing the goods and seller is not liable for

any defects in goods sold by him. This principle in basic form is embodied in

section 16 that subject to provisions of Sale ofGoods Act and any other law, there is no implied

condition or warranty as to quality or fitness ofgoods for any particular purpose. As per section 2(12), Quality of goods includes

their state or condition.


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Transfer of Property as Between Seller andBuyer

Section 18 Goods must be ascertained

Goods must be ascertained: where there iscontract for the sale of unascertained goods, no

property in the goods is transferred to the buyerunless and until the goods are ascertained Synopsis1. Transfer of property

2. Property cannot pass until the goods areidentified3. Part of a specific whole4. Property and risk

5. Identification of goods


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Transfer of property as between

seller and buyer Transfer of general property is required in a sale.

Property means legal ownership. It is necessary todecide whether property in goods has transferred tobuyer to determine rights and liabilities of buyer andseller.

Generally, risk accompanies property in goods i.e. whenproperty in goods passes, risk also passes. If property ingoods has already passed on to buyer, seller cannotstop delivery of goods even if in the meanwhile buyerhas become insolvent.

Where there is a contract for the sale of unascertainedgoods, no property in the goods is transferred to thebuyer unless and until the goods are ascertained.[section 18].


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1. Transfer of property

This and the five following sections of the Act dealwith the question foreshadowed by section 4 of theAct and lay down rules which assist in deciding thequestion when the object of the contract of sale,namely, the transfer of the property in the goods tothe buyer has been affected.


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Property cannot pass until the

goods are identified It is a condition precedent to the passing of the property in every case

that, the individuality of the thing to be delivered should be established.In any given case, there may be question whether this condition isfulfilled or not, and it may be that the property will not pass even if it isfulfilled, but until it is, there is no possibility of the property passing. It isessential that the article should be specific and ascertained in a mannerbinding on both the parties, for unless that be so, the contract cannot beconstrued as contract to pas the property in that category.

Where according to the terms of the contract, the seller was to supplywaste coal ash as and when it was discharged from the bunkers of thepowerhouse, it was held that the contract was for the sale ofunascertained goods and, therefore no property passed to the buyer tillthe goods were ascertained.


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Section 19. Property passes

when intended to pass1. Where there is a contract for the sale of specific or ascertained

goods the property in them is transferred to the buyer at suchtime as the parties to the contract intend it to be transferred.

2. For the purpose of ascertaining the intention of the parties regardshall be had to the terms of the contract, the conduct of the

parties and circumstances of the case.3. Unless a different intention appears, the roles contained in

section 20 to 24 are rules for ascertaining the intention of theparties as to the time at which the property in the goods is topass to the buyer.

Synopsis

1. Principles for determining whether the property is transferred

2. Intention of the parties

3. Ascertained goods

1 Principles for determining


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1. Principles for determining

whether the property is

transferred When it appears that the goods -- the subject of the

contractare specific or ascertained, so that it is

possible for the property to pass to the buyer, itbecomes necessary to determine whether it hasactually passed;

This section reproduces this statement in statutory

form, and the rules of construction adopted bycourts are those set out in Sec 20 to 24.

Rights of Unpaid Seller against goods


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Rights of Unpaid Seller against goods

Section 45. Unpaid seller defined 1. The seller of goods is deemed to be an unpaidseller within the meaning of this

Act (a) when the whole of the price has not been paid or tendered ;

(b) when a bill of exchange or other negotiable instrument has been received asconditional payment, and the condition on which it was received has not beenfulfilled by reason of the dishonour of the instrument or otherwise.

2. In this chapter, the term seller includes any person who is in the position of aseller, as, for instance, an agent of the seller to whom the bill of lading has beenindorsed, or a consignor or agent who has himself paid, or is directly responsible for,the price

Examples

The section may be illustrated by the following example;

The seller draws bills for the price of the goods on the buyer, who accepts them, andthe seller negotiates them. Before the bills arrive at maturity the buyer fails. Theseller is in position of an unpaid seller.


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Rights of unpaid seller against thegoods sold

(i) Where the property in the goods sold has beenpassed, he has the following rights [Section 46 (1)].(1)Right of Lien [Section 47 to 49]. (2)Right of stoppageof goods in transit [Section 50 to 52]. (3)Right of resale

[Section 54]. (ii) Where the property in the goods has notbeen transferred, he gets the following two rights[Section 42(2)]. (1)Withholding the delivery of goods, and(2)Stoppage in transit. (b) Rights against the buyerpersonally: Following four rights, the unpaid seller gets

against the buyer: (1)Suit for price [Section 55]. (2)Suitfor damages [Section 56]. (3)Repudiation of contract[Section 60]. (4)Suit for interest [Section 61].


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Section 46. Unpaid Sellers rights

1. Subject to the provisions of this Act and of and of any lawfor the time being in force, notwithstanding that the propertyin the goods may have passed to the buyer, the unpaid sellerof goods, as such, has by implication of law

(a) a lien on the goods for the price while he is in possession

of them; (b) in case of the insolvency of the buyer a right of stoppingthe goods in transit after he has parted with the possessionof them ;

(c) a right of resale as limited by this Act.

2. Where the property in goods has not passed to thebuyer, the unpaid seller has, in addition to his otherremedies, a right of withholding delivery similar to and co-extensive with his rights of lien and stoppage in transit where

the property has passed to the buyer.


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Section 46. Unpaid Sellers rights

Example The section may be illustrated by the following

example : Sale of goods to be delivered by instalments, each

instalment to be paid for in cash fourteen days afterdelivery. During the currency of the contract, thebuyer becomes insolvent and the price of oneinstalment is unpaid. The seller need not make furtherdeliveries unless the price of that instalment is paid

and cash is paid against delivery of subsequentinstalments.

S ti 47 S ll li


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Section 47. Sellers lien 1. Subject to the provisions of this Act, the unpaid seller of goods

who is in possession of them is entitled to retain possession ofthem until payment or tender of the price in the following cases,

namely : (a) Where the goods have been sold without any stipulation as to

credit ; (b) where the goods have been sold on credit, but the term of

credit has expired ; (c) where the buyer becomes insolvent. 2. The seller may exercise his right of lien notwithstanding that he

is in possession of the goods as agent or bailee for the buyer.

A sellers lien is described as an additional security given to aperson who has a right to be paid, but he has a right to be paid

besides and independently of his lien. One of the objects of S.47which confers the sellers lien is to protect a vendor fromincurring an expense in manufacturing or acquiring goods forwhich payment remains justly in doubt . The sellers lien is aparticular lien arising in the precise circumstances specified by theAct and not a general lien for all his debts due from the buyer andhe cannot rely on the equitable principle of thevendors lien.


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Section 48. Part delivery

Where an unpaid seller has made part delivery of thegoods, he may exercise his right of lien on theremainder, unless such part delivery has been madeunder such circumstances as to show an agreementto waive the lien.

S ti 49 T i ti f li


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Section 49. Termination of lien

1. The unpaid seller of goods loses his lien thereon (a) when he delivers the goods to a carrier or other

bailee for the purpose of transmission to the buyerwithout reserving the right of disposal of goods;

(b) when the buyer or his agent lawfully obtainspossession of the goods; (c) by waiver thereof. 2. The unpaid seller of goods, having a lien thereon,

does not lose his lien by reason only that he hasobtained a decree for the price of the goods.

Documents

MOD3-1Indian Sales of Goods Act 1930