Module III - Sales Good Act 1930

8/8/2019 Module III - Sales Good Act 1930

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Module-III

Indian Sales of Goods Act, 1930


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Sale of Goods Act 1930

Sale of Goods Act is an old mercantile law. Saleof Goods is one of the special types of Contract.

Initially, this was part of Indian Contract Act.

Later these sections in Contract Act were

deleted, and separate Sale of Goods Act waspassed in 1930.


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Contract of SaleAs per Sec.4 of the Act, a contract of sale is where the

seller transfers or agree to transfer the property in goods to

the buyer for price. It includes

Sale: Where the property in goods is immediately

transferred from the seller to the buyer, the contract is

called as a sale.Agreement to sell: Where the transfer in property is to take

place at a future time or subject to the fulfillment of certain

conditions, the contract is called an agreement to sell.

Essentials of a contract of Sale:Two parties

Goods

Price

Transfer of Property


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Distinction between Sale & Agreement to sell

Nature/type of contract Transfer of property/ownership

Types of Goods

Risk of loss Consequences of breach

Right to re-sell

General and particular property Insolvency of buyer

Insolvency of seller


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Sec 5 How Contract of sale is made -

A contract of sale is made by an offer to buy or sellgoods for a price and the acceptance of such offer. Thecontract may provide for the immediate delivery of thegoods or immediate payment of the price or both, or forthe delivery or payment by installments, or that thedelivery or payment or both shall be postponed. [section

5(1)].

Subject to the provisions of any law for the time being inforce, a contract of sale may be made in writing or byword of mouth, or partly in writing and partly by word of

mouth or may be implied from the conduct of the parties.[section 5(2)].

Thus, credit sale is also a sale. - - A verbal contract orcontract by conduct of parties is valid. e.g. putting goodsin basket in super market or taking food in a hotel.


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Sale distinguished from other contracts

Hire purchase agreement- In this the property in goodswill pass on to the buyer only when he pays all hisinstallments. Hirer may return the goods/property anytime and stop paying installments after that.

Pledge- In pledge goods are delivered only for security

for obtaining debt, which must be returned back onpayment of debt.

Mortgage- In this only special property in goods istransferred. The Mortgager continues to be the ownerof property. And moreover it is only for immovable

property. Hypothecation Lease- In case of hypothecation the

property continues to be in possession of the debtor.


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Subject matter of Contract of SaleS-2(7). Goods means every kind of movable property other

than actionable claims and money; and includes stockand shares, growing crops, grass and things attached

to or forming part of the land which are agreed to be

separated before sale. Trade marks, copyrights,

patents, water, gas, electricity etc. are all treated as

goods for this Act.

Types of Goods:

1) Existing Goods- which are owned/possessed at the

time of contract. They can be of the following types-

Specific or Ascertained

Unascertained


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2) Future Goods: To be manufactured, produced or

acquired after making of the contract.

3) Contingent Goods: They are a kind of future goods the

acquisition of which depends on an uncertain

contingency.

Perishable Goods

S-7 In case goods destroyed before contract it is void

(mutual mistake)

S-8 In case goods destroyed before sale but after

agreement to sell without any fault of seller or buyer

agreement becomes void (impossibility of performance)


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Price Price - Price means the money consideration for a sale of goods.

[section 2(10)]. Consideration is required for any contract. However, incase of contract of sale of goods, the consideration should be pricei.e. money consideration.

Sec9. Ascertainment of price.- (1) The price in a contract of sale may befixed by the contract or may be left to be fixed in manner thereby agreed ormay be determined by the course of dealing between the parties.

(2) Where the price is not determined in accordance with the foregoing

provisions, the buyer shall pay the seller a reasonable price. What is areasonable price is a question of fact dependent on the circumstances ofeach particular case.

Sec10. Agreement to sell at valuation.- (1) Where there is an agreementto sell goods on the terms that the price is to be fixed by the valuation of athird party and such third party cannot or does not make such valuation, theagreement is thereby avoided. Provided that, if the goods or any partthereof have been delivered to, and appropriated by, the buyer, he shall paya reasonable price therefor.(2) Where such third party is prevented frommaking the valuation by the fault of the seller or buyer, the party not in faultmay maintain a suit for damages against the party in fault.

Sec11. Stipulations as to time.- Unless a different intention appears fromthe terms of the contract, stipulations as to time of payment are not deemedto be of the essence of a contract of sale. Whether any other stipulations asto time is of the essence of the contract or not depends on the terms of the

contract.


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Conditions and Warranties

There are certain stipulations which areessential for main purpose of the contract of saleof goods. These go to the root of contract andnon-fulfillment will mean loss of foundation of

contract. These are termed as conditions. Other stipulations, which are not essential are

termed as warranty. These are collateral tocontract of sale of goods. Contract cannot be

avoided for breach of warranty, but aggrievedparty can claim damages. - -A breach ofcondition can be treated as breach of warranty,but vice versa is not permissible.


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contd A stipulation in a contract of sale with reference to goods which are

the 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)]( Where a particular stipulation incontract is a condition or warranty depends on the interpretation ofterms of contract. Mere stating Conditions of Contract in agreementdoes not mean all stipulations mentioned are conditions withinmeaning of 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 as

repudiated. [section 12(3)].

Whether a stipulation in a contract of sale is a condition or awarranty depends in each case on the construction of the contract.A stipulation may be a condition, though called a warranty in thecontract. [section 12(4)].


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When condition to be treated as warranty-VOLUNTARY WAIVER OF CONDITION Where a contract of sale is subject to any condition to be fulfilled by

the seller, the buyer may waive the condition or elect to treat thebreach of the condition as a breach of warranty and not as a groundfor treating the contract as repudiated. [section 13(1)].

ACCEPTANCE OF GOODS BY BUYER Where a contract of sale is not severable and the buyer has

accepted the goods or part thereof, the breach of any condition to befulfilled by the seller can only be treated as a breach of warranty andnot as a ground for rejecting the goods and treating the contract asrepudiated, unless there is a term of the contract, express orimplied, to that effect. [section 13(2)].

Nothing in this section shall affect the case of any condition orwarranty fulfillment of which is excused by law by reason ofimpossibility or otherwise. [section 13(3)].


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Implied warranties

Implied warranties of quiet possession

Implied warranties against encumbrances

Disclosure of Dangerous Nature of Goods


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Implied conditions

Implied condition as to titleImplied condition under a sale by description-

goods must correspond with description,

goods must be of merchantable quality,

condition of wholesomeness, condition for a fitness for a particular purpose-Priest v. Last Grant v.Australian Knitting Mills

Implied conditions underSale by Sample-

Correspondence with sample

Buyer's opportunity

merchantabilityImplied conditions underSale by Sample as well as description


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Doctrine of caveat emptor The principle termed as caveat emptormeans buyer be aware.

Generally, buyer is expected to be careful while purchasing 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 of Goods Act and any other law, there is no

implied condition or warranty as to quality or fitness of goods for

any particular purpose. As per section 2(12), Quality of goods

includes their state or condition.

Exceptions

1. False representation by seller

2. Seller actively conceals a defect

3. Buyer relying upon the skill of the sellerPriest v. Last ,

4. Goods bought by description


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Transfer of Property

The phrase transfer of property in goods meanstransfer of ownership of the goods.

Property in goods is different from possession of

goods which means custody over goods. The

moment of time at which property in goodspasses from seller to buyer is very important due

following points:

i) Risk passes with ownership

ii) Action against third parties

iii) Suit for price

iv) Insolvency of buyer or seller


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Rules regarding transfer of property

In specific or ascertained GoodsWhen goods are in a deliverable state Sec-20When goods have to be put in a deliverable state Sec-21

When price of goods is to be ascertained by weighting etc. 22

When goods are delivered on approval Sec-24

In unascertained or future Goods

Where goods contracted to be sold are not ascertained orthey are future goods the property in goods does not passto the buyer unless the goods are ascertained or

unconditionally appropriated to the contract so as to bringthem in deliverable state. The buyer must have noticethereof.


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Rights of unpaid sellerWho is an unpaid seller.

When the whole of the price has not been paidWhere a bill of exchange or other negotiable instrument

received as conditional payment is dishonoured.

A seller of goods is deemed as unpaid seller on followingconditions-

He must sell goods on cash terms and must be unpaid.

He must be unpaid either wholly or partly.

A bill of exchange or other negotiable instrument wasreceived but has been dishonoured.

He must not refuse to accept payment when tendered.Rights of unpaid seller can be divided into two categories-

i) Right against the goods

ii) Right against the buyer personally.


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RIGHT AGAINST THE GOODS1) Right of lien (Sec- 47)

(1) Subject to the provisions of this Act, the unpaid seller of

goods who is in possession of them is entitled to retainpossession of them until payment or tender of the price in thefollowing cases, namely:-

(a) where the goods have been sold without any stipulation as tocredit;

(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 notwithstandingthat he is in possession of the goods as agent or bailee for thebuyer.

In case of part delivery- Where an unpaid seller has made partdelivery of the goods, he may exercise his right of lien on theremainder, unless such part delivery has been made undersuch circumstances as to show an agreement to waive thelien.


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Termination of lien (Sec-49)

The unpaid seller of goods loses his lien

(a) when he delivers the goods to a carrier or other baileefor the purpose of transmission to the buyer withoutreserving the right of disposal of the goods;

(b) when the buyer or his agent lawfully obtains possessionof the goods;

(c) by waiver thereof.


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2) RIGHT OF STOPPAGE IN TRANSIT

Right of stoppage in transit (Sec-50)

When the buyer of goods becomes insolvent, the unpaid seller whohas parted with the possession of the goods has the right ofstopping them in transit, that is to say, he may resume possession ofthe goods as long as they are in the course of transit, and mayretain them until payment or tender of the price.

Duration of transit (Sec-51)

(1)Goods are deemed to be in course of transit from the time whenthey are delivered to a carrier or other bailee for the purpose oftransmission to the buyer, until the buyer or his agent in that behalftakes delivery of them from such carrier or other bailee.

(2) If, after the arrival of the goods at the appointed destination, thecarrier or other bailee acknowledges to the buyer or his agent thathe holds the goods on his behalf and continues in possession ofthem as bailee for the buyer or his agent, the transit is at an end andit is immaterial that a further destination for the goods may havebeen indicated by the buyer.


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(3) If the buyer or his agent in that behalf obtains delivery of thegoods before their arrival at the appointed destination, thetransit is at an end

(4) If the goods are rejected by the buyer and the carrier orother bailee continues in possession of them, the transit isnot deemed to be at an end, even if the seller has refused to

receive them back.

(6) Where the carrier or other bailee wrongfully refuses todeliver the goods to the buyer or his agent in that behalf, thetransit is deemed to be at an end.

(7) Where part delivery of the goods has been made to thebuyer or his agent in that behalf, the remainder of the goodsmay be stopped in transit,


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How stoppage in transit is effected (Sec-52)

(1)The unpaid seller may exercise his right of stoppage in transit eitherby taking actual possession of the goods, or by giving notice of hisclaim to the carrier or other bailee in whose possession the goodsare. Such notice may be given either to the person in actualpossession of the goods or to his principal.

The notice to principal be given on time and in such circumstances,that he, by the exercise of reasonable diligence, may communicate itto his servant or agent in time to prevent a delivery to the buyer.

(2) When notice of stoppage in transit is given by the seller to thecarrier or other bailee in possession of the goods, he shall re-deliverthe goods to, or according to the directions of, the seller. The

expenses of such re-delivery shall be borne by the seller.


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Effect of sub-sale or pledge by buyer (Sec-53)

(1)The unpaid seller's right of lien or stoppage in transit is not affectedby any sale or other disposition of the goods which the buyer mayhave made, unless the seller has assented thereto:

(2) Where the transfer is by way of pledge, the unpaid seller mayrequire the pledgee to have the amount secured by the pledgesatisfied in the first instance, as far as possible, out of any other

goods or securities of the buyer in the hands of the pledgee andavailable against the buyer.

3) Right of Resale (Sec-54)

The unpaid seller has limited right to resell the goods in case of

i) Perishable goods

ii) Where seller has given notice to the buyer to resell and buyer doesnot pay the price in reasonable time.

iii) Where the seller has expressly reserved the right in contract in casebuyer should make a default.


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RIGHT AGAINST THE BUYER PERSONALLY

1) Suit for price (Sec-55)(i) Where under a contract of sale the property in the goods has passed

to the buyer and the buyer wrongfully neglects or refuses to pay forthe goods according to the terms of the contract, the seller may suehim for the price of the goods.

(ii) Where under a contract of sale the price is payable on a day certainirrespective of delivery and the buyer wrongfully neglects or refusesto pay such price, the seller may sue him for the price although theproperty in the goods has not passed and the goods have not beenappropriated to the contract.

2) Damages for non-acceptance (Sec-56)Where the buyer wrongfully neglects or refuses to accept and payfor the goods, the seller may sue him for damages for non-

acceptance.3) Suit forInterest and special damages (Sec-61)

The seller can charge interest on price when it becomes due andnotify to the buyer.

4) Suit for repudiation of contract (Sec-60)

Documents

Module III - Sales Good Act 1930