Sale of Goods Act,1930 Presentation

Anantdeep Singh PuriAnantdeep Singh Puri 11

A Presentation OnA Presentation On

Presented By:

Sahaj Singh Puri


CONTENTSCONTENTS Goods Kinds Of Goods Contract Of Sale Sale Of Goods Shall Apply To Sale Of Goods Shall Not Apply

To Importance of the Contract of

sale of good Essential Of Contract Of Sale Sale and Agreement to Sale Difference Between Sale And

Agreement To Sale Formalities Of Contract Of Sale Price Fixing The Price Subject Matter Of Contract Of

Sale

Condition Or Warranties Difference Between Condition

and Warranties Types Of Condition And

Warranties Implied Conditions Implied Warranties When a Condition to be treated

as Warranty Caveat Emptor Transfer of Property Transfer of Title Rules as to delivery of goods Unpaid Seller Features of the Unpaid Seller Rights of an Unpaid Seller Buyer’s right against seller

Anantdeep Singh Puri 3

Goods means every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass and things attached and forming part of lands which are agreed to be served before sale or under the contract of sale. Section 2(7).


Kinds Of Goods:

• Existing goods- Section 6(1) These are the goods which are in existence and are physically present in the seller’s possession.

• Specific goods- Section 2(14) – These are the goods identified and agreed upon at the time the contract is made.

• Ascertained goods- These are identified after the formation of the contract.

• Unascertained goods- These are the goods which are not specifically identified or agreed upon at the time of the contract of sale.

• Future goods – Section 2(6) Goods which are to be manufactured or produced or acquired by the seller after making contract of sale.

• Contingent goods- Section 6(2).


Contract of Sale:Contract of Sale:

A contract of sale of goods is a contract A contract of sale of goods is a contract whereby the seller transfers or agrees to whereby the seller transfers or agrees to transfer the property in goods to the buyer transfer the property in goods to the buyer for a for a priceprice. Sec.4(1). Sec.4(1)

There may be a contract of sale between There may be a contract of sale between one part owner and another.one part owner and another.

A contract of sale may be absolute or A contract of sale may be absolute or conditional.conditional.


The Sale of Goods Act shall The Sale of Goods Act shall apply toapply to

A Contract only if the ownership A Contract only if the ownership of goods is transferred from one of goods is transferred from one person to another immediately person to another immediately at the time of formation of at the time of formation of contract or subsequent to contract or subsequent to formation of contract;formation of contract;


Sale of Goods Act shall not apply to

Bailment of goods;Bailment of goods; Pledge of goods ;Pledge of goods ; Any contract relating to Any contract relating to

immovable property ;immovable property ; Contract of work and skillContract of work and skill


Importance of the Contract of sale of good:A contract of sale of goods is essential for the smooth operations andexchange of goods in the economy. It is always preferred to have written contractas it serves as proof in legal proceedings. A written and attested contract ensuresquality of the subject matter. The Seller, thus is duty-bound to warrant that thegoods are merchantable, conforms to Industry Standards and specifications. Itprevents fraud and deception on behalf of the subject-matter of price by either ofthe parties. It assigns specific responsibilities upon the buyer and seller which theyare bound to perform. The Buyer has a responsibility to reasonably examine goodsprior to acceptance and to notify the seller of any defect of the goods – hence itmake a buyer more aware of what s/he is buying, thus preventing flaw. A writtencontract ensures transfer of ownership of the goods to the buyer. The sellerthrough the contract warrants that the goods are free from any security interestliens, outstanding titles, claims or any other outstanding encumbrances. Acontract ensures authenticity of the two parties involved in the exchange. It alsoserves as a proof of a legal transaction and prevents the selling party to make anunlawful mark-up on any product sold. In a nutshell, a contract binds and well asbenefits both the parties in the contract.


Essential of Contract Of Sale: Essential of Contract Of Sale: There must be at least 2 parties.There must be at least 2 parties. The Subject matter of contract must necessarily The Subject matter of contract must necessarily

be goods.be goods. A price in money (not in kind) should be paid or A price in money (not in kind) should be paid or

promised.promised. A transfer of property in goods from seller to A transfer of property in goods from seller to

buyer must take place.buyer must take place. A contract of sale must be absolute or A contract of sale must be absolute or

conditional. Section 4(2).conditional. Section 4(2). All other essential elements of a valid contract All other essential elements of a valid contract

must be presented in contract of sale.must be presented in contract of sale.


Sale and Agreement to Sale:Sale and Agreement to Sale:

When property is transferred from When property is transferred from seller to buyer at the time of seller to buyer at the time of formation of contract, an absolute formation of contract, an absolute sale occurs.sale occurs.

When property in the goods is to be When property in the goods is to be transferred at some future date and transferred at some future date and not at the time of contract, the not at the time of contract, the contract of sale is termed as an contract of sale is termed as an agreement to sell. agreement to sell.


Difference Between Sale And Difference Between Sale And Agreement To Sale Agreement To Sale

SaleSale1)1) The Property in the goods The Property in the goods

passes to the buyer and along passes to the buyer and along therewith the risk.therewith the risk.

2)2) It is an executed contract.It is an executed contract.3)3) The seller can sue the buyer for The seller can sue the buyer for

the price of the goods because the price of the goods because of the passage of the property of the passage of the property therein to buyer.therein to buyer.

4)4) A subsequent loss or destruction A subsequent loss or destruction of goods is liability of buyer.of goods is liability of buyer.

5)5) Breach on the part of the sellers Breach on the part of the sellers gives the buyer double remedy; gives the buyer double remedy; a suit for damages against the a suit for damages against the seller and a proprietary remedy seller and a proprietary remedy of recovering the goods from of recovering the goods from third parties who bought them.third parties who bought them.

Agreement To SaleAgreement To Sale1)1) Since property in the goods Since property in the goods

does not pass to buyer, the risk does not pass to buyer, the risk also does not pass to him.also does not pass to him.

2)2) It is an executory contract.It is an executory contract.3)3) The aggrieved party can sue for The aggrieved party can sue for

damages only and not for the damages only and not for the price, unless the price was price, unless the price was payable at a stated date.payable at a stated date.

4)4) Such loss or destruction is the Such loss or destruction is the liability of the seller. liability of the seller.

5)5) The seller, being still the owner The seller, being still the owner of the goods, may dispose of of the goods, may dispose of them as he likes, and the them as he likes, and the buyer’s remedy would be to file buyer’s remedy would be to file a suit for damages only.a suit for damages only.


Formalities Of Contract Of Sale: Formalities Of Contract Of Sale:

Contract can be made in any of the following Contract can be made in any of the following modes:modes:

There may be immediate delivery of goods.There may be immediate delivery of goods. There may be immediate payment of price, but There may be immediate payment of price, but

it may be agreed that the delivery is to be made it may be agreed that the delivery is to be made at some future date.at some future date.

There may be immediate delivery of goods and There may be immediate delivery of goods and immediate payment of price.immediate payment of price.

It may be agreed that delivery or payment or It may be agreed that delivery or payment or both are to be made in installments.both are to be made in installments.

It may be agreed that delivery or payment or It may be agreed that delivery or payment or both are to be made at some future date.both are to be made at some future date.

1313Anantdeep Singh PuriAnantdeep Singh Puri

PricePrice

Sec.2(10) defines the price as ‘the money Sec.2(10) defines the price as ‘the money consideration for the sale of goods.’consideration for the sale of goods.’

Price has to be in terms of money.Price has to be in terms of money.

All monitory payments do not amount to All monitory payments do not amount to price.price.


Fixing the priceFixing the price

Price is mentioned in the contract.Price is mentioned in the contract.

The manner of fixing the price is The manner of fixing the price is mentioned in the contract.mentioned in the contract.

It is determined by the course of dealings It is determined by the course of dealings of the parties. when price is not fixed by of the parties. when price is not fixed by any of the above modes a ‘reasonable any of the above modes a ‘reasonable price’ is considered as the price of the price’ is considered as the price of the contract.contract.


Subject Matter Of Contract Of SaleSubject Matter Of Contract Of Sale

The subject matter of contract of sale is always the goods. This is The subject matter of contract of sale is always the goods. This is enshrined in the Sale of Goods Act 1930, under Section 6, 7 and 8.enshrined in the Sale of Goods Act 1930, under Section 6, 7 and 8.

Under Section 6:Under Section 6:

The subject matter of contract must always be goods. The goods The subject matter of contract must always be goods. The goods may be existing or future goods.may be existing or future goods.

Like an ordinary contract, a contract of sale of goods can also be Like an ordinary contract, a contract of sale of goods can also be made with regard to the goods, the acquisition of which by sellers made with regard to the goods, the acquisition of which by sellers depends upon a contingency, which may or may not happen. Thus, a depends upon a contingency, which may or may not happen. Thus, a contract for sale of certain cloth to be manufactured by a certain mill contract for sale of certain cloth to be manufactured by a certain mill is a valid contract. Such contracts are called contingent contracts.is a valid contract. Such contracts are called contingent contracts.

When the seller purports by his contract of sale to effect a sale of When the seller purports by his contract of sale to effect a sale of future goods, the contract will operate only as an agreement to sell future goods, the contract will operate only as an agreement to sell the goods and not as sale.the goods and not as sale.


Under Section 7 & 8:Under Section 7 & 8:

Goods not existing at the time of contract: If at the time a sale is Goods not existing at the time of contract: If at the time a sale is entered into, the subject- matter of a contract being specific entered into, the subject- matter of a contract being specific goods, which without the knowledge of the seller have been goods, which without the knowledge of the seller have been destroyed or so damaged as not to answer to the description in destroyed or so damaged as not to answer to the description in the contract, and then the contract is void ab initio.the contract, and then the contract is void ab initio.

Goods perishing after contract is made: Where there is an Goods perishing after contract is made: Where there is an agreement to sell specific goods and the goods, subsequently agreement to sell specific goods and the goods, subsequently without any fault of seller or the buyer perish or suffer such without any fault of seller or the buyer perish or suffer such damages as not to answer to the description in the agreement damages as not to answer to the description in the agreement

before the risk passes to the buyer.before the risk passes to the buyer.


Condition Or WarrantiesCondition Or Warranties

Condition: It is a stipulation essential to Condition: It is a stipulation essential to main purpose of the contract, the breach main purpose of the contract, the breach of which gives right to the repudiate the of which gives right to the repudiate the contract and to claim damages.contract and to claim damages.

Warranty: It is a stipulation collateral to Warranty: It is a stipulation collateral to main purpose of the contract, the breach main purpose of the contract, the breach of which gives rise to claim for damages of which gives rise to claim for damages but not the right to reject the goods and but not the right to reject the goods and treat contract as repudiated.treat contract as repudiated.


Difference Between Difference Between Condition and Warranties Condition and Warranties

ConditionCondition1.1. A condition is essential to A condition is essential to

the main purpose of the the main purpose of the contract.contract.

2.2. The aggrieved party can The aggrieved party can repudiate the contract or repudiate the contract or claim damages or both in claim damages or both in case of breach of condition.case of breach of condition.

3.3. A breach of condition may A breach of condition may be treated as breach of be treated as breach of warranty.warranty.

WarrantyWarranty1.1. It is only collateral to main It is only collateral to main

purpose of contract.purpose of contract.

2.2. The aggrieved party can The aggrieved party can claim only the damages in claim only the damages in case of breach of warranty.case of breach of warranty.

3.3. A breach of warranty cannot A breach of warranty cannot be treated as breach of be treated as breach of condition. condition.


Types of conditions and Types of conditions and warrantieswarranties

1) Express – which are expressly 1) Express – which are expressly provided in the contract.provided in the contract.

2) Implied- which the law implies into 2) Implied- which the law implies into the contract unless the parties the contract unless the parties stipulate stipulate

to the contrary.to the contrary.


Implied ConditionsImplied Conditions

1.1. Condition as to title Condition as to title [sec.14(a)][sec.14(a)] - - seller has the seller has the right to sell.right to sell.

2.2. Sale by description Sale by description (sec.15)(sec.15)-- goods shall goods shall correspond with the description.correspond with the description.

3.3. Condition as to quality or fitnessCondition as to quality or fitness [sec16(1)][sec16(1)]

4.4. Condition as to merchantabilityCondition as to merchantability [sec.16(2)][sec.16(2)]

5.5. Condition implied by custom- Condition implied by custom- fitness for a fitness for a particular purpose may be annexed by the usage of tradeparticular purpose may be annexed by the usage of trade [sec.16(3)][sec.16(3)]

6.6. Sale by sample Sale by sample (sec.17)(sec.17)

7.7. Condition as to wholesomenessCondition as to wholesomeness


Implied WarrantiesImplied Warranties

1. Warranty of quiet possession 1. Warranty of quiet possession [sec.14(b)].[sec.14(b)].

2. Warranty of freedom from 2. Warranty of freedom from encumbrances encumbrances [sec.14(c)].[sec.14(c)].

3. Warranty as to quality or fitness by 3. Warranty as to quality or fitness by usage of trade usage of trade [sec16(4)].[sec16(4)].

4. Warranty to disclose dangerous 4. Warranty to disclose dangerous nature of goods.nature of goods.


When is a condition considered to be a warranty:

According to the Sale of Goods Act, a condition is taken as warranty forrepudiation purpose under the following:i. Where a contract of sale is subject to any condition to be fulfilled by theseller, the buyer may waive the condition or elect to treat the breach ofthe condition as a breach of warranty and not as a ground for treatingthe contract as repudiated. Section 13(1)ii. Where a contract of sale is not severable and the buyer has accepted thegoods or part thereof, the breach of any condition to be fulfilled by theseller can only be treated as a breach of warranty and not as a groundfor rejecting the goods and treating the contract as repudiated, unlessthere is a term of the contract, express or implied, to that effect. Sction13(2)iii. Nothing in this section shall affect the case of any condition or warranty fulfillment of which is excused by law by reason of impossibility orotherwise. Section 13(3)


CAVEAT EMPTORCAVEAT EMPTOR

In a contract of sale of goods the seller In a contract of sale of goods the seller is under no duty to reveal unflattering is under no duty to reveal unflattering truths about the goods sold. Therefore, truths about the goods sold. Therefore, when a person buys some goods, he when a person buys some goods, he must examine them thoroughly. If the must examine them thoroughly. If the goods turn out to be defective or do goods turn out to be defective or do not suit his purpose, he cannot blame not suit his purpose, he cannot blame anybody excepting himself.anybody excepting himself.


Transfer of PropertyTransfer of Property

Goods must be ascertainedGoods must be ascertained Specific goods in a deliverable stateSpecific goods in a deliverable state Specific goods to be put in a deliverable Specific goods to be put in a deliverable

statestate Specific goods in a deliverable state Specific goods in a deliverable state

when the seller has to do anything when the seller has to do anything thereto in order to ascertain pricethereto in order to ascertain price

Sale of unascertained goods and Sale of unascertained goods and appropriationappropriation

Goods sent on approval or “ on sale or Goods sent on approval or “ on sale or return”return”

Reservation of right of disposal Reservation of right of disposal Risk prima facie passes with the Risk prima facie passes with the

property property


Transfer of TitleTransfer of Title

The general rule “ no one can give The general rule “ no one can give that which one has not got”that which one has not got”

Sale by person not the owner – Sale by person not the owner – “effect of estoppel”“effect of estoppel”

Sale by mercantile agentSale by mercantile agent Sale by one of joint ownersSale by one of joint owners Sale by person in possession Sale by person in possession

under voidable contractunder voidable contract Seller in possession after saleSeller in possession after sale Buyer in possession after saleBuyer in possession after sale Sale by an unpaid sellerSale by an unpaid seller


Rules as to delivery of goodsRules as to delivery of goods

Place of deliveryPlace of delivery Time of deliveryTime of delivery Goods in the possession of a third personGoods in the possession of a third person Expenses of deliveryExpenses of delivery Delivery of wrong quantityDelivery of wrong quantity Installment deliveriesInstallment deliveries Delivery to carrier or wharfingerDelivery to carrier or wharfinger Risk where goods are delivered at a distant Risk where goods are delivered at a distant

placeplace Buyer’s right of examining the goodsBuyer’s right of examining the goods AcceptanceAcceptance Buyer not bound to return rejected goodsBuyer not bound to return rejected goods Liability of buyer for neglecting or refusing Liability of buyer for neglecting or refusing

delivery of goodsdelivery of goods


Unpaid Seller

The seller of goods is deemed to be unpaid (Sec. 45-1)

I. When whole of the price has not been paid of tendered.

II. When the bill of exchange or negotiable instrument has been received as a condition of payment and the condition on which it was received has not been fulfilled by the reason on dishonor of the instrument or otherwise.


Features of the Unpaid SellerI. He must sell goods on the cash basis and must be unpaid.II. If he sells on credit basis, he is not an unpaid seller during the period of credit.III. The term of credit has expired and the price has not been paid to him.IV. He must be unpaid wholly or partially. If a part of price remains unpaid, he is

unpaid.V. When the price is paid in the form of negotiable instruments and it has been

dishonored.VI. If buyer offers payment and seller refuses to accept, the seller is not an

unpaid seller.Example:I. Party A sells a car on cash basis to party B and the price has not been received

yet.II. A sells good to B on 5 months credit period and B turns insolvent after 2

months.III. A sells TV set to B on the same day cheque basis, the cheque is dishonored

due to insufficient funds. A is an unpaid seller.


Rights of an Unpaid Seller

The unpaid seller has following rights:1) Rights against the goods.i. Rights of lienii. Right of stoppage of goods in transitiii. Right of rescale2) Rights against buyer personallyi. Suit for priceii. Suit for damages for non-acceptanceiii. Suit for special damages and interest


Rights of lienThe right of lien means lawfully right to retain the goods possession until the

full price is received. An unpaid seller can exercise his right of lien in following cases. Sec 47-49 :

I. Where the goods have been sold on the cash basis.II. Where the goods have been sold on credit basis and the term

of credit has expired.III. Where the buyer has become insolvent even if the period of

credit has not been expired.Other rules to satisfy the conditions for this right areI. The unpaid seller must be in actual possession of the goods

sold.II. It can be exercised even If the documents of title have been

delivered to the buyer.III. It can be exercised for the price and not for other expensesIV. If the seller delivers some goods, it can be exercised on the

remaining.


Termination of right of lienSeller’s right of lien is terminated in following cases.I. When he delivers the goods to the carrier or other

bailey for transmission to the buyerII. When the buyer or his agent lawfully obtains the

possession of the goodsIII. When seller waives his right of lien on the goodsIV. The right of lien once lost will not be restoredV. When the buyer further sells the goods and the seller

agreesExample:A seller “S” sells a TV set to “B” and delivers it to “B” and

since the TV set was not functioning properly, “B” delivered it back to “S” for the repairs. It was held that “S” can not exercise his right of lien over TV set.


Right of stoppage of goods in Transit:

It means stoppage of goods while they are in transit to take possession until the price is paid (sec. 50-52). Unpaid seller can stop the goods in transit in the following cases.

I. While the buyer becomes insolvent.II. While the goods are out of actual

possession of seller, but have not reached buyer’s possession i.e. goods are in transit with career.

III. The unpaid seller can stop the goods in transit only for payment of the price of the goods and not for any other charges.


The unpaid seller can not stop goods in transit in following cases:

I. When the goods reaches the destination.II. While the buyer or his agent takes possession of

delivery even if it is not reached destination.III. In case the carrier is agent of the buyer, the transit

comes to an end the instance carrier receives the goods and seller can not stop the transition

IV. Carrier’s wrongful refusal to deliver goods to the buyer.Example:“A” sells TV set to “B”. “A” delivers the TV to the carrier to

carry it to “B”. Later on gets news that “B” has become insolvent; “A” can stop delivery.


Right of Resale:If a buyer fails to pay or offer the price within a

reasonable time, the unpaid seller has the right to resell the goods in the following circumstances.

a) Where the goods are of perishable nature.b) Where the unpaid seller has exercised his right of lien

or stoppage in transit and gives a notice to buyer of his intension of resell the goods.

c) Where the unpaid seller has expressly reserved his right of resale.

d) Where seller gives notice to the buyer of his intension to resell and the buyer does not pay within a reasonable time, he can

a. Recover loss on resale of the goods, if anyb. Retain any surplus on resale of goods, if any


However if the seller sells without the notice to the buyer, he can not:

a. Recover any loss of the goods, if anyb. Retain any surplus on the resale of the

goods, if anyExample:a) “X” sells vegetable to “Y” on credit, “Y”

does not pay, “X” can resell to any other person.

b) “M” sells 100 blankets to “N” and gives him one week for payment. “N” does not pay. “M” can resell those to any other person.


Suit for Price:

Where ownership of the goods has passed to the buyer and the buyer refuses to pay the price according to the terms of the contract, the seller can sue the buyer for price, irrespective of delivery of the goods. (Sec. 55).


Suit for damages for non-delivery:

Where the buyer refuses to accept and pay for the goods, the seller may sue him for damages for nonacceptance. The seller can recover damages only and not the full price (Sec. 56)


Suit for special damages and Interest:

The seller can sue the buyer for special damages where the parties are aware of such damages at the time of contract. The unpaid seller can recover interest at a reasonable rate on the total unpaid price of goods, from the time it was due until it is paid. (Sec. 61).


Buyer’s right against seller:

• Suit for damages for non-delivery• Suit for specific performance• Suit for damages for breach of

warranty• Suit for cancellation and damages for

breach of contract• Suit for recovery of price with

interest.


Suit for damages for non-delivery:

When the seller wrongfully refuses to deliver the goods to the buyer, the buyer may sue the seller for damages for non-delivery (Sec. 57)


Suit for specific performance

Where there is a breach of contract for sale of specific goods, the buyer may file a suit for specific performance. The remedy is granted when subject matter of the contract is rare goods, say, a picture by a dead painter (Sec. 58)


Suit for damages for breach of warranty

Where there is a breach of warranty, the buyer is entitled to sue for damages if he had paid the price to the seller. But if he has not paid the price yet, he may ask the seller for a reasonable reduction in the price. (Sec. 59)


Suit for cancellation and damages for breach of contract

Where there is a breach of contract by the seller, the buyer may avoid the contract and claim damages.


Suit for recovery of price with interest.

If the buyer has already paid the price to the seller and the seller does not deliver the goods to the buyer, he can sue the seller for refund of price and interest at a reasonable rate. (Sec. 61)


Thank You

Documents

Sale of Goods Act,1930 Presentation