SALES OF GOODS ACT 1930

CONTRACT OF SALE –DEFINED

(SECTION-4)

A contract of sale of goods is a contract whereby the seller

transfers or agrees to transfer the property in

goods for a price

Essentials of contract of sale

A valid contract

Two parties

Transfer the property

Goods

Price

Important distinctions

Sale and agreement to sell

Sale and bailment

Sale and Hire-purchase

Sale and mortgage

Elements of a sale of goods contract

A contract involving

transfer of ownership

in goods

for a money consideration called the price

Not

hire purchase

barter

Leasing

Hire purchase is for a specific item for a specific time, lease purchase is when you lease something with the option to buy it

DEFINITION OF GOODS

SECTION –6 GOODS MEANS

Every kind of movable property other than actionable claims and money and includes stock and shares, growing crops,grass,and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale

Goods Chattels(moveable possession) personal but

not choses in action not growing crops but harvested crops are future goods = to be manufactured specific goods = identified and agreed upon at

time of sale existing goods = in existence but not yet seller's

property unascertained goods = goods not yet

appropriated (devote to special purpose) to this contract

ascertained goods = identified and appropriated

DEFINITION OF PRICE

Price in a contract of sale means the money consideration for sale of goods [Sec.2 (10)]. It must be expressed in money.

MODES OF FIXING PRICE SECTION-9

As expressly stated in the contract I.e by agreement

By the course of dealing between the parties

If nothing is there then reasonable price

Through valuation By the third party

Passing of property and risk

General rule is that risk passes with property unless otherwise agreed

Property passes when goods are ascertained contract is made for sale of specific goods in a deliverable

state when whatever needs to be done to put specific goods in a

deliverable state is done when something that needs to be done to determine price of

specific goods is done and buyer has notice when goods are delivered on approval or sale or return basis

when buyer expressly or impliedly accepts goods

Where non-owner can validly pass title to goods

Nemo dat quod non habet rule – cannot give better title than you have Exceptions to nemo dat

sells with authority of true owner

disposal by mercantile agent

under court order

sale under common law or statutory power

sale under voidable title

sale by seller in possession

sale in market overt

CONDITIONS AND WARRANTIES

SEC-12(1) A stipulation(demand/specify as a part of bargain) in a contract of sale with reference to goods which are subject matter there of , may be a condition or a warranty

The stipulation which are essential for the main purpose of the contract and the breach of which gives rise to right to treat the contract as repudiated is called Condition. Section –12(2)

The stipulation which is collateral(additional but subordinate) to the main purpose of the contract and the breach of which gives rise to claim for damages but not a right to reject the goods and treat it as repudiated is called Warranty Section –12(3)

IMPLIED CONDITIONSCondition as to title:- (sec-14) subject to a contrary intention,there is an implied condition on the part of the seller that in the case of sale, he has a right to sell goods and that in case of the agreement to sell, he will have a right to sell the goods at the time when property is to pass.

Sale by description :- (sec-15) where goods are sold by description, there is an implied condition that the goods shall correspond with the description. This rule is based on the maxim,”if you contract to sell peas,you cannot oblige a party to take beans.Sale by sample as well as description;-(sec-15) if the sale is by sample as well as description, it is not sufficient that the bulk of the goods shall correspond with the sample,if the goods do not also correspond with the description.thus should correspond with both sample as well description.

Condition as to quality or fitness ;- su

bject to the provisions of this act, and of any other law for a time being in force,there is no implied condition as to quality or fitness for any particular purpose of goods supplied. But where the buyer expressly or by implication makes known to the seller the particular purpose for which the goods are required.

Condition as to merchantability ;- there is always an implied condition in a contract of sale that the goods purchased should be of merchantable quality.thus where goods are brought by description from a seller,who deals in such goods,there is an implied condition as to merchantability

Merchantability means;- that the article sold must be of such quality and in such condition that reasonable man would accept the article as performance of a promise

SALE BY SAMPLE ;- In the contract of sale by sample, there is an implied condition-

(i) That the bulk shall correspond with the sample in quality(ii) That the buyer should have reasonable opportunity of

comparing the bulk with the sample(iii) That the goods shall be free from any defect rendering them

unmerchantable, which would not apparent on reasonable examination

CONDITION AS TO CUSTOM OR USAGE;- An implied condition as to quality or fitness for a particular purpose may be annexed by custom or usage of trade (sec-16(3))

IMPLIED WARRANTIES

Implied warranty of quiet possession – Buyer will shall enjoy quiet possession of goods. Buyer shall have the possession and enjoyment of goods.

Implied warranty of freedom from encumbrances

Implied warranty annexed by usage of trade.

CAVEAT EMPTOR

Let the buyer beware

Exceptions;-

where the buyer relies on the skill and judgment of the skill

Merchantability quality of goods – where the goods are bought by description.

Consent by fraud – false representation.

Usage of trade

Difference between Transfer of Property and Possession,

Transfer of property means transfer of ownershipRisk of loss also passes with ownership to buyerWhen the goods are destroyed or damaged ,only the owner can sueThe seller can sue for price only if the ownership of goods has been transferred to the buyer

Transfer of possession means property just passes

Risk of loss remains with the seller

Possessor does not have the right to sue

This is not in case of transfer of possession

Express and implied terms in a sale of goods contract (conclusion)

Express terms are those expressly agreed upon and included in the agreement

Terms implied by custom, usage or statute

Terms are either conditions – essential – or warranties – subsidiary – less important

Remedies depend on significance of breached term condition treat contract as terminated and sue for

damages or affirm

warranty sue for damages only

Implied conditions under Sale of Goods Act

that seller has the right to sell the goods

that unascertained goods when delivered will correspond with description or sample

where buyer relies on seller, that the goods are fit for purpose

where the goods are bought by description from a dealer that they are of merchantable quality

Implied warranties under Sale of Goods Act

that buyer shall have and enjoy quiet possession of goods

the goods shall be free of any charge or encumbrance

Terms implied under sale of Goods Act can be excluded

Similar terms implied under Trade Practices Act – non-excludable

Remedies for breach of a sale of goods contract

Failure to deliver goods or to pay for them will amount to breach of the sales contractRemedies of unpaid seller lien against goods (sec-47-49) right of stoppage in transit right of retention of goods right of resale (sec-54) sue for price if it is due and payable sue for damages for non-acceptance

Rights of buyer reject the goods recover the price sue for damages for breach of warranty sue for damages for non-delivery sue for specific performance sue in detinue or conversion

Auction salesLegislative provisions changeable by agreement between partiesAuction sale is a contractEach lot is subject of a separate contractBidder makes offer, acceptance is at fall of hammer. Auctioneer can refuse to accept bidNormally sellers cannot bid for own goods but can reserve the right to bidAuction may be subject to reserve priceWhere no reserve auctioneer may refuse to accept bid – can specify this right in sale conditions.