Naveed Butt

Mohsin Fayyaz

Bilal Islam

Sabahat Malik

Sale of Goods Act, 1930 Definition Essentials of a Contract of Sale How contract is made Condition of a contract of sales of goods And exemptions in contract of sales

Definition It is a contract by which the ownership

of movable goods is transferred from the seller to the buyer. The term ‘contract of sale’ is defined in Section 4(1) of the Sale of Goods Act as-

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

transfers or agrees to transfer the property in goods to the buyer for

a price”.

Essentials of a Contract of Sale

(i) All requirements of a valid contract must be fulfilled

(ii) Two Parties

(iii) Goods

(iv) Transfer of Property/ownership

(v) Price

(vi) Includes both a ‘sale’ and ‘agreement to sale’

(vii) No formalities are required

Price

Exchange or sale

Mode of determining of price [ section 9(1)]

The price in a contract of sale may be Fixed by contract By third parties

Goods

The subject matter of a contract of sale of goods is goods. According to Sec 2(7) “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 contract of sale.

Actionable claim Means a claim which can be

enforced through the court of law e.g. a debt due from one person to another is an actionable claim.

Examples of Goods Goodwill, Trade Mark, Copyright,

Patent right, Water, Gas, Electricity, machines, animals are all example of goods.

Classification of Goods Existing Goods Specific goods Unascertained goods Future Goods:- This is applicable to

goods which are subject matter of the agreement to sale.

Contingent Goods:- i.e. the goods arriving by ships etc.

Sale & Agreement to sell

The ownership is transferred immediately.

Executed contract. A seller can sue for

price. He has all the right of

unpaid seller. Sale takes place in

the case of existing goods usually.

A buyer bears the risk.

At some future date.

Executory Contract

A seller can sue for damages.

An agreement to sell takes place in the case of future goods.

A seller bears the risk.

How Contact of sale is made A contract of sale is made by an offer to buy or sell

goods for a price and the acceptance of such offer. The contract may provide for the immediate

delivery of the goods or immediate payment of the price or both, or for the delivery or payment by installments, or that the delivery or payment or both shall be postponed.

Subject to the provisions of any law for the time being in force, a contract of sale may be made in writing or by word of mouth, or partly in writing and partly by word of mouth or may be implied from the conduct of the parties.  

Performance of the Contract Duties of seller and buyer:- It is the duty of the seller to deliver

the goods and of the buyer to accept and pay for them, in accordance with the terms of the contract of sale.

Delivery:- Delivery of goods sold may be made by doing anything which the parties agree shall be treated as delivery or which has the effect of putting the goods in the possession of the buyer or of any person authorized to hold them on his behalf.

Effect of part delivery:- A delivery of part of goods, in progress of the delivery of the whole has the same effect, for the purpose of passing the property in such goods, as a delivery of the whole, but a delivery of part of the gods, with an intention of severing it from the whole, does not operate as a delivery of the remainder.

Stipulation, Condition & Warranty

A representation which forms part of the contract of sale and affects the contract, is called a ‘stipulation’.

A stipulation which is most important for formation of the contract of sale is known as a ‘condition’.

A stipulation which is collateral or of least importance for the formation of the contract of sale, is known as a ‘warranty’.

Unpaid seller’s rights Subject to the provisions of this Act and of any law for the for

the time being in force, not with standing that the property in the goods may have passed to the buyer, the unpaid seller of goods, as such, has by implication of law.

I. a lien on the goods for the period while he is in possession of them,

II. in case of the insolvency of the buyer a right of stopping the goods in transit after he has parted with the possession of them.

III. a right of re-sale as limited by this Act. Where the property in goods has not passed to the buyer,

the unpaid seller has, in addition to his other remedies, 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.

Conditions

Section 12(2) of the Sale of Goods Act, 1930 defines condition as, “a condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to right to treat the contract as repudiated.”

Example: Buyer wanted a horse which could run at a speed of 45 m.p.h.

Implied Conditions Condition as to Title [Sec 14(a)] Condition as to Description [Sec 15] Condition as to Sample [Sec 17(2)] Condition as to Sample as well as

Description [Sec 15] Condition as to Quality or Fitness for

Buyer’s purpose [Section 16(1)] Condition as to Merchantability [Section

16(2)] Condition as to Wholesomeness

Condition as to Title [Sec 14(a)]

It is the most important implied condition in a contract of sale that seller has the right to sell the goods.

Condition as to Description [Sec 15]

Whenever the goods are sold by description, the implied condition is that the goods shall correspond with the description.

Condition as to Sample In a sale by sample there is a implied condition

that the goods shall correspond with the sample in quality, and the goods shall be free from the defects which render them un-merchantable.

Sale by sample has following three conditions:

1. Correspondence of Goods with sample in quality [sec 17(2)(a)]

2. Reasonable opportunity of comparing goods with the sample [Sec 17(2)(b)]

3. Merchantability of Goods [Sec 17(2)(c)]

Condition as to Sample as well as Description [Sec 15]

Sometimes, the seller shows sample to the buyer and also gives him description. In such case, the implied condition is that the goods shall correspond with both, the sample as well description.

Condition as to Merchantability [Section 16(2)]

The term merchantability means two things: If goods are purchased for resale, they

should be immediately re-saleable

& If goods are purchased for self use then

they should be reasonably fit for the purpose for which they are generally used.

.

Condition & Warranties

Condition is a stipulation which is essential to the main purpose of the contract.

It is of vital importance In case of breach of

condition, the buyer may put an end to the contract.

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

Warranties are subsidiary or collateral to the main purpose of the contract.

It is not of vital importance. The main contract can be completed even if warranty is not fulfilled.

In case of breach of warranty, the buyer cannot put an end to the contract He can only claim damages from the seller.

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

Doctrine of Caveat Emptor [Sec 16] The doctrine of caveat emptor is a

fundamental principle of law of sale of goods. It means ‘Caution Buyer’ i.e. ‘let the buyer beware’. In other words, it is no part of the seller’s duty to point out defects in his own goods. The buyer must inspect the goods to find out if they will suit his purpose e.g. certain pigs are sold ‘subject to all faults’. These pigs being infected cause typhoid to the other healthy pigs of the buyer. The rule of caveat emptor would apply.

Exceptions to the Doctrine of Caveat Emptor

Condition as to Quality or Fitness for Buyer’s purpose.

Where the seller makes a false representation or obtains consent of the buyer by fraud.

Condition as to Merchantability. Condition as to Wholesomeness. Condition implied by the Custom or

Trade Usage