Sale of Goods Act 1930Sale of Goods Act 1930

Contd -Contd -

Act Deals with goodsAct Deals with goods Sec 4(1) – contract of sale – Contract of sale Sec 4(1) – contract of sale – Contract of sale

of goods is a contract whereby the seller of goods is a contract whereby the seller transfers or agrees to transfer the property transfers or agrees to transfer the property in goods to the buyer for a price.in goods to the buyer for a price.

Essential elementsEssential elements

Contract of saleContract of sale

Contract of sale and agreement to Contract of sale and agreement to sellsell

Condition and warrantiesCondition and warranties

Both seller and buyer make representations Both seller and buyer make representations to each other at the time of entering into to each other at the time of entering into contract of sale.contract of sale.

Some of these representations are mere Some of these representations are mere opinions which do not form a part of the opinions which do not form a part of the contract of the sale. Whereas some become contract of the sale. Whereas some become part of the contract of salepart of the contract of sale

Contd -Contd -

Representations which become part of the Representations which become part of the contract of sale are termed as stipulations contract of sale are termed as stipulations which may rank as condition or warrantywhich may rank as condition or warranty

StipulationStipulation – Sec 12(1) – A stipulation in a – Sec 12(1) – A stipulation in a contract of sale of goods may be a condition contract of sale of goods may be a condition or warranty.or warranty.

Meaning of conditionMeaning of condition

A condition is a stipulation –A condition is a stipulation – (a) which is essential to the main purpose of the (a) which is essential to the main purpose of the

contractcontract (b) the breach of which gives the aggrieved (b) the breach of which gives the aggrieved

party a right to terminate the contract.party a right to terminate the contract. It goes to the root of the contract.It goes to the root of the contract. Its non-fulfillment upsets the very basis Its non-fulfillment upsets the very basis

of the contract.of the contract.

WarrantyWarranty

It is a stipulation collateral to the main It is a stipulation collateral to the main purpose of the contractpurpose of the contract

It is of secondary importanceIt is of secondary importance If there is a breach of a warranty, the If there is a breach of a warranty, the

aggrieved party can only claim damages and aggrieved party can only claim damages and it has no right to treat the contract as it has no right to treat the contract as repudiated.repudiated.

Condition and warrantiesCondition and warranties

There is no hard and fast rules as to which There is no hard and fast rules as to which stipulation is a condition and which one is a stipulation is a condition and which one is a warranty.warranty.

Whether a stipulation is a condition or a Whether a stipulation is a condition or a warranty depends in each case on the warranty depends in each case on the construction of the contract as a whole.construction of the contract as a whole.

The court is not to be guided by the The court is not to be guided by the terminology used by the parties to the terminology used by the parties to the contractcontract

Basis of distinctionBasis of distinction

Condition Condition It is a stipulation which is It is a stipulation which is

essential to the main essential to the main purpose of the contract.purpose of the contract.

The aggrieved party can The aggrieved party can terminate the contractterminate the contract

A breach of condition can A breach of condition can be treated as a breach of be treated as a breach of warranty . For example, a warranty . For example, a buyer may like to retain buyer may like to retain the goods and claim only the goods and claim only damages.damages.

WarrantyWarranty It is a stipulation which is It is a stipulation which is

only collateral to the main only collateral to the main purpose of the contractpurpose of the contract

The aggrieved party can The aggrieved party can claim damages but cannot claim damages but cannot terminate the contract.terminate the contract.

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

Conditions and warrantiesConditions and warranties Two kinds – express and impliedTwo kinds – express and implied Express conditions and warranties – Conditions Express conditions and warranties – Conditions

and warranties expressly provided in the contractand warranties expressly provided in the contract Implied conditions – They are implied by the law Implied conditions – They are implied by the law

into the contract – into the contract – Condition as to titleCondition as to title Sale by descriptionSale by description Sale by sampleSale by sample Condition as to the quality of the itemsCondition as to the quality of the items

Conditions and warrantiesConditions and warranties

Implied warranties –Implied warranties – Warranty of quite possessionWarranty of quite possession Warranty as to freedom from Warranty as to freedom from

encumbrancesencumbrances Warranty to disclose dangerous nature of Warranty to disclose dangerous nature of

goodsgoods

Doctrine of caveat emptorDoctrine of caveat emptor

““Let the buyer beware”Let the buyer beware” It is the duty of the buyer to be careful while It is the duty of the buyer to be careful while

purchasing goods of his requirement and in purchasing goods of his requirement and in the absence of the enquiry from the buyer, the absence of the enquiry from the buyer, the seller is not bound to disclose every the seller is not bound to disclose every defect in the goods of which he may be defect in the goods of which he may be cognisant.cognisant.

Exceptions to the doctrine of Exceptions to the doctrine of caveat emptorcaveat emptor

In case of misrepresentation by the sellerIn case of misrepresentation by the seller In case of concealment of latent defectIn case of concealment of latent defect In case of sale by descriptionIn case of sale by description In case of sale by sampleIn case of sale by sample In case of sale by sample and descriptionIn case of sale by sample and description Fitness for a particular purposeFitness for a particular purpose Merchantable qualityMerchantable quality

Passing of propertyPassing of property Transfer of property in goods from the seller to Transfer of property in goods from the seller to

the buyer is the main object of a contract of sale.the buyer is the main object of a contract of sale. ““property in goods” means the ownership of property in goods” means the ownership of

goodsgoods An article may belong to A although it may not be An article may belong to A although it may not be

in his possession. B may be in possession of that in his possession. B may be in possession of that article although he is not its owner.article although he is not its owner.

It is important to know the precise moment of It is important to know the precise moment of time at which the property in goods passes from time at which the property in goods passes from the seller to the buyer for the following reasons the seller to the buyer for the following reasons

Contd -Contd - Significance – Time of transfer of ownership of Significance – Time of transfer of ownership of

goods decides various rights and liabilities of the goods decides various rights and liabilities of the seller and buyer.seller and buyer.

Risk – Owner to bear the risk and not the person Risk – Owner to bear the risk and not the person who merely hs the possessionwho merely hs the possession

Action against third party – Owner can take action Action against third party – Owner can take action and not the person who merely has possession.and not the person who merely has possession.

Types of goodsTypes of goods

Types of existing goodsTypes of existing goods

Specific goodsSpecific goods Ascertained goodsAscertained goods Unascertained goodsUnascertained goods Goods sent “on approval” or “on sale on Goods sent “on approval” or “on sale on

return basis”return basis”

Primary rulesPrimary rules Goods must be ascertained – Where there is a Goods must be ascertained – Where there is a

contract for the sale of unascertained goods, no contract for the sale of unascertained goods, no property in the goods is transferred to the buyer property in the goods is transferred to the buyer unless and until the goods are ascertained.unless and until the goods are ascertained.

Intention of the parties –Where there is a contract Intention of the parties –Where there is a contract for the sale of specific or ascertained goods the for the sale of specific or ascertained goods the property in them passes to the buyer at the time property in them passes to the buyer at the time when the parties intend it to pass when the parties intend it to pass

Contd -Contd - Where the intention of the parties cannot be Where the intention of the parties cannot be

ascertained from the contract-ascertained from the contract- Specific goods –Specific goods –

Passing of the property at the time of the contract – Passing of the property at the time of the contract – Where there is an unconditional contract for the sale Where there is an unconditional contract for the sale of specific goods in a deliverable state, the property of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is in the goods passes to the buyer when the contract is made.made.

Contd-Contd- Passing of property delayed beyond the Passing of property delayed beyond the

date of the contractdate of the contract (1) Goods not in a deliverable state –Where (1) Goods not in a deliverable state –Where

there is a contract for the sale of specific goods there is a contract for the sale of specific goods not in a deliverable state,ie, the seller has to do not in a deliverable state,ie, the seller has to do something to the goods to put them into a something to the goods to put them into a deliverable state, the property does not pass deliverable state, the property does not pass until such thing is done and the buyer has until such thing is done and the buyer has notice of it.notice of it.

Contd - Contd - (2) When the price of goods is to be ascertained (2) When the price of goods is to be ascertained

by weighing, etc. – Where there is a contract for by weighing, etc. – Where there is a contract for the sale of specific goods in a deliverable state, the sale of specific goods in a deliverable state, but the seller is bound to weigh measure test or but the seller is bound to weigh measure test or to do some other act or thing with reference to to do some other act or thing with reference to the goods for the purpose of ascertaining the the goods for the purpose of ascertaining the price the property does not pass until such act price the property does not pass until such act or thing is done and the buyer has notice or thing is done and the buyer has notice thereof thereof

Contd -Contd - Unascertained goods – Unascertained goods –

Where there is a contract for the sale of Where there is a contract for the sale of unascertained goods, the property in the goods unascertained goods, the property in the goods does not pass to the buyer until the goods are does not pass to the buyer until the goods are ascertained. Until the goods are ascertained ascertained. Until the goods are ascertained there is merely an agreement to sell.there is merely an agreement to sell.

Contd -Contd - Where there is a contract for sale of Where there is a contract for sale of

unascertained or future goods by description unascertained or future goods by description and goods of that description and in a and goods of that description and in a deliverable state are unconditionally deliverable state are unconditionally appropriated to the contract, the property in appropriated to the contract, the property in the goods thereupon passes to the buyer. the goods thereupon passes to the buyer.

““ascertainment of goods’, “unconditional ascertainment of goods’, “unconditional appropriation to the contract”appropriation to the contract”

Delivery to carrier Delivery to carrier A seller is deemed to have unconditionally A seller is deemed to have unconditionally

appropriated the goods to the contract appropriated the goods to the contract where he delivers them to the buyer or to a where he delivers them to the buyer or to a carrier or other bailee for the purpose of carrier or other bailee for the purpose of transmission to the buyer and does not transmission to the buyer and does not reserve the right of disposal.reserve the right of disposal.

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

When goods are delivered to the buyer on When goods are delivered to the buyer on approval or ‘on sale or return’ or other approval or ‘on sale or return’ or other similar terms the property therein passes to similar terms the property therein passes to the buyer –the buyer – (1) When he signifies his approval or (1) When he signifies his approval or

acceptance to the seller:acceptance to the seller: (2)When he does any other act adopting the (2)When he does any other act adopting the

transactiontransaction

Reservation of right of disposal Reservation of right of disposal

The property in goods whether specific or The property in goods whether specific or subsequently appropriated to the contract subsequently appropriated to the contract does not pass to he buyer if the seller does not pass to he buyer if the seller reserves the right of disposal of goods until reserves the right of disposal of goods until certain conditions are fulfilled.certain conditions are fulfilled.

Transfer of Title by Person not the Transfer of Title by Person not the ownerowner

General rule – Only the Owner of goods can sell the General rule – Only the Owner of goods can sell the goodsgoods

No one can give a better title than what he himself No one can give a better title than what he himself has. has.

This rule is expressed by the maxim, ‘This rule is expressed by the maxim, ‘Nemo Dat Nemo Dat Quod Non HabetQuod Non Habet‘ - no one can pass a better title than ‘ - no one can pass a better title than he himself possess. he himself possess.

Thus, even a bonafide buyer who buys stolen goods Thus, even a bonafide buyer who buys stolen goods from a thief or from a transferee from such thief can from a thief or from a transferee from such thief can get no valid title to them since the thief has no title, get no valid title to them since the thief has no title,

nor nor he could give one to any transfereehe could give one to any transferee

Exceptions to the general ruleExceptions to the general rule

1.1. Sale by a mercantile agent Sale by a mercantile agent

2.2. Sale by a joint ownerSale by a joint owner

3.3. Sale by a person in possession under a voidable Sale by a person in possession under a voidable contractcontract

4.4. Sale by a seller in possession of goods after saleSale by a seller in possession of goods after sale Sale by a buyer in possession of goodsSale by a buyer in possession of goods

1.1. Sale by an unpaid sellerSale by an unpaid seller

2.2. Exceptional cases under other ActsExceptional cases under other Acts

Performance of the Contract of Performance of the Contract of SaleSale

The contract of sale of goods is to be performed. The contract of sale of goods is to be performed. Duties of the Seller and the Buyer.Duties of the Seller and the Buyer.

It is the duty of the seller to deliver the goods and of It is the duty of the seller to deliver the goods and of the buyer to accept and pay for them, in accordance the buyer to accept and pay for them, in accordance with the terms of the contract of sale (s.31). with the terms of the contract of sale (s.31).

The seller has the duty of giving delivery of goods The seller has the duty of giving delivery of goods according to the (i) terms of the contract, and (ii) according to the (i) terms of the contract, and (ii) rules contained in the Act. rules contained in the Act.

Delivery.Delivery. A voluntary transfer of possession from one person to A voluntary transfer of possession from one person to

another . another . The delivery of goods sold may be made by doing anything The delivery of goods sold may be made by doing anything

which the parties agree shall be treated as delivery or which the parties agree shall be treated as delivery or which has the effect of putting the goods in the possession which has the effect of putting the goods in the possession of the buyer or of any person authorised to hold them on of the buyer or of any person authorised to hold them on his behalf. his behalf.

Therefore, any other act, in addition to transfer of physical Therefore, any other act, in addition to transfer of physical possession, which the parties agree to treat as equivalent possession, which the parties agree to treat as equivalent thereto, has the effect of delivery.thereto, has the effect of delivery.

Actual delivery and Constructive deliveryActual delivery and Constructive delivery

Rights of an unpaid sellerRights of an unpaid seller Meaning of an unpaid seller – Sec 45(1)(2)Meaning of an unpaid seller – Sec 45(1)(2)

The seller of the goods is deemed to be an The seller of the goods is deemed to be an ‘unpaid seller’ -‘unpaid seller’ -

(a) When whole of the price has not been paid or (a) When whole of the price has not been paid or tenderedtendered

(b) When a bill of exchange or other negotiable (b) When a bill of exchange or other negotiable instrument (such as cheque) has been received as instrument (such as cheque) has been received as conditional payment and it has been dishonoured conditional payment and it has been dishonoured [sec 45(1)][sec 45(1)]

Contd -Contd - The seller shall be called an unpaid seller even The seller shall be called an unpaid seller even

when only a small portion of the price remains when only a small portion of the price remains to be paid.to be paid.

It is for the non-payment of the price and not It is for the non-payment of the price and not for other expenses that a seller is termed as an for other expenses that a seller is termed as an unpaid seller.unpaid seller.

Where the goods have been sold on credit, the Where the goods have been sold on credit, the seller cannot be called as an unpaid seller seller cannot be called as an unpaid seller during the credit period unless the buyer during the credit period unless the buyer becomes insolvent. On the expiry of credit becomes insolvent. On the expiry of credit period if the price remains unpaid, then only period if the price remains unpaid, then only the seller will become an unpaid sellerthe seller will become an unpaid seller

Contd -Contd -

Where the full price has been tendered by Where the full price has been tendered by the buyer and the seller refused to accept it, the buyer and the seller refused to accept it, the seller cannot be called as an unpaid the seller cannot be called as an unpaid seller.seller.

Rights of an unpaid sellerRights of an unpaid seller Against goodsAgainst goods Against buyer personallyAgainst buyer personally

AGAINST GOODSAGAINST GOODS

Where the property in goods has passed to the buyer

Where the property in goods has not passed to the buyer

Contd -Contd -

Where the property in goods has passed to Where the property in goods has passed to the buyerthe buyer

Right of lien

Right of stoppage in transit

Right of resale

Right of lienRight of lien

The right of lien means the right to retain The right of lien means the right to retain the possession of the goods until the full the possession of the goods until the full price is received.price is received.

Circumstances under the right of lien can be Circumstances under the right of lien can be exercisedexercised Where the goods have been sold without any Where the goods have been sold without any

stipulation to creditstipulation to credit Where the goods have been sold on credit, but the Where the goods have been sold on credit, but the

term of credit has expiredterm of credit has expired Where the buyer becomes insolventWhere the buyer becomes insolvent

Right of stoppage of goods in Right of stoppage of goods in transittransit

Right of stoppage in transit means the right Right of stoppage in transit means the right of stopping the goods while they are in of stopping the goods while they are in transit, to regain possession and to retain transit, to regain possession and to retain them till the full price is paid.them till the full price is paid.

Conditions under which Right of stoppage Conditions under which Right of stoppage in transit can be exercisedin transit can be exercised (i)Seller must have parted with the possession (i)Seller must have parted with the possession

of goods,ie, the goods must not be in the of goods,ie, the goods must not be in the possession of the sellerpossession of the seller

Contd -Contd - (ii) the goods must be in course of transit(ii) the goods must be in course of transit (iii) buyer must have become insolvent(iii) buyer must have become insolvent

Right of resaleRight of resale An unpaid seller can resell the goods under the An unpaid seller can resell the goods under the

following circumstances:following circumstances: (i) Where the goods are of a perishable nature(i) Where the goods are of a perishable nature (ii) Where the seller expressly reserves the right of (ii) Where the seller expressly reserves the right of

resale if the buyer commits a default in making resale if the buyer commits a default in making paymentpayment

(iii)Where the unpaid seller who has exercised his right (iii)Where the unpaid seller who has exercised his right of lien or stoppage in transit gives a notice to the buyer of lien or stoppage in transit gives a notice to the buyer about his intention to resell and buyer does not pay or about his intention to resell and buyer does not pay or tender within a reasonable time. tender within a reasonable time.

Contd -Contd -

Where the property in goods has not passed Where the property in goods has not passed to the buyerto the buyer

Withholding delivery Lien Stoppage in

transitResale

Contd -Contd -

Against the buyer personallyAgainst the buyer personally

Suit for price

Suit for damages

Suit for interest

Contd -Contd -

Buyer’s suitsBuyer’s suits (a) Suit for damages for non-delivery of the (a) Suit for damages for non-delivery of the

goodsgoods (b) suit for specific performance(b) suit for specific performance (c) Suit for breach of warranty(c) Suit for breach of warranty (d)Suit for interest(d)Suit for interest (e)Suit for damages for repudiation of contract (e)Suit for damages for repudiation of contract

by the seller before the due date.by the seller before the due date.

Remedies for breach of contract Remedies for breach of contract of saleof sale

(1) seller’s suits(1) seller’s suits (a) Suit for price(a) Suit for price (b) Suit for damages for non acceptance of the (b) Suit for damages for non acceptance of the

goodsgoods (c) Suit for damages for repudiation of contract (c) Suit for damages for repudiation of contract

by the buyer before the due dateby the buyer before the due date (d) Suit for interest.(d) Suit for interest.

Passing of Property in Goods in Passing of Property in Goods in the Case of Foreign Trade.the Case of Foreign Trade.

F.O.B. contractsF.O.B. contracts. - This means that the property in goods passes to . - This means that the property in goods passes to

the buyer only after the goods have been loaded on board the the buyer only after the goods have been loaded on board the

ship, and accordingly, the risk attaches to the buyer only on ship, and accordingly, the risk attaches to the buyer only on

shipment of goods. shipment of goods.

C. I. F contractsC. I. F contracts. - It is a contract for the sale of insured goods, lost . - It is a contract for the sale of insured goods, lost

or not lost, to be implemented by the transfer of certain or not lost, to be implemented by the transfer of certain

documents. These documents are (i) Bill of lading; (ii) Insurance documents. These documents are (i) Bill of lading; (ii) Insurance

policy; (iii) Invoice; (iv) A certificate of origin. policy; (iii) Invoice; (iv) A certificate of origin.

Ex-ship contracts. - Ex-ship contracts. - Under this agreement the seller has to deliver Under this agreement the seller has to deliver

the goods to the buyer at the port of destination. The price the goods to the buyer at the port of destination. The price

quotation will include all expenses up to the point of delivery of quotation will include all expenses up to the point of delivery of

the goods at the port of destination.the goods at the port of destination.