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STUDY NOTE 2 : THE SALE OF GOODS ACT, 1930

SECTION 1:

COMMENCEMENT AND APPLICABLE

APPLICABILITY OF THE ACT

This act extends to whole of India, except the State of Jammu and Kashmir.

This act came into force w.e.f. 1 July 1930.

The contract of sale includes both a sale as sell as an agreement to sell.

The word Indian was omitted the title of the Act in 1963 (22 sept.)

This Act does not deal with the sale of immovable property.

The transaction relating to immovable properties, e.g., the sale, lease, gifts, etc.,
are governed by a separate Act known as Transfer of Property Act, 1882. This
Act is beyond the scope of this book.
DEFINITIONS (Sec. 2)

Buyer Sec 2 (1)

A person, who buys or agrees to buy the goods.

Delivery Sec (2)
It means voluntary transfer of possession from one person to another.

Delivery State Sec 2(3)

Goods are said to be in delivered state, when they are in such state that the Buyer

would be bound to take the delivery of them in accordance with the contract.
Documents of title to Goods 2(4)
A document of the title to goods may be described as any document used as proof

of the possession or control of goods, authorizing or purporting to authorize,

either by endorsement or by delivery, the possessor of the document to transfer or
receive goods thereby represented.
Section 2(4) of the Sale of Goods Act, 1930 recognizes the following as
documents of title to goods:

(i) Bill of lading,

(ii) Dock warrant,
(iii) Warehousekeepers certificate,
(iv) Wharfingers certificate,
(v) Railway receipt,
(vi) Multi modal transport document,
(vii) Warrant or order for the delivery of goods, and
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(viii) Any other document used in the ordinary course of business as document of
title (as described in the preceding paragraph).
Document of Title v. Document showing the title :

A document of title enables a person named therein to transfer the property by mere
endorsement and delivery, whereas a document showing title does not confer any right to
transfer by way of endorsement and delivery.
For example, a share certificate shows that the person named therein is entitled to the
shares represented by it, but does not allow transfer of the shares by mere endorsement
and delivery of the certificate.

Goods Sec 2 (7)

Goods mean every kind of movable property.

Other than actionable claims and money, and it includes.

stock and shares, growing crops, grass and things attached to or forming part of
land which are agreed to be severed before sale or under the contract of sale.

You may notice that money and actionable claims have been expressly
excluded from the term goods. Money means the legal tender. Money does
not include old coins and foreign currency. They can, therefore, be sold or
bought as goods. Sale and purchase of foreign currency is, however, also
regulated by the foreign Exchange Management Act,

Actionable claims, like debts, are things which a person cannot make use of, but
which can be claimed by him by means of a legal action. Actionable claims
cannot be sold or purchased like goods, they can only be assigned, as per the
provisions of Transfer of property Act.

Grass, growing crops, trees to be cut and their log wood to be delivered, malba of
a building to be demolished, etc. are goods. Similarly, things like goodwill,
copyright, trade mark, patents, water, gas electricity are all goods and may be the
subject matter of a contract of sale.

Seller Sec 2 (13)

A person, who sells or agrees to sell the goods,.

Agreement to sell

Where transfer of property in goods takes place at future date.

Sale

Where transfer of property in goods takes place at the time of contract.

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ESSENTIAL ELEMENTS OF VALID CONTRACT OF SALES

The following are the essentials of valid contract of sale:

There must be two parties, one seller and other buyer.

Seller and buyer must be different.

Part owner can sell goods to another part owner.

Partners are not regarded as separate persons for the purpose of sale of the
partnership property. They are the joint owners of the goods and as such they
cannot be both sellers and buyers [State of Gujarat v. Ramanlal S & W.
(1965)]. But, a partner may buy goods from the firm or sell goods to the firm.

There must be movable goods as subject matter of contract.

There must be a transfer of property in goods. It means general property.

(i.e. ownership)

There must be price involved. Price means money consideration for sale of
goods.
Exchange of goods for goods is barter.
If Exchange is for partly goods and partly for money it is sale.

All essential elements of valid contract must be observed.

The contract of sale can be entered into, expressly or impliedly.

Formation. The contract of sale may provide for any of the following methods.

Immediate delivery of goods.

Immediate payment of price but delivery at some future date.

Immediate payment of price and immediate delivery of goods.

Delivery or payment or both made in installments.

Delivery or payment or both will be made at future date.

TRANSFER OF PROPERTY IN GOODS

Property means general property in goods and not merely special property in goods. It
means ownership of goods. Special property in goods means possession of goods.

Cases where property in goods is not transferred:

Bailment
Creating charge or pledge

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Difference Between Sale and Agreement to Sell

Immediate transfer of ownership to buyer

It is executed contract
It creates right in rem for buyer
Seller can use for price if not buyer
Risk passes to buyer
Buyer can get goods even if seller has
becomes insolvent
Delivery to receiver if buyer becomes
insolvent before the payment of price

Ownership remains with the seller

It is an executory contract
It provides right in personam for buyer and seller
Seller can sue for damages
Risk doesnt passes to buyer
Buyer can get proportionate share in money but
cant get goods
Delivery can be refused by seller if buyer
becomes insolvent.

Difference between Sale and Hire Purchase

Metter
Meaning

Sale
Hire Purchase
Property in goods is transferred Agreement where hirer uses goods
from seller to buyer immediately by paying regular installment and
having option to purchase goods on
payment of last installment

Applicable Act
Parties
How it made?
Transfer of ownership

Sale of goods Act, 1930

Buyer and seller
Orally or in writing
Immediately buyer becomes
owner of goods
Risk of loss passes to buyer

Risk of loss
Return of goods
Legal
effect
Installment
Sale tax

Hire Purchase Act, 1972

Hirer and Hire vendor
Only in writing Valid
When hirer paid last installment

Ownership not transferred hire

vendor is liable
Anytime terminate agreement and
Buyer cant return goods
return
of Buyer remain liable to pay Each installment paid is treated as
hire charges
unpaid installment only
When all installment is paid
Payable immediately
Difference between Sale and Bailment

Sale
Transfer of property in goods for price
Property is transferred
Consideration is in form of price, i.e., money
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Bailment
Delivery of goods for specific purpose that it
will be returned to bailor or disposed of as per
his direction
It remains with bailor.
Gratuitous bailment is possible
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Goods not returned to seller

Goods returned to bailor purpose of bailment

is over
CONTRACT FOR WORK AND SKILL

Some contract involves use of both service and goods. This type of contract is considered
as contract for work and skill.

This kind of contract involves exercise of skill and labour by one party on some goods or
materials supplied by other party or supplied by party who exercise skill and labour for
price. It is immaterial who supply material. Alternatively, it can be said that in this kind
of contract, main purpose is to exercise work and skill. Supply of own goods is only
subsidiary. Intension of parties is to transfer goods only after exercise of some skill and
labour.

As it is not falling within categories of contract for Sale no sales tax is payable.
Example:
(1)
A dentist agreed to supply a set of artificial teeth to a patient. The material was
wholly found by the dentist. Held, it was a contract for the sale of goods.
(2)
An artist was asked to paint a portrait. The material was supplied by the party and
not by the painter. It was held to be a contract for work and labour and not of
sale.
CLASSIFICATION OF GOODS
GOODS
Existing

Specific

Future

Contingent

Ascertained Unascertained

Types of Goods

The goods may be classified into following categories:

Existing goods

Existing goods are the goods, which are owned and possessed by the seller at the time of
sale. Existing goods may be of three types;

(a) Specific Goods:

The goods, which are identified and agreed upon by the parties at the time of contract of
sale.
It should be noted that the goods must be both identified and agreed upon.
(b) Unascertained Goods:
These are the goods, are not identified and agreed upon at the time of the contract of sale.
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These goods are merely described by the parties at the time of contract of sale.

(c) Ascertained Goods:

There are the goods, which are identified after the formation of contract of sale. When
the un-ascertained goods are identified and agreed upon by the parties, the goods are
known as ascertained goods.
Future Goods

Future goods are those goods, which do not exist at the time of the contract of sale.
These goods are to be manufactured or acquired by the seller after the making of the
contract of sale.
Future goods cannot be sold, but there can only be an agreement to sell.
Example:
A, a manufacturer agrees to sell 5 tables and 50 chairs to B at Rs.10,000. B agrees to
purchase it. However, tables and chairs are yet to manufactured by A.
Contingent goods

It is a kind of future goods.

It is goods, the acquisition of which is contingent upon the happening or non happening
of an uncertain event.

Example:
A agrees to sell the goods loaded on the ship Titanic, which is coming from London to
Bombay. The ship may or may not arrive. So, these goods will be called as contingent
goods.
Basis
Futures Goods
Contingent Goods
1. Meaning
Goods that are yet to be Goods, the acquisition of which by the
manufactured produced or acquired Seller depends upon a contingency,
by the Seller after making contract of which may or may not happen.
sale.
2. Element of Acquisition of Future Goods does The procurement of Contingent Goods
uncertainty
not depend upon and uncertainty.
is dependent upon an uncertain event.
3. Scope
Future Goods do not include They are wider in scope, it includes
contingent Goods because of the future Goods.
element of certainty.
4. Effect of Where by a contract of Sale, the There may be a Contract for Sale of
Contract
Seller purports to effect a present Goods, the acquisition of which by the
sale of future Goods, the contract Seller depends upon a contingency
operates as an agreement to sell which may or may not happen [Sec.6
(2)]
the Goods[Sec.6(3)]
5. Example
B agrees to buy the entire crop of A agrees to sell to B a certain painting
wheat that would yield in Ss farm, only if C, its present owner, sells it to
him. The sale is contingent upon the
at the rate of Rs.1000 per quintal.
sale by C.
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Price of Goods Sec 9 10

Price means the money consideration for a sale of a Goods 2(10)

The following are the modes of determining price: [Sec. 9]

Price is specified under the contract. It is the most common method of determining the
price. Here, parties decide the price in advance.

Price may be determined as per the method specified in contract.

Example :
Delivery of rice on 1st December 2008 at the rate prevailing on that day.

Price may be determined in accordance to custom and usage of trade. This method is
applicable if parties regularly trade.

Where the price is not fixed as above, the buyer shall pay the seller a reasonable price.
What is a reasonable price is a question of fact and circumstances.

Fixation of price by third party. (Sec. 10)

If it is so, contract shall specify name of third party.
If third party fails to specify, contract is void but if goods are delivered to buyer and used by
him, he is required to pay reasonable price.
If the third party is prevented from fixing price, defaulting party is liable for the damages.
Consequences of Destruction of Specific Goods Sec 7 8

The consequences of destruction of specific goods can be discussed under the following three
heads:

If goods perish before making the contract

Contract is void ab initio, due to mistake as to existence of subject matter.
It is to be noted that if the seller has knowledge about the destruction of goods, even
then the enters into the contract of sale with buyer, then seller is bound to
compensate to the buyer.

Where a part of the goods is perished before making contract

If the goods was divisible, then the contract can be enforced party and if the goods
was indivisible, then the contract becomes void ab inito.
Example:
A contracted to sell one wagon containing 700 bags of groundnut to B. Unknown to A,
109 bags had been stolen at the time of sale, Therefore, A made a delivery of 591 bags.
Held, the sale was void.

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If goods perish after the Agreement to sell; but before Sale [Sec. 8]

The contract is void if subsequently the goods have perished, and there is no fault on the
part of the buyer or seller in perishing the goods.
Example:
A horse was delivered upon trial for 8 days. However, the horse died within 8 days,
without the fault of buyer or seller. Held, the seller must bear the loss, as the contract
was void.

However, parties to the contract may provide otherwise also.

Section 7 and 8 are applicable only in case of specific goods.

Therefore, if unascertained goods are destroyed either before or after making the
agreement, the contract shall not become void. Thus, in an agreement to sell
unascertained goods, even if the entire stock of goods is destroyed, the contract that not
become void and the seller will have to perform his promise.
Example
A agreed to sell to B 100 bags of wheat from his stock of 1,000 bags in his go down.
The entire stock was destroyed by fire. A is bound to deliver 100 bags of wheat or else
he will be liable for damages.
If the contract does not otherwise provide, then
Stipulation as to time of payment is not deemed to be essence of contract.
Stipulation as to time of delivery is deemed to be essence of contract.

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CONDITIONS AND WARRANTIES

Generally, at the time of sale, the seller makes some representation, statements of
stipulations for the praise of his goods. Some of representations are in nature of opinion
others are in nature of facts. Representation as to fact which becomes a part of contract
of sale is called as stipulation.

Stipulation may be condition or warranty depends upon its importance in relation to

contract.

Stipulation which is essential to the main purpose of contract is known as condition.

Breach of condition gives the aggrieved party right to terminate the contract.

Stipulation which is collateral to the main purpose of the contract is warranty. Breach
of warranty gives rise to the aggrieved party right to claim damages but contract cannot
be terminated.

The conditions and warranties may be express or implied.

Express conditions and warranties are those, which the parties agree expressly, i.e. orally
or in writing.

Implied conditions are those, which are implied by the law in the absence of any
agreement to the contrary.

IMPLIED CONDITIONS
The following are the implied conditions which are contained in the Sales of Goods Act:
Conditions as to title sec 14(a)

There is an implied condition on the part of the seller that

In the case of sale, the seller has a right to sell the goods, and
In the agreement to sell, the seller will have a right to sell the goods at the time of
passing of ownership in goods.

If the title of seller out to be defective, the buyer must return the goods to the true owner
and recover the price from the seller.

Conditions as to description Sec 15

Where the goods are sold by description, there is an implied condition that the goods
shall correspond to the description.
Example;

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A machine was sold. The buyer has not been the machine, but the seller described it as a
new one. However, it was found to be a very old one. Held, the machine was not
according to the description.
Sale by sample Sec 17

Where the goods are sold by sample, the following are implied conditions.
The bulk shall correspond to sample in quality.
The buyer shall be given a reasonable opportunity to compare the goods with the
sample.
The goods shall be free from any defect, rendering them un merchantable. It is to
be noted that this implied condition applies only in the case of latent defects, i.e.
those defects which cannot be discovered by ordinary inspection. In fact, such
defects are discovered when the goods are put to use or by examination in
laboratories. The seller is not liable for apparent or visible defects which can be
discovered by examination.
Sale by description as well as sample Sec 15

If the sale is by sample as well as description, both conditions shall be satisfied. Goods
must correspond with sample as well as description.
Example :
A agreed to sell to C some oil described as Foreign refined oil and warranted only
equal to sample. The goods supplied were equal to sample, but contained a mixture to
hemp oil. Held, C could reject the goods.
Conditions as to quality and fitness for buyers purpose Sec 16

Where the buyer, expressly or impliedly, tells the seller the particular purpose for which
he needs the goods and relies on the skill or judgment of the seller, there is an implied
condition that the goods shall be reasonably fit for such purpose.

When the article can be used only for one particular purpose, the buyer need not inform
the seller the purpose for which the goods are required.
Example:
A purchased a hot water bottle from a chemist. While the bottle was being used by As
wife, it burst and injured As wife. Held, the seller was liable for damages as the bottle
was not fit for the purpose for which it was meant Priest vs Last.
Exceptions to the implied condition as to quality or fitness

The condition as to quality or fitness well not apply, if the buyer is suffering from an
abnormality, which renders the goods unsuitable for a particular purpose and the buyer
does not inform the seller about that abnormally.
Example

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A purchased a coat. He had abnormally sensitive skin, By wearing the coat, he got skin
complaint. Held, there was no breach of condition, as he had not disclosed the
abnormally of his skin.

Where the goods can be used for a number of purposes, the buyer should inform the
particular purpose for which such goods were required. If the does not disclose, there is
no such conditions of quality or fitness.
Conditions as to merchantability

Where goods are bought by description from a seller, who deals in goods of that
description, there is an implied conditions that the goods shall be of merchantable
quality.

Merchantability means that there is no defect in the goods, which renders them unfit for
sale. Thus, a watch that will not keep time and a pen that will not write cannot be
regarded as merchantable.
Example:
A radio set was sold to a layman. The set was defective. It did not work in spite of
repairs, Held, the buyer could return the set and claim refund.
Condition as to wholesomeness

In the case of eatable and food stuff, there is an implied condition that the goods shall
be wholesomeness, i.e., free from any defect which renders them unfit for human
consumption.
Example:
A Purchased milk from B, a milk dealer. The milk contained typhoid germs. As wife on
taking the milk got infected and died. Held, A was entitled to get damages Frost vs
Aylesbury Dairy Co. Ltd.

IMPLIED WARRANTIES
The following are the implied warranties which are contained in the Sales of Goods Act:
Warranty as to quiet possession Sec 14

In the absence to any contract showing contrary intention, there is an implied warranty
that the buyer shall have and enjoy quiet possession of the goods. If the buyer is
disturbed in the enjoyment of the goods, he can claim damages from the seller.

Warranty against encumbrances Sec 14

Unless the circumstances of the case are such as to show a contrary intension, there is an
implied warranty that the goods shall be free from any charge or encumbrance in
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favour of any party not declared to the buyer before or at the time contract is made.
However, there will not be any such warranty if charge is declared to buyer at the time of
sale.
Warranty as to quality and fitness by usage of Trade Sec 16

An implied warranty as to quality or fitness for a particular purpose may be annexed by

the usage of trade.

Warranty to disclose the dangerous nature of goods

In case of sale of dangerous goods, the seller is under an obligations to warn the buyer
about the probable danger. Failure to do so will make the seller liable to pay damages.
Example :
A sold a tin of disinfectant to B, knowing that it was likely to be dangerous to the tin,
whereupon disinfectant powder went into her eyes, causing her injury. Held, A was
liable in damages to B, as he failed to warn B of the probable danger.
Difference between Condition and Warranty

Matter
Stipulation

If breach?
Treatment

Condition
Essential to main purpose of contract

Warranty
Collateral (subsidiary) to main purpose
of contract.
Buyer has no right to cancel the contract .
Buyer has right to cancel contract
Can claim damages
Breach of condition may be treated as Breach of warranty cant be treated as
breach of condition
breach of warranty

DOCTRINE OF CAVEAT EMPTOR

The doctrine of Caveat Emptor means let the buyer beware.

It means that the buyer while purchasing goods must act with a third eye and ear,
i.e.,
He should be careful to see that the goods purchased will serve his purpose well.

If the buyer is not careful and he finds later on that the goods do not serve his
purpose, he cannot hold the seller liable for it.

The seller is under no obligation to tell the defects of his articles.

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However, in the following exceptions Doctrine of caveat emptor is not applicable:

Implied conditions as to quality or fitness. It means when buyer has specified his
purpose and relied on skill of seller, the doctrine of caveat emptor is not applicable.

When goods are sold by description, it should be of merchantable quality. In such

case, doctrine of caveat emptor is not applicable.

In case of edible items, implied condition of wholesomeness is applicable and

goods should are not fit for human consumption then buyer is not liable but seller
will be liable.

Usage or custom of trade.

When the consent of buyer is obtained by fraud, the provision of doctrine of caveat
emptor is not applicable.

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TRANSFER OF OWNERSHIP
Transfer of property from seller to Buyer 20-22
Unascertained
Goods

Ascertained Goods i.e. Specific Goods

(a) Goods are

Ascertained
(b) Appropriation
of Goods
Deliverable
Unconditionally state Price
determined

Deliverable
State Price not
determined

After
At the time
when contract determination
of price
is made

Non
deliverable
State

Sale on approval (24)

(a) On approval.
(b) Adopting the
transactions.
(c) Retains without
notice of rejection
for a long time.

After
completion of
process to
make it
deliverable

Ownership is transferred immediately at the time of making the contract if all the
following conditions are satisfied:

Contract is for specific goods.

Goods are in deliverable state.
Goods are not required to be weighed or measured for determining price.

Example :
A sold to B, 100 bales of cotton lying in his godown. Before the bales could be identified
and separated, all bales were destroyed in fire. Here, seller is liable for damage because
ownership is not transferred.
Section 21

If the goods are not ready in deliverable state at the time of making contract of sale,
ownership of goods is transferred after formation of contract of sale when following
conditions are satisfied;

Contract is for specific goods.

Goods are put in deliverable state by seller.

Fact that the goods are put into deliverable state has come to knowledge to the
buyer.
Example :
Certain quantity of oil was purchased by A. The oil was to be filled in tins. B filled up
some of the tins and informed A to take the delivery. In the meantime, a fire destroyed
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the entire quantity of oil. Held, A will bear the loss of the oil which was filed in the tins
and the seller must bear the loss of the balances.

Section 22

If the goods are not weight or measured at the time of making contract of sale, ownership
of goods is transferred after the formation of contract of sale when the following
conditions are satisfied.

Contract is for specific goods

At the time of formation, price is not determined. It is determined later by weighed

or measurement.

Goods are put in deliverable state by the seller.

Fact that the goods have been weighed or measured in order to determine price has
come to knowledge of buyer.
Example
A sold 10 kg wheat. The wheat was to be weighed. Before the wheat was weighed,
it was carried away by the flood. Held, the ownership of the wheat left with the
seller and it did not pass to the buyer.
Transfer of ownership in the case of unascertained goods Sec 18 and 23

In the case of unascertained goods, when both parties come to know which particular
goods shall be delivered, ownership is transferred.

The following conditions must be satisfied to transfer the ownership:

Ascertainment is first step in transfer of ownership. It means process of

identification and setting aside goods from a huge mass of goods.

Generally, it is made by seller, (unilateral act).

Appropriation :

For property to pass u/s 23, the following conditions must be satisfied
(a)

Goods of the description mentioned in the contract must be produced or obtained.

(b)

The must be in a deliverable state, i.e. the Goods are in such state that the Buyer would,
under the contract, be bound to take delivery of them.

(c)

They must be unconditionally appropriated to the contract, Unconditional appropriation

is where, in pursuance of the contract, Seller
(i)
Delivers the Goods to Buyer or a carrier or other bailee for their transmission to
Buyer and
(ii)
does not reserve the right of disposal. [Sec. 23(2)]

(d)

The assent of the parties may be given expressly or impliedly and can be given either
before or after the appropriation.

Example: A having a quantity of sugar in bulk, more than sufficient to fill 20 bags,
contracts to sell to B 20 bags of it. After the contract A fills 20 bags with the sugar, given
notice to B that the bags are ready and requires him to take them away. B says he will
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take them as soon as he can. By this appropriation by A, and assent by B, property in the
sugar passes to B.

Contract to sell unascertained goods is not complete sell, it is agreement to sell.

Example :
20 bags of sugar out of a bulk were agreed to be sold. 4 bags of sugar were filled up and
taken away by the buyer. Subsequently, the seller filled up 16 bags and informed the
buyer. The buyer replied that he will take delivery as soon as possible. However, before
the buyer could take their delivery. Goods were lost. Held, the buyer was responsible as
the ownership had passed to the buyer.

Transfer of ownership in Case of Goods Sent on Approval or on sale or Return Basis

Sec. 24

It means buyer has the option either to return goods. Here, property in goods doesnt pass
from seller to buyer:

Case
When the buyer given his approval or
acceptance.
When the buyer does some act of adopting the
transaction
When the buyer fails to return the goods.
(a) If time is fixed for return of goods.
(b) If no time is fixed

When ownership transferred

Approval or acceptance is communicated to
seller
When act of adoption is done.

On expiry of the fixed time

On expiry of the reasonable time.

Example
Certain jewellery was delivered to a buyer on sale or return basis. The buyer pledged the
jewellery. Held, the buyer had adopted the transaction and as such property had passed and the
seller could not recover the jewellery from the Pawnee.
Right to disposal of Goods Sec. 25

Where the railway receipt or the bill of landing is in the name of the buyer, but is sent
through the bank with the instructions that the same is to be delivered against the
acceptance of the bill or payment of the price, the property in the goods shall not pass.

Deemed right of reservation Sec. 25

The seller may reserve the right of disposal under the following modes
Reservation of right of disposal
Shipment or Railway delivery

Drawing of B/E on buyer

By making the Goods deliverable to the order of the

Seller or his agent.

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By Seller drawing a bill for the price

and making it acceptable by the
Buyer.

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Passing of Risk Sec. 26

The general rule is that risk passes with ownership. We can say that risk and ownership
and ownership to together. However, express agreement between parties may provide
otherwise.

Possession of goods is immaterial for risk.

When delivery is delayed because of fault of any party, he is liable for risk.

Sometime, risk is based upon custom or usage of trade.

Where the delivery of goods has been delayed due to the fault of buyer/seller, goods are
at the risk of the party in fault.
Sale by Non Owners or Transfer of Title by Non Owners Sec 27 30

The general rule is expressed by maxim Namodat quod non habet which means no one
can give what he does not himself posses. If sellers title is defective, then buyers title will
be defective.

Alternatively, we can say that the seller cant give a better title to the buyer than be himself
has.
The following are the exceptions to the above general rule:

Sale of Estoppel [Sec. 27]:

Where the owner by his conduct or by his act leads the buyer to believe that the seller has
the authority to sell and induces the buyer to buy the goods, he shall be estopped from
denying the fact that seller had no right to sell the goods.
Example : (Refer Classroom Notes Hira Sweets)

Sale by mercantile agent Sec. 27

Agent of seller can transfer the title if following conditions are satisfied :

Agent must be in possession of goods or documents of title.

Agent has sold goods in ordinary course of business.

Buyer has acted in good faith.

Buyer has no knowledge that seller had no authority to sell.

Example
A entrusted his car to a mercantile agent to receive offers and not to sell. A also delivered
signed documents to the agent. On the basis of these documents, the agent pretended to the
buyer that he had authority to sell the car and thus, the car was sold. Held, the owner was
estopped from denying buyers title.

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A mercantile agent means an agent having in the customary course of business as such
agent authority either to sell goods, or to consign goods for the purpose of sale, or to buy
goods, or to raise money on the security of goods [Section 2(9)].

Sale by one of the joint owners Sec 28

One of the joint owners can sale goods if following condition are satisfied.

Goods are in sole possession of one of the joint owner.

Buyer has acted in good faith.

Buyer has no knowledge that seller had no authority to sell.

Example
A and B Jointly purchased a car. The car was in the possession of A with the consent of B.
Later on A sold the car to an innocent purchaser. The purchaser will get a good title.

Sale by person in possession under voidable contract

Seller must be in possession of goods under contract voidable.

Goods must have been sold before contract is rescinded.

Buyer has no knowledge that seller had no authority to sell.

Example
A purchased a watch from B under fraud. A sold the watch to C, who bought it in good
faith. C gets goods title.

Sale by seller in possession after sale Sec 30

Ownership of goods has been passed to buyer.

Seller continuous to be in possession of goods even after sale.

Seller resells goods to new buyer.

New buyer buys without notice to prior sell.

Example
A sells certain goods to B and promises to deliver the goods the next day. Before the
delivery, A sells and delivers the goods to C, who buys them in good faith and without
notice of the prior sale to B, C gets a good title to the goods, not with standing that the
property had, before he purchased, passed to B.

Sale by unpaid seller Sec. 54

After exercise of his right of lien or right of stoppage goods in transit.
If the owner of goods has declared insolvent and his goods, is sold by official receiver or
assignee or liquidator.

Sale by finder of goods (Sec.169 of IC Act 1872).

The owner cant be found or found but refuse to pay lawful charges to finder.

The Goods are perishable in nature or in danger. To save goods from loss, finder can
sale it.

Lawful charges of finder amount as 2/3 of its original value.

Sale by pawnee or pledge(Sec.176 of IC Act 1872).

If there is default on part of payment of price or performance within time.

Reasonable notice is given by pawnee or pledge.

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PERFORMANCE OF A CONTACT OF SALE

1.

Meaning Sec.2(2): Delivery means voluntary transfer of possession from one person to
another.

2.

Duty of Seller Sec. 31: 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 contract of Sale.

3.

Mode of delivery : Sec. 33: Delivery of Goods sold may be made by

(a)

doing anything which the parties agree shall be treated as delivery ; or

(b)

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.

TYPES OF DELIVERY
Actual Delivery

It is a delivery where
goods are handed
over to the buyer or
his authorized agent.
It means goods are
physically put in
possession of the
buyer.

Symbolic Delivery

Constructive Delivery

When goods are not

physically delivered to the
buyer but some symbol of
the real possession or
control over goods is
handed over to buyer.

Where the third party who

is in possession of goods,
acknowledge to hold
goods on behalf of the
buyer is known as
construction delivery.

Example
Delivery of key of the car.

Example:
A sells 100 bags of
cement lying in Bs
godown. B agrees to hold
the 100 bags of cement on
behalf of A.

Forward Delivery

Where delivery is to be made in future, and not at the time contract is entered into.
RULES REGARDING DELIVERY
Payment and delivery are concurrent Sec 32.

General rule suggest that the delivery of goods and payment of price are concurrent
conditions. However, parties may provide otherwise.

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Part Delivery Sec34.

A delivery of part of goods with an intention of giving the delivery of the whole amounts
to the delivery of the whole for the purpose of transfer of ownership of goods but a
delivery of part of goods with an intention of separating it from the whole lot does not
amount to the delivery of the whole of the goods.

Buyers duty to Demand the Goods Sec. 35

It is sellers duty to be ready and willing to deliver the goods to the buyer. But he is not
bound to deliver goods unless the buyer makes a demand for delivery of the goods.
If the buyer fails to demand the delivery of goods, the seller is not liable for breach;
Buyer must demand delivery within a reasonable time. However, contract may provide
otherwise.
Rules as to Delivery [Sec. 36]

Place of delivery:
Situation
Place where goods are to be delivered
If contract specified the place of delivery At the place specified
Contract does not specify the place of At the place at which goods are at the time of sale
delivery;

In case of sale
In case of agreement of sell
(i) In respect of existing goods
(ii) In respect of future goods

At the place at which goods are at the time of

agreement of sell.
At the place at which goods are manufacture,
produce or acquire

Time of Delivery

If the contract specified time of delivery, goods shall be delivered within such time.
If no time is specified in contract as to time of delivery of goods, it should be delivered
within reasonable time.

Delivery when the Goods in Possession of third party 36(3):

Unless and until such third person acknowledge to the buyer that the holds the goods on his
behalf
However this provision shall not affect the operation of the issue or transfer of any documents of
the title of the goods.

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Time is tender of delivery

Demand or tender of delivery may be treat is reasonable unless made at reasonable hour. That is
reasonable hour is a question affects.
Expenses of delivery

All expenses of making delivery of goods shall be paid by seller

Buyer shall be the expense for receipt of goods.

unless otherwise agreed.

Delivery of Wrong quantity Sec 37

If the seller has delivered excess quantity, the buyer has the following options:

To accept the whole of the goods delivered to him.

To reject the whole of the goods delivered of him.

To accept contracted quantity and reject the excess.

Seller has delivered short quantity, buyer has following options.

To accept the goods delivered to him.

To reject whole quantity delivered to him.

Right to reject the goods in excess of the contract does not apply where the variation is
negligible.
Further, the right to reject the goods is not similar to the right to cancel the contract. If
the buyer rejects the goods (either because they are less than or in excess of the quantity
contracted for), the seller has a right to tender again the contract quantity and the buyer is
bound to accept the same.

Delivery of Mixed Quality Quantity

The seller is bound to deliver goods of exact quality quantity otherwise buyer may:

Reject the whole.

Reject the goods not complying with quality or quantity and accept the rest.
[Contract is not repudiated] means subsisting
Delivery by Installment Sec 38

Delivery by installment is not valid except when the contract provides so or buyer accepts
the delivery in installment.

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Delivery to Carrier or Wharfinger Sec 39

Delivery to carrier or wharfinger amounts as delivery to buyer if the following conditions

satisfy:

Buyer has made reasonable contract with carrier.

Seller is required to give notice to buyer to enable him to insure goods. If not to do
then his risk.

If seller makes valid delivery of goods, buyer has following duties:

To accept the goods.

To pay the unpaid price.

Where goods are sent by sea route, seller shall give notice to buyer to insure goods other
wise he will be liable for loss.

Risk where goods are delivered at distant place Sec 40

Where the seller agrees to deliver the Goods at his own risk at a place other than at which they
are sold, the Buyer shall bear the risk of deterioration necessarily incident to the course of
transit, unless otherwise agreed.
Buyers right to examining goods Sec 41

Delivered to buyer not previously examined reasonable opportunity.

Seller is bound on request to afforded the buyer a reasonable opportunity of examine the good.
Acceptance of Delivery Sec 42

Delivery doesnt mean acceptance of goods, Buyer has deemed to have accepted the goods
under the following circumstances:

When he intimates the seller about acceptance of goods.

After receipt of goods, he does some act of affirmation.

When he doesnt inform seller about rejection of goods within a reasonable time.
Buyers not bound to return the rejected good Sec 43.

He is required to intimate the seller about rejection. (Buyers not bound to return the rejected
goods)
Liability of the Buyer for refusal of delivery of goods Sec 44

If the buyer wrongfully refuses to take delivery of goods, he is liable for damages and
expenses like storage cost and transportation cost to the seller.

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UNPAID SELLER
Section 45
A seller of goods is deemed to be unpaid in the following cases:
The price must be due but not paid. (When the whole of the price has not been paid

or tendered)

A negotiable instrument, like cheque, bill of exchange etc., was received, but the
same has been dishonored.

Seller who has obtained a decree for the price of the goods will also be an unpaid
seller, if the decree has not been satisfied.

When the seller has been paid the large amount but small portion of payment remains
to be paid.

Seller must have an immediate right of action for the price.

Right of an Unpaid Seller

Unpaid seller has the right against goods as well as against the buyer:
Rights of unpaid seller against the goods:

Where ownership is transferred

9
Right of lien Sec 47 49
9
Right to stoppage in transit Sec 50 52
9
Right to resale of the goods
9
Where ownership is not transferred to the buyer, seller has the right to with hold
delivery of goods.
Right of an unpaid seller against the goods Sec 46

The ownership has not been transferred.

Conditions
Unpaid Seller + ownership not transferred.
Consequences Lawfully refuse to deliver the goods to the buyer until he is paid the price.
Buyer cannot hold the seller liable for now delivery of goods.
Sellers Lien Sec.47
Condition for exercising lien
Condition Unpaid seller actual possession
Buyer not paid the price of the good. The unpaid seller can exercise lien even through.
The property is goods has passed to the buyer
He is in the possession of the goods as an agent or bailee for the buyer.
Right of Lien
It means the right to retain the possession of goods until full price is received.
Seller can exercise his right of lien on the following two conditions:
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He must be in possession of the goods.

He is the unpaid seller.

If buyer becomes insolvent, lien can be exercised by unpaid seller.
In the following circumstances, unpaid sellers lien is lost: Sec 49

When the seller waives his right of lien.

When the buyer disposes off the goods by sale with consent of seller.
When the goods are delivered off the buyer or his agent.
When price is paid by the buyer.
The right of lien cannot be exercised, where the right of lien has been expressly
excluded.

By delivery of goods to carrier. Without reserving the right of disposal of goods,.

By Estoppels i.e. where the seller so conducts himself that be leads third parties to
believe that the lien does not exist.
Lien is not lost merely become the unpaid seller has obtained a decree for the price of
the goods
Part delivery Sec. 48

Part delivery of goods does not disentitle the unpaid seller from exist lien on the remainder
goods.
Right of Stoppage in Transit Sec 50 to 52
Right of stoppage goods in transit Sec 50
The right of stoppage in transit is an extension of the right of lien.
The right of lien is a right to retain possession, whereas right of stoppage in transit is a
right to regain possession.
The right of stoppages in transit can be exercised, if the goods are in transit, and the buyer
has become insolvent in the meantime.
Conditions : unpaid Seller + possession of goods with carrier (independent) + insolvent buyer
Duration of transit Sec 51

Carrier may hold the goods in three capacities:

As Sellers Agent : In this case, the seller has lien on the goods, so question of right
of stoppage in transit does not arise.

As Buyers Agent: In this case, the seller cannot exercise the right of stoppage in
transit.

In an Independent Capacity: In this case, sit from the time they are delivered to a
carrier for the purpose of transmission to the buyer, until the buyer or his agent takes
their delivery.
Goods are deemed to be in course of transit from the time they are delivered to a carrier for
the purpose of transmission to the buyer, until the buyer or his agent takes their delivery.
The goods are in transit, even if the buyer asks the carrier to take them to some other
destination until they are delivered to the buyer at some other destination.

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If the goods are rejected by the buyer and the goods are in the possession of the carrier, the
transit is not at an end, even if the seller has refused to take them back.
How Stoppage in transit is effected Sec 52

Right of Stoppage of Goods in Transit can be exercised either:

By taking actual possession of the goods, or

By giving notice of his claim to the carrier, who holds the goods
Effect of sub sale or pledge by the buyer Sec.53

Sub sale of pledge by the buyer

Effect on unpaid sellers right

The unpaid sellers right of lien or stoppage in transit is not affected by any further sale or other
disposition of goods by the buyer.
Exception
o When seller has given his assent to such mortgage or other disposition of goods made by
the buyer.
o When a document of title has been transferred to the buyer and the buyer transfer the
document to a person who has brought the goods in good faith for value.

Distinction Between Lien and Stoppage in Transit

1.
2.
3.
4.
5.

Lien
The goods are in actual possession of the
seller.
This right can be exercised even when the
buyer is solvent but fails or refuses to pay
the price.
This right comes to an end when the seller
parts with the goods.
This is a right to retain possession over
the goods.
This right can be exercised by the seller
himself.

Stoppage in Transit
1. The goods are in possession of an
independent carrier or bailes.
2. This right can be exercised only when the
buyer becomes insolvent.
3. This right commences only when the seller
delivers the goods to a carrier.
This is a right to regain possession o the
goods.
4. This right can be exercised by the seller
through the carrier or the bailee in whose
possession the goods are.

Right of Resale Sec 54

In case of perishable goods, unpaid seller can resale the goods if following conditions
satisfied.

Buyer fails to pay the price within reasonable time.

Seller is not required to give notice of re sale.

In case of other goods (not perishable) unpaid, the seller can resale goods if the following
conditions are satisfied:

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Seller has exercised his right of lien or stoppage of goods in transit.

Seller has given notice to buyer to pay the price within reasonable time and buyer
fails to pay the price.
Following will be effect of resale:
Rights

Unpaid sellers right to recover loss on sale

Original buyers right to recover profit on goods
New buyers right to acquire good title.

In case of resale
after notice
Available
Not available
Available

In case of resale
without notice
No Available
Available
Available

Right to Withhold Delivery of Goods

It means seller refuses to deliver goods to buyer.

The following conditions must be satisfied to exercise right to withhold delivery of goods:

Seller is unpaid seller

Ownership of goods has not been passed.

Right of unpaid seller against buyer:

Suit for price [sec 55]

55 (1) Property has passed to the buyer
- Buyer wrongfully neglector refuses to pay price of goods
55 (2) - property has not passed to the buyer
- price is payable on a particular date irrespective of delivery.
- Buyer wrongfully neglects or refuses to pay price of goods
Suit for damages for non acceptance (56)
When buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may sue
him for damages for non acceptance.
Suit for damages for Breach (60)
Repudiation of contract before due date: Where the contract is repudiated by the buyer before
the date of delivery the seller may treat the contract as rescind and sue for damage for the
breach.
Suit for interest [61(2) (d)]
Specific agreement between seller and buyer as to interest on price of goods from the date on
which payment becomes due the seller may recover the interest from the buyer.

This right is in addition to other remedies available to the seller.

Rights of
buyer/Buyers
remedies
against seller

Suit for
damage for
non
delivery JHA
SUJEET

Suit for
Specific
performance

Repudiation
of contract

111

Suit for
Breach of
warranty

Suit for
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Buyers right against the seller or remedies against seller

The buyer has following remedies against the seller:

Suit for damage for non delivery Sec 57

Buyer is ready and willing the take delivery of goods but seller wrongfully neglects or
refuses delivery of goods, buyer may sue seller.

Suit for specific performance Sec 58

Where seller wrongfully refuses to deliver specific or ascertained goods, court may direct
specific performance order.

Suit for breach of warranty Sec 59

If there is breach of warranty, buyer may claim damages from the seller. Buyer may deduct
the amount of damage from price payable if price is not paid. Buyer may recover the
damages if price paid.

Right to repudiate the contract

If the seller declares his intention of non delivery of goods, buyer may repudiate the
contract and immediately sue for damages.

Suit for Interest

In the absence of any contract to the contrary no interest shall be payable by the buyer on
the delay payment. If , there is no such agreement, the seller may give notice to the
buyer of his intention to charge interest on delayed payment.
Delivery to Carrier

It means transporter or bailee to whom goods are delivered by the seller for
transportation to buyer.
When goods are delivered to a carrier, it is deemed delivery of goods to the buyer if
following conditions are satisfied:

Seller delivers exactly same goods as per contract.

The Buyer has informed carrier name, address and goods required to be delivered.

The seller delivers goods for the purpose of delivery.

Auction Sale Sec 64

It means public sale. The seller invites the interested parties by advertisement to offer the
price. (i.e. bid)

The seller may hire service of auctioneer. An auctioneer is an agent of seller.

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Advertisement of auction sale is not offer but an invitation to make an offer and therefore
if an auction sale is not held on appointed day, bidder cant sue auctioneer.

Every bid amounts as offer and acceptance is given by auctioneer by some usual mode of
acceptance e.g., fall of hammer, going going gone or one two three.
Auction sale starts with placing of bids. Auctioneer accepts the highest bids but he may
accept lower bid without giving any reason. When bid accepted, valid contract is formed.

Bid once made can be withdrawn before fall of hammer even if expressly prohibit.

Seller can bid at auction sale if bidders are informed of fact. (pretended bidding)

If the seller makes use of pretended bidding to raise the price, the sale is voidable at the
option of the buyer. The bid is said to be pretended when it is made by the seller or some
one on his behalf.

Only one person can be appointed for bidding.(called puffer)

Auctioneer may set reserve price or upset price. Bid lower that which is invalid.

In the case of Knockout agreement, the buyers joint their hands to eliminate competition
among themselves at an raise the bid against each other and only one of them will bid at
the auction. When the profit. Prima facie, a knockout agreement is not illegal. However, if
the intention of the parties to the agreement is to defraud a third party, this will be illegal.

Damping is illegal, it includes;

Pointing out defects in the goods, or

Misleading the purchaser or doing any other act so that he may not participate in the
auction. It empowers the auctioneer to with draw the property from the auction.

Sale in lots :

When the goods are put up for sale in lots, each lot is deemed, prima facie, to be the
subject matter of a separate contract of sale.
Delivery of Goods in Contract by Sea Route

It includes following three categories of contracts:

CIF Contract

It means cost, insurance and freight;

Here, the price of goods includes the cost of goods, insurance and freight expenses.

In CIF contract, buyer pays insurance and freight expenses.

The essential of CIF contract is that seller shall deliver shipping documents to the
buyer usually through the bank. If the seller fails to deliver the documents within
reasonable time, he is liable for breach of contract.

Ownership of goods is transferred to the buyer, when he pays the price of goods
while receiving shipping documents. If buyer refuses to pay the price, the seller can
claim damages for breach of contract.
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FOB Contract

It means free on board. Here, seller is required to put the goods on board of ship at
his expense.

Buyer is liable for all the expenses and risk one goods are loaded on ship.

The ownership of goods is transferred to the buyer as soon as goods are loaded to
ship.

Ex Ship Contract

It means contract in which the seller has to deliver the goods to the buyer at the port
of destination.

All the freight charges and risk during voyage for goods remain with seller.

Ownership of the goods is transferred to the buyer when goods are actually delivered
at the port of destination.

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