CHAPTER 2

THE SALE OF GOODS ACT, 1930

UNIT -1: FORMATION OF THE CONTRACT OF SALE

LEARNING OUTCOMES
After studying this unit, you would be able to understand-
♦ Scope of the Act
♦ Definitions of certain terms.
♦ Meaning of contract of sale.
♦ Distinctions of sale from other similar contracts.
♦ Formalities of contract of sale.
♦ Subject matter of contract of sale.
♦ Ascertainment of price for the contract of sale.

UNIT OVERVIEW

© The Institute of Chartered Accountants of India

2.2 BUSINESS LAWS

Introduction

Sale of goods is one of the specific forms of contracts recognized and regulated by law in India. Sale is a typical
bargain between the buyer and the seller. The Sale of Goods Act, 1930 allows the parties to modify the provisions
of the law by express stipulations. However, in some cases, this freedom is severely restricted.
Sale of Goods Act, 1930 is an Act to define and amend the law relating to the sale of goods. It extends to the
whole of India. It came into force on 1st July, 1930.

1.1 SCOPE OF THE ACT

The provisions of the Act are applicable to the contracts related to the sale of goods which means movable
properties. The Act is not applicable for the sale of immovable properties like land, shop or house etc.
The general provisions of the Indian Contract Act, 1872 apply to a Contract of Sale of Goods in so far as they
are not inconsistent with the express provisions of the Sale of Goods Act.
The expressions used but not defined in the Sales of Goods Act, 1930 and defined in the Indian Contract Act,
1872 have the meanings assigned to them in that Act.
The customs and usages will bind both the parties if these are reasonable and are known to the parties at the
time of entering the contract.

1.2 DEFINITIONS
The Sale of Goods Act, 1930 defines the terms which have been frequently used in the Act, which are as follows –
(A) Buyer and Seller: ‘Buyer’ means a person who buys or agrees to buy goods [Section 2(1)]. ‘Seller’
means a person who sells or agrees to sell goods [Section 2(13)]. The two
terms, ‘buyer’ and ‘seller’ are complementary and represent the two parties
to a contract of sale of goods. Both the terms are, however, used in a sense
wider than their common meaning. Not only the person who buys but also
the one who agrees to buy is a buyer. Similarly, a ‘seller’ means not only a
person who sells but also a person who agrees to sell.
(B) Goods and other related terms:
“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. [Section 2(7)]
‘Actionable claims’ are claims, which can be enforced only by an action or suit, e.g., debt. A debt is not
a movable property or goods. Even the Fixed Deposit Receipts (FDR) are considered as goods under
Section 176 of the Indian Contract Act read with Section 2(7) of the Sales of Goods Act.
“Goods” include both tangible goods and intangible goods like goodwill, copyrights, patents, trademarks
etc. Stock and shares, gas, steam, water, electricity and decree of the court are also considered to be
goods.

© The Institute of Chartered Accountants of India

3 THE SALE OF GOODS ACT, 1930 2.3

Other Also
Goods
than includes
Means every
Actionable
kind of movable Stock & Shares
claims
property

Money in
Growing crops
circulation

Grass, and

Things attached
to or forming
part of land
which agreed to
be severed
Classification of Goods

Goods

Existing Contingent
Future Goods
Goods Goods

Specific Ascertained Unascertained

(i) EXISTING GOODS are such goods as are in existence at the time of the contract of sale, i.e.,
those owned or possessed or acquired by the seller at the time of contract of sale (Section 6).
The existing goods may be of following kinds:
(a) Specific goods means goods identified and agreed upon at the time a contract
of sale is made [Section 2(14)].
Example 1: Any specified and finally decided goods like a Samsung Galaxy S7 Edge,
Whirlpool washing machine of 7 kg etc.
Example 2: ‘A’ had five cars of different models. He agreed to sell his ‘Santro’ car
to ‘B’ and ‘B’ agreed to purchase the same car. In this case, the sale is for specific
goods as the car has been identified and agreed at the time of the contract of sale.

© The Institute of Chartered Accountants of India

2.4 BUSINESS LAWS

(b) Ascertained Goods are those goods which are identified in accordance with the
agreement after the contract of sale is made. This term is not defined in the Act but
has been judicially interpreted. In actual practice, the term ‘ascertained goods’ is
used in the same sense as ‘specific goods.’ When from a lot or out of large quantity
of unascertained goods, the number or quantity contracted for is identified, such
identified goods are called ascertained goods.
Example 3: A wholesaler of cotton has 100 bales in his godown. He agrees to sell
50 bales and these bales were selected and set aside. On selection, the goods
becomes ascertained. In this case, the contract is for the sale of ascertained goods,
as the cotton bales to be sold are identified and agreed after the formation of the
contract. It may be noted that before the ascertainment of the goods, the contract
was for the sale of unascertained goods.
(c) Unascertained goods are the goods which are not specifically identified or
ascertained at the time of making of the contract. They are indicated or defined only
by description or sample.
Example 4: If A agrees to sell to B one packet of salt out of the lot of one hundred
packets lying in his shop, it is a sale of unascertained goods because it is not known
which packet is to be delivered. As soon as a particular packet is separated from the
lot, it becomes ascertained or specific goods.
Example 5: X has ten horses. He promises to sell one of them but does not specify
which horse he will sell. It is a contract of sale of unascertained goods.
(ii) FUTURE GOODS means goods to be manufactured or produced or acquired by the seller
after making the contract of sale [Section 2 (6)].
A contract for the sale of future goods is always an agreement to sell. It is never actual sale
because a person cannot transfer what is not in existence.
Example 6: 1,000 quintals of potatoes to be grown on A’s field, is not illegal, though the actual
sale of future goods is not possible. This is an example of agreement to sell.
Example 7: P agrees to sell to Q all the milk that his cow may yield during the coming year.
This is a contract for the sale of future goods.
Example 8: T agrees to sell to S all the oranges which will be produced in his garden this year.
It is contract of sale of future goods, amounting to ‘an agreement to sell.’
(iii) CONTINGENT GOODS: The acquisition of which by the seller depends upon an uncertain
contingency (uncertain event) are called ‘contingent goods’ [Section 6(2)].
Contingent goods also operate as ‘an agreement to sell’ and not a ‘sale’ so far as the question
of passing of property to the buyer is concerned. In other words, like the future goods, in the
case of contingent goods also, the property does not pass to the buyer at the time of making
the contract.
Example 9: A agrees to sell to B a Picasso painting provided he is able to purchase it from its
present owner. This is a contract for the sale of contingent goods.

© The Institute of Chartered Accountants of India

5 THE SALE OF GOODS ACT, 1930 2.5

Example 10: P contracts to sell 50 pieces of particular article provided the ship which is bringing
them reaches the port safely. This is an agreement for the sale of contingent goods.
(C) Delivery - its forms and derivatives: Delivery means voluntary transfer of possession from one person
to another [Section 2(2)]. As a general rule, delivery of goods may be made by doing anything, which
has the effect of putting the goods in the possession of the buyer, or any person authorized to hold them
on his behalf.
Forms of delivery: Following are the kinds of delivery for transfer of possession:
Delivery of Goods
Voluntary transfer of possession by one person to another
Actual delivery Constructive delivery Symbolic delivery

(i) Actual delivery: When the goods are physically delivered to the buyer. Actual delivery takes
place when the seller transfers the physical possession of the goods to the buyer or to a third
person authorised to hold goods on behalf of the buyer. This is the most common method of
delivery.
(ii) Constructive delivery: When it is effected without any change in the custody or actual
possession of the thing as in the case of delivery by attornment (acknowledgement)
Example 11: Where a warehouseman holding the goods of A agrees to hold them on behalf of
B, at A’s request.
Constructive delivery takes place when a person in possession of the goods belonging to the
seller acknowledges to the buyer that he holds the goods on buyer’s behalf.
(iii) Symbolic delivery: When there is a delivery of a thing in token of a transfer of something else,
i.e., delivery of goods in the course of transit may be made by handing over documents of title
to goods, like bill of lading or railway receipt or delivery orders or the key of a warehouse
containing the goods is handed over to buyer. Where actual delivery is not possible, there may
be delivery of the means of getting possession of the goods.
Goods are said to be in a deliverable state when they are in such a condition that the buyer would,
under the contract, be bound to take delivery of them [Section 2(3)].
Example 12: When A contracts to sell timber and make bundles thereof, the goods will be in a deliverable
state after A has put the goods in such a condition.
(D) “Document of title to goods” includes bill of lading, dock-warrant, warehouse keeper’s certificate,
wharfingers’ certificate, railway receipt, multimodal transport document, warrant or order for the delivery
of goods and any other document used in the ordinary course of business as proof of the possession or
control of goods or is for 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)]
Example 13: Bill of lading, dock warrant, warehouse keeper’s certificate, wharfinger’s certificate, railway
receipt, warrant, an order of delivery of goods.

© The Institute of Chartered Accountants of India

2.6 BUSINESS LAWS

The list is only illustrative and not exhaustive. Any other document which has the above characteristics
also will fall under the same category. Though a bill of lading is a document of title, a mate’s receipt is
not; it is regarded at law as merely an acknowledgement for the receipt of goods. A document amounts
to a document of title only where it shows an unconditional undertaking to deliver the goods to the holder
of the document.
However, there is a difference between a ‘document showing title’ and ‘document of title’. A share
certificate is a ‘document’ showing title but not a document of title. It merely shows that the person named
in the share certificate is entitled to the share represented by it, but it does not allow that person to
transfer the share mentioned therein by mere endorsement on the back of the certificate and the delivery
of the certificate.
(E) Mercantile Agent [Section 2(9)]: It means an agent who in the customary course of business has, 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 the goods.
Example 14: Such kind of agents are auctioneers or brokers, etc.
(F) Property [Section 2(11)]: ‘Property’ here means ‘ownership’ or general property. In every contract of
sale, the ownership of goods must be transferred by the seller to the buyer, or there should be an
agreement by the seller to transfer the ownership to the buyer. It means the general property (right of
ownership-in-goods) and not merely a special property.
The property in the goods means the general property i.e., all ownership right of the goods. Note that
the ‘general property’ in goods is to be distinguished from a ‘special property’. It is quite possible that
the general property in a thing may be in one person and a special property in the same thing may be in
another e.g., when an article is pledged. The general property in a thing may be transferred, subject to
the special property continuing to remain with another person i.e., the pledgee who has a right to retain
the goods pledged till payment of the stipulated dues.
Example 15: If A who owns certain goods pledges them to B, A has general property in the goods,
whereas B has special property or interest in the goods to the extent of the amount of advance he has
made.
(G) Insolvent [Section 2(8)]: A person is said to be insolvent when he ceases to pay his debts in the ordinary
course of business, or cannot pay his debts as they become due, whether he has committed an act of
insolvency or not.
(H) Price [Section 2(10)]: Price means the money consideration for a sale of goods. It is the value of goods
expressed in monetary terms. It is the essential requirement to make a contract of sale of goods.
(I) Quality of goods includes their state or condition. [Section 2(12)]

1.3 SALE AND AGREEMENT TO SELL (SECTION 4)

According to section 4(1), “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”. There may be a contract of sale between one part-owner
and another.
A contract of sale may be absolute or conditional. [Section 4(2)]

© The Institute of Chartered Accountants of India

7 THE SALE OF GOODS ACT, 1930 2.7

Where under a contract of sale, the property in the goods is transferred from the seller to the buyer, the contract
is called a sale, but where the transfer of the property in the goods is to take place at a future time or subject to
some condition thereafter to be fulfilled, it is called an agreement to sell. [Section 4(3)]
An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the
property in the goods is to be transferred. [Section 4(4)]
Analysis
A contract for the sale of goods may be either sale or agreement to sell.

Contract of
sale

Sale

Agreement
to sell

Sale: In Sale, the property in goods is transferred from seller to the buyer immediately. The term sale is defined
in the Section 4(3) of the Sale of Goods Act, 1930 as – “where under a contract of sale the property in the goods
is transferred from the seller to the buyer, the contract is called a sale.”
Agreement to Sell: In an agreement to sell, the ownership of the goods is not transferred immediately. It is
intending to transfer at a future date upon the completion of certain conditions thereon. The term is defined in
Section 4(3) of the Sale of Goods Act, 1930, as – “where the transfer of the property in the goods is to take place
at a future time or subject to some condition thereafter to be fulfilled, it is called an agreement to sell.”
Thus, whether a contract of sale of goods is an absolute sale or an agreement to sell, depends on the fact whether
it contemplates immediate transfer from the seller to the buyer or the transfer is to take place at a future date.
Example 16: X agrees with Y on 10th October, 2020 that he will sell his car to Y on 10th November, 2020 for a
sum of ` 3 lakhs. It is an agreement to sell.
When agreement to sell becomes sale: An agreement to sell becomes a sale when the time elapses or the
conditions are fulfilled subject to which the property in the goods is to be transferred.
The following elements must co-exist so as to constitute a contract of sale of goods under the Sale of Goods
Act, 1930:
(i) There must be at least two parties, the seller and the buyer and the two must be different persons. A
person cannot be both the seller and the buyer and sell his goods to himself.
(ii) The subject matter of the contract must necessarily be goods covering only movable property. It may be
either existing goods, owned or possessed by the seller or future goods.

© The Institute of Chartered Accountants of India

2.8 BUSINESS LAWS

(iii) A price in money (not in kind) should be paid or promised. But there is nothing to prevent the
consideration from being partly in money and partly in kind.
(iv) A transfer of property in goods from seller to the buyer must take place. The contract of sale is made by
an offer to buy or sell goods for a price by one party and the acceptance of such offer by other.
(v) A contract of sale may be absolute or conditional.
(vi) All other essential elements of a valid contract must be present in the contract of sale, e.g. free consent
of parties, competency of parties, legality of object and consideration etc.

1.4 DISTINCTION BETWEEN SALE AND AN AGREEMENT TO SELL

The differences between the two are as follows:

Basis of difference Sale Agreement to sell

Transfer of property The property in the goods passes to the Property in the goods passes to the
buyer immediately. buyer on future date or on fulfilment of
some condition.
Nature of contract It is an executed contract. i.e. contract It is an executory contract. i.e. contract
for which consideration has been paid. for which consideration is to be paid at
a future date.
Remedies for breach The seller can sue the buyer for the The aggrieved party can sue for
price of the goods because of the damages only and not for the price,
passing of the property therein to the unless the price was payable at a
buyer. stated date.
Liability of parties A subsequent loss or destruction of the Such loss or destruction is the liability
goods is the liability of the buyer. of the seller.
Burden of risk Risk of loss is that of buyer since risk Risk of loss is that of seller.
follows ownership.
Nature of rights Creates Jus in rem Creates Jus in personam
Right of resale The seller cannot resell the goods. The seller may sell the goods since
ownership is with the seller.
In case of insolvency The official assignee will not be able to The official assignee will acquire
of seller take over the goods but will recover the control over the goods but the price will
price from the buyer. not be recoverable.
In case of insolvency The official assignee will have control The official assignee will not have any
of buyer over the goods. control over the goods.

1.5 SALE DISTINGUISHED FROM OTHER SIMILAR CONTRACTS

(i) Sale and Hire Purchase: Contract of sale resembles with contracts of hire purchase very closely, and
indeed the real object of a contract of hire purchase is the sale of the goods ultimately.

© The Institute of Chartered Accountants of India

9 THE SALE OF GOODS ACT, 1930 2.9

Hire purchase agreements are governed by the Hire-purchase Act, 1972. Term “hire-purchase
agreement” means an agreement under which goods are let on hire and under which the hirer has an
option to purchase them in accordance with the terms of the agreement and includes an agreement
under which—
(a) Possession of goods is delivered by the owner thereof to a person on condition that such person
pays the agreed amount in periodical instalments, and
(b) The property in the goods is to pass to such person on the payment of the last of such
instalments, and
(c) Such person has a right to terminate the agreement at any time before the property so passes;
None the less a sale has to be distinguished from a hire purchase as their legal incidents are quite
different.
The main points of distinction between the ‘sale’ and ‘hire-purchase’ are as follows:

Basis of difference Sale Hire- Purchase

Time of passing Property in the goods is The property in goods passes to the
property transferred to the buyer hirer upon payment of the last
immediately at the time of instalment.
contract.

Position of the party The position of the buyer is that of The position of the hirer is that of a
the owner of the goods. bailee till he pays the last
instalment.

Termination of contract The buyer cannot terminate the The hirer may, if he so likes,
contract and is bound to pay the terminate the contract by returning
price of the goods. the goods to its owner without any
liability to pay the remaining
instalments.

Burden of Risk of The seller takes the risk of any The owner takes no such risk, for if
insolvency of the buyer loss resulting from the insolvency the hirer fails to pay an instalment,
of the buyer. the owner has right to take back the
goods.

Transfer of title The buyer can pass a good title to The hirer cannot pass any title even
a bona fide purchaser from him. to a bona fide purchaser.

Resale The buyer in sale can resell the The hire purchaser cannot resell
goods. unless he has paid all the
instalments.

© The Institute of Chartered Accountants of India

2.10 BUSINESS LAWS

(ii) Sale and Bailment: A ‘bailment’ is the delivery of goods for some specific purpose under a contract on
the condition that the same goods are to be returned when the purpose is accomplished to the bailor or
are to be disposed of according to the directions of the bailor. Provisions related to bailment are regulated
by the Indian Contract Act, 1872.
The difference between bailment and sale may be clearly understood by studying the following:

Basis of difference Sale Bailment

Transfer of property The property in goods is transferred There is only transfer of possession
from the seller to the buyer. So it is of goods from the bailor to the bailee
transfer of general property. for any of the reasons like safe
custody, carriage etc. So, it is
transfer of special property.
Return of goods The return of goods in contract of The bailee must return the goods to
sale is not possible. the bailor on the accomplishment of
the purpose for which the bailment
was made.
Consideration The consideration is the price in The consideration may be gratuitous
terms of money. or non-gratuitous.

(iii) Sale and contract for work and labour: A contract of sale of goods is one in which some goods are
sold or are to be sold for a price. But where no goods are sold, and there is only the doing or rendering
of some work of labour, then the contract is only of work and labour and not of sale of goods.
Example 17: Where gold is supplied to a goldsmith for preparing an ornament or when an artist is asked
to paint a picture.

1.6 CONTRACT OF SALE HOW MADE (SECTION 5)

According to section 5(1), 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 instalments, or that the delivery or payment or both shall be
postponed.
Further, as per sub-section (2) of section 5, 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.
Example 18: R agrees to deliver his old motorcycle valued at ` 25000 to S in exchange for a new motorcycle
and agrees to pay the difference in cash, it is a Contract of Sale.
Analysis:
A contract of sale may be made in any of the following modes:
(i) Contract of sale is made by an offer to buy or sell goods for a price and acceptance of such offer.
(ii) There may be immediate delivery of the goods; or

© The Institute of Chartered Accountants of India

11 THE SALE OF GOODS ACT, 1930 2.11

(iii) There may be immediate payment of price, but it may be agreed that the delivery is to be made at some
future date; or
(iv) There may be immediate delivery of the goods and an immediate payment of price; or
(v) It may be agreed that the delivery or payment or both are to be made in instalments; or
(vi) It may be agreed that the delivery or payment or both are to be made at some future date.

1.7 SUBJECT MATTER OF CONTRACT OF SALE

Existing or future goods (section 6):
(1) The goods which form the subject matter of a contract of sale may be either existing goods that are
acquired, owned or possessed by the seller, or future goods.
(2) There may be a contract for the sale of goods the acquisition of which by the seller depends upon a
contingency which may or may not happen.
Example 19: A contract for sale of certain cloth to be manufactured by a certain mill is a valid contract.
Such contacts are called contingent contracts.
(3) Whereby a contract of sale the seller purports to effect a present sale of future goods, the contract
operates as an agreement to sell the goods.
Goods perishing before making of contract (Section 7): Where there is a contract for the sale of specific
goods, the contract is void if the goods without the knowledge of the seller have, at the time when the contract
was made, perished or become so damaged as no longer to answer to their description contract.
Example 20: A agrees to sell B 50 bags of wheat stored in the A’s godown. Due to water logging, all the goods
stored in the godown were destroyed. At the time of agreement, neither parties were aware of the fact. The
agreement is void.
Goods perishing before sale but after agreement to sell (Section 8): Where there is an agreement to sell
specific goods, and subsequently the goods without any fault on the part of the seller or buyer perish or become
so damaged as no longer to answer to their description in the agreement before the risk passes to the buyer, the
agreement is thereby avoided or becomes void.
Perishing of future goods: If the future goods are specific, the destruction of such goods will amount to
supervening impossibility and the contract shall become void.

1.8 ASCERTAINMENT OF PRICE (SECTION 9 & 10)

Ascertainment of price (Section 9):
(1) The price in a contract of sale may be fixed by the contract or may be left to be fixed in manner thereby
agreed or may be determined by the course of dealing between the parties.
(2) Where the price is not determined in accordance with the foregoing provisions, the buyer shall pay the
seller a reasonable price. What is a reasonable price is a question of fact dependent on the
circumstances of each particular case.

© The Institute of Chartered Accountants of India

2.12 BUSINESS LAWS

Analysis:
‘Price’ means the monetary consideration for sale of goods [Section 2 (10)]. By virtue of Section 9, the price in
the contract of sale may be-
(1) fixed by the contract, or
(2) agreed to be fixed in a manner provided by the contract, e.g., by a valuer, or
(3) determined by the course of dealings between the parties.
Agreement to sell at valuation (Section 10):
(1) Where there is an agreement to sell goods on the terms that the price is to be fixed by the valuation of
third party and such third party cannot or does not make such valuation, the agreement is thereby
avoided:
Provided that, if the goods or any part thereof have been delivered to, and appropriated by, the buyer,
he shall pay a reasonable price therefore.
(2) Where such third party is prevented from making the valuation by the fault of the seller or buyer, the
party not in fault may maintain a suit for damages against the party in default.
Analysis
Section 10 provides for the determination of price by a third party. Where there is an agreement to sell goods on
the terms that price has to be fixed by the third party and he either does not or cannot make such valuation, the
agreement will be void. In case the third party is prevented by the default of either party from fixing the price, the
party at fault will be liable to the damages to the other party who is not at fault. However, a buyer who has
received and appropriated the goods must pay a reasonable price for them in any eventuality.
Example 21: P is having two bikes. He agrees to sell both of the bikes to S at a price to be fixed by the Q. He
gives delivery of one bike immediately. Q refuses to fix the price. As such P ask S to return the bike already
delivered while S claims for the delivery of the second bike too. In the given instance, buyer S shall pay
reasonable price to P for the bike already taken. As regards the Second bike, the contract can be avoided.

SUMMARY
In nutshell, contract of sale of goods is a contract where the seller transfers or agrees to transfer the property in
goods to the buyer for a price. Where, however, the transfer of property in goods is to take place at a future date
or subject to some conditions to be fulfilled, the contract is called ‘agreement to sell’. The subject matter of such
contract must always be goods. Price for goods may be fixed by the contract or may be agreed to be fixed later
on in a specific manner.

© The Institute of Chartered Accountants of India

13 THE SALE OF GOODS ACT, 1930 2.13

TEST YOUR KNOWLEDGE

Multiple Choice Questions
1. A contract for the sale of goods where property would pass to the buyer on payment of total price would
be;
(a) sale (b) agreement to sell
(c) hire-purchase contract. (d) sale on approval.
2. The term “goods” under Sale of Goods Act, 1930 does not include
(a) goodwill. (b) actionable claims.
(c) stocks and shares. (d) harvested crops.
3. A contract for the sale of “future goods” is
(a) sale (b) agreement to sell.
(c) void. (d) hire-purchase contract.
4. The sale of Goods Act, 1930 deals with the
(a) movable goods only. (b) immovable goods only.
(c) both movable and immovable goods. (d) all goods except ornaments.
5. Under Sale of Goods Act, 1930 the terms “Goods” means every kind of movable property and it includes
(a) stock and share. (b) growing crops, grass
(c) both (a) and (b). (d) none of the above
6. The Sale of Goods Act, 1930 deals with
(a) sale (b) mortgage.
(c) pledge. (d) all of the above.
7. Which one of the following is true?
(a) the provisions of Sale of Goods were originally with the Indian Contract Act, 1872.
(b) the Sale of Goods Act, 1930 deals with mortgage.
(c) the Sale of Goods Act restricts the parties to modify the provisions of law.
(d) none of the above.
8. Goods which are in existence at the time of the Contract of Sale is known as
(a) present Goods. (b) existing Goods.
(c) specific Goods. (d) none of the above.
9. Which of the following is not a form of delivery?
(a) constructive delivery. (b) structured delivery.

© The Institute of Chartered Accountants of India

2.14 BUSINESS LAWS

(c) actual delivery. (d) symbolic delivery.

10. Which one of the following is/are document of title to goods?
(a) railway receipt. (b) wharfinger’s certificate.
(c) warehouse keeper’s certificate. (d) all of the above
11. Which one of the following is not true?
(a) document showing title is different from document of title.
(b) bill of lading is a document of title to goods.
(c) specific goods can be identified and agreed upon at the time of the Contract of Sale.
d) none of the above.
12. Mercantile Agent is having an authority to
(a) sell or consign goods. (b) raise money on the security of goods.
c) sell or buy goods. (d) any of the above.
13. Contract of Sale is
(a) executory Contract. (b) executed Contract.
(c) both of the above. (d) none of the above.
14. In which form of the contract, the property in the goods passes to the buyer immediately:
(a) agreement to sell. (b) hire purchase.
(c) sale (d) instalment to sell.
15. In case of hire purchase the hirer can pass title to a bona fide purchaser.
(a) true. (b) false.
16. In a contract of sale, the agreement may be expressed or implied from the conduct of the parties.
(a) true. (b) false.
17. In a contract of sale, subject matter of contract must always be money.
(a) true. (b) false.
18. If a seller handed over the keys of a warehouse containing the goods to the buyer results in
(a) constructive delivery (b) actual delivery
(c) symbolic delivery (d) none of the above
19. If A agrees to deliver 100 kg of sugar to B in exchange of 15 mts of cloth, then it is
(a) Contract of sale. (b) Agreement to sell.
(c) Sale on Approval. (d) Barter.

© The Institute of Chartered Accountants of India

15 THE SALE OF GOODS ACT, 1930 2.15

20. In a hire-purchase agreement, the hirer

(a) has an option to buy the goods. (b) must buy the goods.
(c) must return the goods. (d) is not given the possession of goods.
21. A agrees to deliver his old car valued at ` 80,000 to B, a car dealer, in exchange for a new car, and
agrees to pay the difference in cash it is
(a) Contract of sale. (b) Agreement to sell.
(c) Exchange. (d) Barter.
22. Legally, a contract of sale includes
(a) sale. (b) agreement to Sell.
(c) barter. (d) both (a) and (b)
23. The Sale of Goods Act, 1930 came into force on
(a) 15th March, 1930. (b) 1st July, 1930.
(c) 30th July, 1930. (d) 30th June, 1930.
24. The person who buys or agrees to buy goods is known as
(a) consumer. (b) buyer.
(c) both (a) and (b) (d) none of the above.
25. Voluntary transfer of possession by one person to another is popularly known as
(a) transfer. (b) possession.
(c) delivery. (d) none of the above.
26. If X commissioned Y, an artist, to paint a portrait of A for 200 dollars & Y uses his own canvas & paint
then it is
(a) Contract of sale. (b) Contract of work & materials.
(c) Sale on approval. (d) Hire-Purchase agreement.
27. The property in the goods means the
(a) possession of goods. (b) custody of goods.
(c) ownership of goods. (d) both (a) and (b)
28. The goods are at the risk of a party who has the
(a) Ownership of goods. (b) Possession of goods.
(c) Custody of goods. (d) both (b) and (c)
29. In case of sale of standing trees, the property passes to the buyer when trees are
(a) felled and ascertained. (b) not felled but earmarked.
(c) counted and ascertained. (d) both (b) and (c)

© The Institute of Chartered Accountants of India

2.16 BUSINESS LAWS

30. In case the delivery of goods is delayed due to the fault of party, the goods shall be at the risk of
defaulting party even though the ownership is with the other party.
(a) True, if there is a provision to this effect.
(b) False, as it is against the general rule.
31. Which of the following modes of delivery of goods is considered effective for a valid contract of sale?
(a) Actual delivery. (b) symbolic delivery.
(c) Constructive delivery. (d) all of these.

Answers to MCQs

1. (b) 2. (b) 3. (b) 4. (a) 5. (c)

6. (a) 7. (a) 8. (b) 9. (b) 10. (d)

11. (d) 12. (d) 13. (c) 14. (c) 15. (b)

16. (a) 17. (b) 18. (c) 19. (d) 20. (a)

21. (a) 22. (d) 23. (b) 24. (b) 25. (c)

26. (b) 27. (c) 28. (a) 29. (a) 30. (a)

31. (d)

Descriptive questions
1. A agrees to buy a new TV from a shop keeper for Rs. 30,000 payable partly in cash of Rs. 20,000 and
partly in exchange of old TV set. Is it a valid Contract of Sale of Goods? Give reasons for your answer.
2. A agrees to sell to B 100 bags of sugar arriving on a ship from Australia to India within next two months.
Unknown to the parties, the ship has already sunk. Does B have any right against A under the Sale of
Goods Act, 1930?
3. X contracted to sell his car to Y. They did not discuss the price of the car at all. X later refused to sell
his car to Y on the ground that the agreement was void being uncertain about price. Can Y demand the
car under the Sale of Goods Act, 1930?
4. Classify the following transactions according to the types of goods they are:
(i) A wholesaler of cotton has 100 bales in his godown. He agrees to sell 50 bales and these bales
were selected and set aside.
(ii) A agrees to sell to B one packet of sugar out of the lot of one hundred packets lying in his shop.
(iii) T agrees to sell to S all the apples which will be produced in his garden this year.

Answers to Descriptive Questions

1: It is necessary under the Sales of Goods Act, 1930 that the goods should be exchanged for money. If
the goods are exchanged for goods, it will not be called a sale. It will be considered as barter. However,

© The Institute of Chartered Accountants of India

17 THE SALE OF GOODS ACT, 1930 2.17

a contract for transfer of movable property for a definite price payable partly in goods and partly in cash
is held to be a contract of Sale of Goods.
In the given case, the new TV set is agreed to be sold for ` 30,000 and the price is payable partly in
exchange of old TV set and partly in cash of ` 20,000. So, in this case, it is a valid contract of sale under
the Sales of Goods Act, 1930.
2. In this case, B, the buyer has no right against A the seller. Section 8 of the Sales of Goods Act, 1930
provides that where there is an agreement to sell specific goods and the goods without any fault of either
party perish, damaged or lost, the agreement is thereby avoided. This provision is based on the ground
of supervening impossibility of performance which makes a contract void.
So, all the following conditions required to treat it as a void contract are fulfilled in the above case:
(i) There is an agreement to sell between A and B
(ii) It is related to specific goods
(iii) The goods are lost because of the sinking of ship before the property or risk passes to the buyer.
(iv) The loss of goods is not due to the fault of either party.
3. Payment of the price by the buyer is an important ingredient of a contract of sale. If the parties totally
ignore the question of price while making the contract, it would not become an uncertain and invalid
agreement. It will rather be a valid contract and the buyer shall pay a reasonable price.
In the give case, X and Y have entered into a contract for sale of car but they did not fix the price of the
car. X refused to sell the car to Y on this ground. Y can legally demand the car from X and X can recover
a reasonable price of the car from Y.
4. (i) A wholesaler of cotton has 100 bales in his godown. So, the goods are existing goods. He
agrees to sell 50 bales and these bales were selected and set aside. On selection, the goods
becomes ascertained. In this case, the contract is for the sale of ascertained goods, as the
cotton bales to be sold are identified and agreed after the formation of the contract.
(ii) If A agrees to sell to B one packet of sugar out of the lot of one hundred packets lying in his
shop, it is a sale of existing but unascertained goods because it is not known which packet is to
be delivered.
(iii) T agrees to sell to S all the apples which will be produced in his garden this year. It is contract
of sale of future goods, amounting to 'an agreement to sell.'

© The Institute of Chartered Accountants of India