Sale of Goods Act 1930

Till 1930,transactions relating to sale and purchase of goods were regulated by the
Indian Contract Act,1872.In 1930,Sections 76 to 123 of the Indian Contract Act,
1872 were repealed and a separate Act called ‘The Indian Sale of Goods Act,1930
was passed. It came into force on 1st July, 1930. With effect from 22ndSeptember,
1963, the word ‘Indian’ was also removed. Now, the present Act is called’ The
sales of goods act, 1930’. This Act extends to the whole of India except the State
of Jammu and Kashmir.

Scope of the Act

The sale of Goods Act deals with ‘Sale of Goods Act,1930,’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.” ‘Contract of sale’ is a generic term which includes
both a sale as well as an agreement to sell.

Essential elements of Contract of sale

1. Seller and buyer-

There must be a seller as well as a buyer. Buyer means a person who buys or
agrees to buy goods [Section 2910].’Seller’ means a person who sells or agrees to
sell goods [Section 29(13)].

2. Goods-
There must be some goods. Goods means every kind of movable property other
than actionable claims and money 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)].

3. Transfer of property
Property means the general property in goods, and not merely a special property
[Section 2(11)].General property in goods means ownership of the goods. Special
property in goods means possession of goods. Thus, there must be either a transfer
of ownership of goods or an agreement to transfer the ownership of goods. The
ownership may transfer either immediately on completion of sale or sometime in
future in agreement to sell.

4. Price
There must be a price. Price here means the money consideration for a sale of
goods [Section 2(10)].When the consideration is only goods, it amounts to a
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‘barter’ and not sale. When there is no consideration, it amounts to gift and not
sale.

5. Essential elements of a valid contract

In addition to the aforesaid specific essential elements, all the essential elements of
a valid contract as specified under Section 10 of Indian Contract Act, 1872 must
also be present since a contract of sale is a special type of a contract.

Meaning of goods [Section 2(7)]

Good means every kind of movable property other than actionable claims and
money, and includes the following:

• Stock and share

• Growing crops, grass and thing attached to or forming part of the land which
are agreed to be served before sale or under the Contract of sale.

The Law of Sale of Goods provides such guidelines and liabilities for the safety
and security of the consumers. Any firm or person entering into the business of
selling goods to consumers should be aware of the fact that the law will impose
certain terms and conditions on each transaction.
Consumers can be defined as the group of people who buy certain commodities
which will not be involved in their trade, profession or business. Consumers lie at
the end of the trade chain.

Important Sections
Most of the terms and conditions of the Law of the Sale of Goods, 1979 are found
between sections 12 and 15 of the law. Some of the important aspects of the law
are discussed below.
Section 12
• The right to sell goods must be held by the seller.

• In case the goods are found to be stolen, the seller loses the right to sell the
goods.
• In such situations, the buyer might take the responsibility of returning the
goods to the rightful owner and the seller must compensate for the buyer’s
loss.
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 • A commodity hired by a seller cannot be sold as the buyer has no legal
rights on the commodity and the commodity is still in possession of the
hiring party.
• The seller cannot claim a full refund from the buyer in case the seller did not
know that the commodity he sold was stolen.
Section 13
• If a commodity is being sold by using its description, the commodity must
correspond to the description.
• If the buyer relies at least on parts of the commodity, which he is buying
according to the description, those parts of the commodity must be present
in the commodity.
• This section is a strict liability and applies to both the sellers and those
selling goods in the course of business.
• The information provided in the registered documents does not provide any
defense.
Section 14(2)
This section deals with the quality of the product. This section imposes the
following criteria to be fulfilled by a commodity to be considered of satisfactory
quality −

• The commodity must be fit for serving all the purposes for which it is sold.
• The appearance and finish of the commodity must be acceptable.
• There should be freedom for minor defects of the product.
• The good should be safe and durable.

Buyers cannot expect legal remedies in accordance with the

following −

• Fair wear and tear

• Misuse or accidents
• In case the item is not needed anymore
Section 14(3)

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 • Any specific purpose for which a commodity is bought by the buyer must
be conveyed to the seller by the buyer and the seller must comply with the
purpose.
• The purpose may be regardless of the purpose for which the commodity is
commonly bought.
Section 15
• This section deals with the contracts of sale determined by sample.

• If the seller and the buyer come across a contract of sale by the sample, the
sample of goods provided by the seller to the buyer must correspond to the
whole bulk of the commodity.

Types of Goods [Section 6]

1. Existing Goods
Existing goods mean the goods which are either owned or possessed by the seller
at the time of contract of sale.The existing goods may be specific or ascertained or
unascertained as follows:

a) Specific Goods [Section 2(14)]:

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These are the goods which are identified and agreed upon at the time when a
contract of sale is made-For example, specified TV, VCR, Car, Ring.

b) Ascertained Goods:

Goods are said to be ascertained when out of a mass of unascertained goods,the

quantity extracted for is identified and set aside for a given contract.Thus,when
part of the goods lying in bulk are identified and earmarked for sale,such goods are
termed as ascertained goods.

c) Unsanctioned Goods:

These are the goods which are not identified and agreed upon at the time when a
contract of sale is made e.g. goods in stock or lying in lots.

2. Future Goods [Section 2(6)]

Future goods mean goods to be manufactured or produced or acquired by the seller

after the making of the contract of sale.There can be an agreement to sell
only.There can be no sale in respect of future goods because one cannot sell what
he does not possess.

3. Contingent Goods [Section 6(2)]

These are the goods the acquisition of which by the seller depends upon a
contingency which may or may not happen.

Price of Goods

Meaning [Section 2(10)]

Price means the money consideration for a sale of goods.

Modes of determining Price [Section 9(1)]

There are three modes of determining the price as under:

1. It may be fixed by the contract or

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 2. It may be left to be fixed in an agreed manner
3. It may be determined by the course of dealing between the parties.
Thus, the price need not necessarily be fixed at the time of sale.

Consequences of not determining the Price in any of the Mode

[Section 9(2)]

Where the price is not determined in accordance with Section 9(1), the buyer must
pay seller a reasonable price. What is a reasonable price is a question of fact
dependent on the circumstances of each particular case. It may be noted that a
reasonable price need not be market price.

Consequence of not Fixing Price by third party[Section 10(1)]

The agreement to sell goods becomes void if the following two conditions are
fulfilled.

• If such agreement provided that the price is to be fixed by the valuation of a

third party,
• If such third party cannot or does not make such valuation.

Conditions and Warranties

It is usual for both seller and buyer to make representations to each other at the
time of entering into a contract of sale. Some of these representations are mere
opinions which do not form a part of contract of sale. Whereas some of them may
become a part of contract of sale. Representations which become a part of contract
of sale are termed as stipulatuins which may rank as condition and warranty e.g. a
mere commendation of his goods by the seller doesn’t become a stipulatuin and
gives no right of action to the buyer against the seller as such representations are
mere opinion on the part of the seller. But where the seller assumes to assert a fact
of which the buyer is ignorant, t will amount to a stipulation forming an essential
part of the contract of sale.

Meaning of Conditions [Section 12(2)]

A condition is a stipulation
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 1. Which is essential to the main purpose of the contract
2. The breach of which gives the aggrieved party a right to terminate the
contract.

Meaning of Warranty [Section 12(3)]

A warranty is a stipulation

1. Which is collateral to the main purpose of the contract

2. The breach of which gives the aggrieved party a right to claim damages but
not a right to reject goods and to terminate the contract.

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Conditions to be treated as Warranty [Section 13]
In the following three cases a breach of a condition is treated as a breach of a
warranty:

1. Where the buyer waives a conditions; once the buyer waives a conditions,he
cannot insist on its fulfillment e.g. accepting defective goods or beyond the
stipulated time amount to waiving a conditions.
2. Where the buyer elects to treat breach of the condition as a breach of
warranty; e.g. where he claims damages instead of repudiating the contract.
3. Where the contract is not severable and the buyer has accepted the goods or
part thereof, the breach of any condition by the seller can only be treated as
breach of warranty. It cannot be treated as a gorund for rejecting the goods
unless otherwise specified in the contract. Thus, where the buyer after
purchasing the goods finds that some condition is not fulfilled, he cannot
reject the goods. He has to retain the goods entitling him to claim damages.

Express and Implied Conditions and Warranties

In a contract of sale of goods, conditions and warranties may be express or

implied.

1. Express Conditions and Warranties-

These are expressly provided in the contract. For example, a buyer desires to buy a
Sony TV Model No. 2020.Here, model no. is an express condition. In an
advertisement for Khaitan fans, guatantee for 5 years is an express warranty.

2. Implied Conditions and Warranties-

These are implied by law in every contract of sale of goods unless a contrary
intention appears from the terms of the contract. The various implied conditions
and warranties have been shown below:

Implied Conditions

1. Conditions as to title [Section 14 (a)]

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

• In the case of a sale, he has a right to sell the goods, and

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 • In the case of an agreement to sell, he will have a right to sell the goods at
the time when the property is to pass.

2. Condition in case of sale by description [Section 15]

Where there is a contract of sale of goods by description, there is an implied
condition that the goods shall correspond with description. The main idea is that
the goods supplied must be same as were described by the seller. Sale of goods by
description includes many situations as under:

i. Where the buyer has never seen the goods and buys them only onm the basis of
description given by the seller.

ii. Where the buyer has seen the goods but he buys them only on the basis of
description given by the seller.

iii. Where the method pf packing has been described.

3. Condition in case of sale by sample [Section 17]

A contract of sale is a contract for sale by sample when there is a term in the
contract, express or implied,to that effect.Such sale by sample is subject to the
following three conditions:

1. The goods must correspond with the sample in quality.

2. The buyer must have a reasonable opportunity of comparing the bulk with
the sample.
• The goods must be free from any defect which renders them unmerchantable
and which would not be apparent on reasonable examination of the
sample.Such defects are called latent defects and are discovered when the
goods are put to use.
4. Condition in case of sale by description and sample [Section 15]
If the sale is by sample as well as by description, the goods must correspond with
the sample as well as the description.

5. Condition as to quality or fitness [Section 16(1)]

There is no implied condition as to the quality or fitness for any particular purpose
of goods supplied under a contract of sale.In other words,the buyer must satisfy
himself about the quality as well as the suitability of the goods.

Exception to this rule:

There is an implied condition that the goods shall be reasonably fit for a particular
purpose described if the following three conditions are satisfied:
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 1. The particular for which goods are required must have been
disclosed(expressly or impliedly) by the buyer to the seller.
2. The buyer must have relied upon the seller’s skill or judgement.
• The seller’s business must be to sell such goods.

6. Condition as to merchantable quality [Section 16(2)]

Where the goods are bought by description from a seller who deals in goods of that
description, there is an implied condition that the goods shall be of merchantable
quality. The expression merchantable quality means that the quality and condition
of the goods must be such that a man of ordinary prudence would accept them as
the goods of that description.Goods must be free from any latent or hidden defects.

7. Condition as to wholesomeness
In case of eatables or provisions or foodstuffs, there is an implied condition as to
wholesomeness. Condition as to wholesomeness means that the goods shall be fit
for human consumption.

8. Coditions implied by custom [Section 16(3)]

Condition as to quality or fitness for a particular purpose may be annexed by the
usage of trade.

Implied warranties

a) Warranty as to quiet possession [Section14 (b)]

There is an implied warranty that the buyer shall have and enjoy quiet possession
of the goods. The reach of this warranty gives buyer a right to claim damages from
the seller.

b) Warranty of freedom from encumbrances [Section 14(c)]

There is an implied warranty that the goods are free from any charge or
encumbrance in favour of any third person if the buyer is not aware of such charge
or encumbrance. The breach of this warranty gives buyer a right to claim damages
from the seller.

1. Warranty as to quality or fitness for a particular purpose annexed by usage

of trade[Section 16(3)]
2. Warranty to disclose dangerous nature of goods

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Unpaid seller and his rights

Meaning of an Unpaid Seller [Sec 45(1)(2)]

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

1. When the whole of the price has not been paid or tendered
2. When a bill of exchange or other negotiable instrument(such as cheque) has
been received as conditional payment,and it has been dishonoured[Section
45(1)].
3. The term ‘seller’includes any person who is in the position of a seller(for
instance,an agent of the sellerto whom the bill of lading has been
endorsed,or a consignor or agent who has himself paid,or is directly
responsible for the price) [Section 4592)].
Rights of an Unpaid Seller [Section 46-52,54-56,60-61]

The rights of an unpaid seller can broadly be classified under the following two
categories:

1. Rights against the goods

2. Rights against the buyer personally

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The various rights of an unpaid seller have been shown in Fig.

I) Rights against the goods where the property in the goods has
passed to the buyer

a) Right of Lien [Section 47,48 and 49]

Meaning of Right of Lein:

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

Three circumstances under which right of lien can be exercised [Section 47(1)]

1. Where the goods have been sold without any stipulation to credit;
2. Where the goods have been sold on credit, but the term of credit has expired;
3. Where the buyer becomes insolvent.

Other provisions regarding right of lien [Sections 47(2), 48, 49 (2)]

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 1. The seller may exercise his right of lien, even if he possesses the goods as
agent or bailee for buyer[Section 47(2)]
2. Where an unpaid seller has made part delivery of the goods, he may exercise
his right of lien on the remainder,unless such part delivery has been made
under such circumstances as to show agreement to waive the lien[Section
48].
3. The seller may exercise his right of lien even though he has obtained a
decree for the price of the goods [Section 49(2)].
4.
Circumstances under which right of lien in the following cases:

1. When he delivers the goods to a carrier or other bailee for the purpose of
transmission to the buyer without reserving the right of disposal of the goods
[Section 49(1)(a)].
2. When the buyer or his agent lawfully obtains possession of the goods
[Section 49(1)(b)]
3. When the seller waives his right of lien [Section 49(1)(c)].
4. When the buyer disposes of the goods by sale or in any other manner with
the consent of the seller [Section 53(1)].
5. Where document of title to goods has been issued or lawfully transfer to any
person as buyer or owner of the goods and that person transfers the
document by way of sale, to a person who takes the document in good faith
and for consideration.[Proviso to Section 53(1)].

b) Right of Stoppage of Goods in Transit-

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

Conditions under which right of stoppage in transit can be exercised[Section 50]

The unpaid seller can exercise the right of stoppage in transit only if the following
conditions are fulfilled:

1. The seller must have parted with the possession of goods,i.e. the goods must
not be in the possession of seller.
2. The goods must be in the course of transit.
• The buyer must have become insolvent.

c)Right of Resale[Section 46(1) and 54]-

An unpaid seller can resell the goods under the following three circumstances:

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 1. Where the goods are of a perishable nature.
2. Where the seller expressly reserves a right of resale if the buyer commits a
default in making payment.
• Where the unpaid seller who has exercised his right of lien or stoppage in
transit gives a notice to the buyer about his intention to resell and buyer does
not pay or tender within a reasonable time.
•
II Rights against the goods where the property in the goods has not passed to
the buyer

Right of withholding delivery [Section 46(2)]

Where the property in the goods has not been passed to the buyer, the unpaid
seller, cannot exercise right of lien, but get a right of withholding the delivery of
goods, similar to and co-extensive with lien and stoppage in transit where the
property has passed to the buyer.

Rights of Unpaid Seller against the Buyer Personally

The unpaid seller, in addition to his rights against the goods as discussed above,
has the following three rights of action against the buyer personally:

1. Suit for price (Sec. 55)- Where property in goods has passed to the buyer; or
where the sale price is payable ‘on a day certain’, although the property in goods
has not passed; and the buyer wrongfully neglects or refuses to pay the price
according to the terms of the contract, the seller is entitled to sue the buyer for
price, irrespective of the delivery of goods. Where the goods have not been
delivered, the seller would file a suit for price normally when the goods have been
manufactured to some special order and thus are unsaleable otherwise.

2. Suit for damages for non-acceptance (Sec. 56)- Where the buyer wrongfully
neglects or refuses to accept and pay for the goods, the seller may sue him for
damages for non-acceptance. The seller’s remedy in this case is a suit for damages
rather than an action for the full price of the goods.

3. Suit for Interest [Section 61(2)]-

In case of breach of the contract on the part of seller, the buyer may sue the seller
for interest from the date on which the payment was made.

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