SALE OF GOODS ACT 1930

These are reference notes which are to be read along with the bare act Sale of
Goods Act 1930 , PPT of Sales of Goods Act and brief notes discussed in class-
for better understanding and clarity of concepts.

By Prof. Madhura Bhangle

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Introduction:
Up until 1930, Chapter VII of the Indian Contract Act, 1872 (Chapter VII) contained the laws
governing the sale of goods. However, there were significant developments in India's trade and
commerce between 1872 and 1930.Moreover, the decisions of the Privy Council and various
High Courts rendered the existing law of Sale of Goods obsolete. Thus, Chapter VII of the
Indian Contract Act, 1872 was repealed, and the Sale of Goods Act was enacted in 1930. In
1930, Sections 76-123 were replaced by the Act of 1930.The English Sale of Goods Act, 1893,
serves as its foundation.
A contract for the sale of goods has such unique characteristics like transfer of ownership of
the goods, delivery of goods, rights and duties of the buyer and seller, remedies for breach of
contract, conditions and warranties implied under a contract for the sale of goods, etc. These
are governed under the 1930 Sale of Goods Act's provisions. This Act extends to the whole of
India. It came into force on 1st July 1930.
The Act deals with movable property only. 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 the Transfer of Property Act, 1882.

Important elements and their definitions under 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. DELIVERABLE STATE:
The goods are said to be in a “deliverable state” when they are in such a state that the
buyer would under the contract be bound to take delivery of them. [Section 2(3)]
3. GOODS [SECTION 2(7)] :
The term “Goods” is one of the crucial clauses in the Contract of Sale. According
to Section 2(7) of the Act, “goods” include-
• Any movable property except actionable claims (Unsecured Debt) and money;
• Stock and shares;
• The growing crops, standing timber, grass;
• The things that are attached or forming part of the land which is agreed to be
severed from the land before the sale.
It is concluded from the above definition that the Act deals with the sale of goods i.e. movable
property only.
Actionable claim means what a person cannot make a present use of or enjoy, but can recover
it by means of a suit or an action. Thus, a debt due to a man from another is an actionable claim
and cannot be sold as goods, although it can be assigned.

In The Commissioner of Sales Tax, MP vs MP Electricity Board (AIR 1970 SC 732), the
question involved in this case was whether electric energy could be considered to be “goods”
for the purpose of Sales Tax. It was held that although electric energy is not tangible and cannot
be touched like a piece of wood or book, it still falls under the definition of “goods” as it can
be transmitted, transferred, delivered, stored, and possessed in the same way as any other
movable property.

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Law Commission’s Recommendation:
The Law Commission of India suggested that Section 2(7) of the Sale of Goods Act, 1930 be
changed to include electric energy, water, and gas as goods in its 8th Report, which was
submitted in 1958.The Law Commission observed that contracts with regard to the supply of
electricity and water have become common in India. They are known as Standard Form
Contracts. However, no amendment has been made to Section 2(7) of the Sale of Goods Act,
1930, till date.

In Jabalpur Cable Network Pvt. Ltd. vs ESPN India Pvt. Ltd. (AIR 1999 MP 271) The
MP High Court held that electronic TV signals are a form of energy just like electricity and fall
within the definition of goods which can be the subject matter of sale. Supplying Cable TV
Signals is a sale of goods as defined in Section 2(7) of the Sale of Goods Act, 1930. Such
signals constitute movable property.

Types of Goods[Section 6]

Types of Goods

Existing Future Contingent

Specific

Unascertained

Ascertained

A. 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)]: 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.

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 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.
B. 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.
C. 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.

4. PRICE OF GOODS [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:

• It may be fixed by the contract or
• It may be left to be fixed in an agreed manner
• 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.
- It may be fixed by the parties through the contract itself. This is the most usual way of
fixing the price.
- It may be fixed in accordance with an agreed manner. For example: it may be agreed
that the market price prevailing on the date of supply of goods will be the price to be
paid.
- It may be determined by a course of dealing among the parties. For ex example: if the
buyer has been previously paying to the seller the price prevailing on the date of supply
of goods, the course of dealing suggests that this rule has to be followed in the
subsequent transactions also.

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.

5. MERCANTILE AGENT [Section 2(9)]:

Mercantile Agent” means a mercantile agent having in the customary course of business as
such agent authority either:

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 • To sell the goods, or
• To consign the goods for the purposes of sale, or
• To buy the goods, or
• To raise money on the security of goods.

6. DELIVERY [SECTION 2(2)]

By delivery of goods it means, the voluntary transfer of the possession of goods from one
person to the other. The transfer of possession is the end result of the whole delivery
process. It is not necessary that the person to whom the goods are delivered is a buyer, he
can be any other person authorized by the buyer. The definition of the term delivery is
defined under Section 2(2) of the Act.
Kinds of Delivery:
• Actual
• Constructive
7. THE DOCUMENT OF THE TITLE TO GOODS [Section 2(4)
the Document of the title to goods includes a bill of lading, dock-warrant, warehouse
keeper’s certificate, railway receipt, multimodal transport document, warrant or order for
the delivery of goods. It also includes any other documents that are used in the usual
course of business proving the possession or control of goods or which proves the
authority of the possessor to transfer or receive the goods. The document is a very
imperative document for taking any legal action without which one cannot proceed with
the proceeding in the court.

Contract of Sale (Section 4)

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. Contract to Sale includes
Sale and Agreement to Sell.

Sale:
Section 4(1) defines sale as a contract whereby, the seller transfers or agrees to transfer the
property in goods to the buyer for a price. Thus, it happens in the present. Such an event of sale
is fixed and binding upon both the parties. The existing goods mostly from the subject of the
contract of sale.
Agreement to Sell:
An agreement to sell can be defined as the transfer of property in goods that is to take place in
future time or the transfer might take place depending on the fulfilment of certain
conditions. The same had been defined in section 4(3). An agreement to sell also becomes a
sale when the given time elapses or the conditions that are needed for the transfer to happen
gets fulfilled. Thus, an agreement to sell establishes the terms and conditions of the offer of a
property by the seller to the buyer.
These terms and conditions incorporate the sum at which it is to be sold and the future date of
payment. The concept of contingent contract as per section 31 of the Indian Contract Act 1872,

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can also be brought into it. Thus an agreement to sell is a contract, to do or not to do something
if some event collateral to such contract, does or does not happen
Example:
A owns an Apple orchard in Shimla and sells 10,000 kg of Apples every year. He can either
enter into a contract of sale with B for selling Apples that are ripe and ready to be plucked, or
he can enter into an Agreement to Sell Apples that would be ripe and ready after one year.
In 2022, A enters into an Agreement to Sell with B for selling him Pears in 2024, which will
be grown in an orchard in Shimla, which A will purchase from Z in 2023.A further mentions
in the agreement to sell that it will be valid only if A purchases the orchard from Z. The
agreement to sell is valid.
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 in the contract.
Example:
a) A enters into a contract with B to sell him 100 kg of Apples lying in his cold store @
Rs. 50 per kg. However, at the time of making the contract, A is unaware of the fact
that due to a power failure in his cold store two days ago, the Apples have rotten.The
contract is void as the goods have become so damaged that they can no longer answer
to their description in the contract.
b) A enters into a contract with B to sell him 100 kg of Apples @ Rs. 50 per kg. A has
Apples lying in his cold store in Chandigarh, as well as ripe Apples in his orchard in
Shimla. At the time of making the contract, A is unaware of the fact that due to a power
failure in his cold store two days ago, the Apples lying therein have rotten .Whether the
contract becomes void in this situation? No, because A can still supply Apples to B
from his Shimla orchard.

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.

Example
A enters into an agreement to sell with B for supplying him 100 liters of Milk after one
month.On the day agreed for delivery, before A could deliver the Milk to B, it is contaminated
due to extreme heat. The agreement is avoided as the risk has not passed over to the buyer (B).

DIFFERENCES BETWEEN SALE AND AGREEMENT OF SELL

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 Principle of Nemo Dat Quad Non Habet and Exceptions
The general rule laid down in Section 27 protects the interest of the actual owner of goods.
This rule is based on the maxim “Nemo Dat Quod Non Habet,” which means that “nobody can
give what he himself does not have”. It implies that “a seller cannot convey a better title than
that of his own to the buyer”. If the seller’s title is defective, the buyer’s title will also suffer
from the same defect.
Section 27(1) Of the Sale of Goods Act, 1930 states that when any goods are sold by a person
who is not the real owner of the goods and sells them without proper authority and consent
from the real owner, the buyer acquires no better title to the goods than the seller had. Section
27 can be considered as a general rule which protects the interest of the real owner.
Although the rule is extremely clear, it isn’t always fair as the innocent buyer may suffer. When
the goods are in question, a buyer may find himself in a very tough situation. The apparent
harshness of the nemo dat rule was realized, and some exception were provided. The exception
applies only to the buyer who has acquired the goods in a good faith and without having
knowledge about the rights of the true owner. (Greenwood v Bennett)
Exception to the Rule:

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Various exceptions to the general rule are mentioned in this Act, as well as under The Indian
Contract Act, 1872.
If a case falls under any of these exceptions, then although the seller of the goods may not be
having a good title over them, yet a good title will be conferred on the buyer of the goods.

1. Transfer Of Title By Estoppel (Sec 27 )

2. Sale By A Mercantile Agent (Section 27)

3. Sale By Joint Owner (Section 28)

4. Sale By A Person In Possession Under A Voidable Contract- (Section 29)

5. Sale By The Seller In Possession (Section 30) (1)

6. Sale By The Buyer In Possession – Sec 30(2)

7. Resale By An Unpaid Seller – Sec 54(3)

8. Sale By Finder Of Goods- (Sec 169, Indian Contract Act)

9. Sale By Pawnee- Sec 176 Of Indian Contract Act

Sale under the Owner’s Implied Authority/ Transfer Of Title By Estoppel (Section 27)
When a person through his actions or words leads another person to believe that some
particular state of affairs existed, he would be stopped from denying later that such state of
affairs did not exist. This is known as an estoppel.
When the real owner of the goods, through his words or actions leads the buyer to believe
that the seller had the authority to dispose of the goods, the real owner would be estopped
from denying it later.
Section 27 of the Act has the following words “unless the owner of the good is by his conduct
precluded from denying the seller’s authority to sell….”
A sells a stolen Car to B for Rs. 5 Lakhs. The Car originally belonged to C. Subsequently, C
transfers the ownership of the Car to B in writing. Later on, C cannot deny A’s authority to
sell. Hence, the sale will be binding on C
Estoppel can arise in the following manner:
- Estoppel by act or omission: If there is a legal omission on the part of the real
owner, the doctrine of estoppel will apply. (by not stopping the sale, assisting the
sale, induces the buyer to alter his position)
- Estoppel by negligence: Estoppel arises due to the negligence of the owner when
he negligently persuades the buyer into believing that the seller is the owner of the
goods and has the authority to transfer the title of the goods. The owner has a duty
to fulfil his legal obligation that is to not give false ideas to the buyer.

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Sale by the Mercantile Agent (Section 27)
If the real owner of the goods has employed a mercantile agent and the goods are sold by the
agent, then the buyer will get a good title because as a general rule an agent can pass better
title. The problem arose when the agent did not have the authority to dispose of the goods. The
following conditions need to be satisfied is this provision is to be evoked:
Must be a Mercantile agent as defined in Sec. 2(9) of the Act. Section 2(9) states that
“mercantile agent” means a mercantile agent having in the customary course of business as
such agent authority either to sell goods, or to consign goods for the purposes of sale, or to
buy goods, or to raise money on the security of goods;
The agent got the documents and goods with the authority of the principal and in the capacity
of an agent, and not in the personal capacity. The agent must be acting in the regular course of
business while selling the goods to the third party. The buyer should have acted in good faith
without having knowledge of the fact that the agent did not have the authority to sell the goods
Folks vs King [(1923) 1 KBD 282] :
An agent was given a Car by the owner to sell the same subject to a reserve price. However,
the agent sold the Car below the reserve price to a bona fide purchaser and misappropriated the
sale proceeds. The Court held that as the buyer had purchased the Car from the mercantile
agent in good faith, he had acquired a good title.
Sale By Joint Owner (Section 28)
If one of several joint owners of goods has the sole possession of them by permission of the
co-owners, the property in the goods is transferred to any person who buys them from such
joint owner in good faith and has not at the time of the contract of sale notice that the seller has
not authority to sell.
Example:
A 1 kg Gold Bar is jointly owned by A, B, and C. It is in the possession of C. C sells the Gold
Bar to Z for Rs. 50 Lakhs without obtaining the permission of A and B. Z is a bona fide
purchaser who was unaware of the fact that C does not have the authority to sell the goods. The
sale is valid and Z has acquired a good title over the goods.

Sale by a Person in Possession under a Voidable Contract (Section 29)

When the seller of goods has obtained possession thereof under a contract voidable under
Section 19 or 19A of the Indian Contract Act, but the contract has not been rescinded at the
time of the sale, the buyer acquires a good title to the goods, provided he buys them in good
faith and without notice of the seller’s defect of title.

Sale by the Seller in Possession of Goods, the property in which has passed to the Buyer
[Section 30(1)]
If a seller has sold some goods, then he cannot deal with the same goods. Section
30(1): however states that if the seller has sold the goods but is still in possession of the goods
or possession of the documents, and such goods or documents are sold to some other buyer
again or is sold by a mercantile agent on behalf of the seller, then the subsequent buyer will get
a good title provided that he was acting in good faith.

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Sale by the Buyer in Possession of Goods before the property in them has passed to him
[Section 30(2)]
Sale by a buyer is possession is governed by Section 30 (2) of the Sale of Goods Act. The
provision states that if a buyer is in possession of goods or the documents of title, and he has
done so with the consent of the seller, and if such property or goods is transferred to some other
person without any notice as regards any lien or other rights of the original seller in respect of
those goods, then the third party gets a good title.

Resale of the Goods by an Unpaid Seller after he has exercised the Right of Lien [Section
54(3)]
This section states that, if a seller who hasn’t been paid by the buyer, exercises the right of lien
or stops the goods in transit, he may re-sell the goods to another buyer, and such a buyer would
get a good title as against the original buyer.

Sale by Finder of Goods (Section 169, Indian Contract Act)

Section 169 of the Indian Contract Act states that when the founder of lost goods, cannot find
the real owner even after making reasonable diligent efforts or the owner of the goods refuses
to pay the finder the legal charges the finder can sell the goods and the buyer will get a good
title.

Sale by a Pawnee when the Pawnor makes a default (Section 176, Indian Contract Act
If the pawnor makes default in payment of the debt, or performance, at the stipulated time of
the promise, in respect of which the goods were pledged, the pawnee may bring a suit against
the pawnor upon the debt or promise. He can retain the goods pledged as a collateral security;
or He may sell the thing pledged after giving the pawnor a reasonable notice of the sale.

Sale by a Pawnee when the Pawnor makes a default (Section 176, Indian Contract Act)
If the proceeds of such sale are less than the amount due in respect of the debt or promise, the
pawnor is still liable to pay the balance. If the proceeds of the sale are greater than the amount
so due, the pawnee shall pay over the surplus to the pawnor.

Conditions and Warranties

Sections 11 to 17 deal with conditions and warranties under the Sale of Goods Act, 1930.
Section 12 of the Act draws a demarcation between a condition and a warranty.
Buyers worry about the warranty durations whenever they purchase any things, such as
electronic devices. To make sure that even if the goods is discovered to be defective after
purchase, they can simply get the thing replaced or repaired, they question the seller about the
warranty. The contract of sale defines the terms "Condition" and "Warranty" in order to specify
the remedies the parties may demand in the event of a violation by either party.

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Stipulation: Something which is required as a part of contract
Two Types of Stipulation ( Section 12)

Section 11: Stipulation

Unless a different intention appears from the terms of the contract, stipulations as to time of
payment are not deemed to be of the essence of a contract of sale. Whether any other Stipulation
as to time is of the essence of the contract or not depends on the terms of the contract. Generally,
in common phenomenon - Time of delivery is stipulation or no depends on contract.

Effect of Section 11
The general rule under Section 11 is that the time of payment of the price is not the essence of
the contract unless a contrary intention appears from the terms of the contract. Therefore, if the
buyer makes a delay in the payment of the price of goods, the seller cannot avoid the contract
on this ground. He can only claim compensation for the delay.
In Orissa Textile Mills Ltd. vs Ganesh Das (AIR 1961 Patna 107), It was held that where time
is of the essence of the contract and the same has been extended, the extended date is also of
the essence of the contract.

Condition
A condition is the cornerstone of the entire contract and essential to carrying it out in the
framework of the Sale of Goods Act, 1930. The aggrieved party has the right to treat the
contract as repudiated if the conditions are broken. In other words, the buyer has the choice to
revoke the contract or refuse to take the items if the seller doesn't comply with a requirement.
If the buyer has already made a payment, he is entitled to both a price refund and compensation
for the contract's breach.

For example,
- A wants to purchase a horse from R, which can run at a speed of 50 km per hour. R
shows a horse and says that this horse is well suited for A. A buys the horse. Later on,
he finds that the horse can run only at a speed of 30 km/hour. This is the breach of
condition as the requirement of the buyer is not fulfilled.

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 - A woman orders a Red Saree from a Boutique and asks the seller to deliver it by 15 th
January so that she can wear it on 16th January at her wedding. But the seller delivers a
Blue Saree instead of a Red one. This is a breach of a condition and the buyer can
repudiate the contract.
- A (buyer) told B (car dealer) that he wants to buy a car for the purpose of touring. B
suggested Maruti Car to A for the same purpose. After buying the car A realized, that
the car is not suitable for the purpose. Now, here A has the right to return the car to B
and receive the refund for the same.

Kinds of Conditions
a) Express Conditions These are conditions which are expressly incorporated/ mentioned by the
parties in the contract. It can be oral or written.
b) Implied Conditions These are such conditions which are automatically incorporated/ applicable
by the law/ conduct/ behaviour in the contract.

a) Expressed Condition
The term defines the statement as a condition which says that something should be exist or
should be there for the fulfillment of contract. These conditions are generally imperative to the
functioning and are done only when both the parties are agreeing on the said or expressed
condition. These are the conditions explicitly stated by parties and agreed.
Example:
A women explicitly stated that she wants a red saree and no other and if she gets anything other
than red saree she will return it

b) Implied Conditions

There are several implied conditions which are assumed by the parties in different kinds of
contracts of sale. For example the assumption during sale by description or sale by sample.
Implied conditions are described in Section 14 to 17 of the Sale of Goods Act, 1930. Unless
otherwise agreed, these implied conditions are assumed by the parties as if it is incorporated in
the contract itself.

1. Implied Condition as to Title [Section 14(a)].

2. Implied Condition in Sale by Description [Section 15].
3. Implied Condition in Sale by Sample as well as Description [Section 15].
4. Implied Condition as to Quality or Fitness [Section 16(1)].
5. Implied Condition of Merchantable Quality [Section 16(2)].
6. Implied Condition in a Sale by Sample [Section 17].

1. Implied condition as to title

In every contract of sale, the basic yet essential implied conditions on the part of the seller are
that-

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 1. Firstly, he has the title to sell the goods.
2. Secondly, in case of an agreement to sell, he will have the right to sell the goods at
the time of performing the contract.
Consequently, if the seller has no title to sell the given goods, the buyer may refuse or reject
those goods. He is also entitled to recover the full price paid by him.

In Rowland v. Divall (1923, the party bought a second-hand motor car from the former and
paid for the same. After six months, he was deprived of it as the seller had no title to sell the
car. It was held that the aggrieved party is entitled to recover the money.

2. Implied condition as to the description

Moving to Section 15 of the Act, In the contract of sale, there is an implied condition that the
goods should be in conformity with the description. The buyer has the option to either accept
or reject the goods which do not conform with the description of the good. Say for example:
Where Ram buys a new car which he thinks to be new from “B” and the car is not new. Ram’
can reject the car.

Referring to Section 16(2) of the given Act, goods must be of merchantable quality. In other
words, the goods are of such quality that would be accepted by a reasonable person. For eg: A
purchased sugar sack from B which was damaged by ants. The condition of merchantability is
broken here and it is unfit for use. It must be noted from this section that the buyer has the right
to examine the goods before accepting it. But a mere opportunity without an actual examination
would not suffice to deprive the buyer of his rights. If however, the examination does not reveal
the defect but within a reasonable time period the goods are found to be defective, He may
repudiate the contract even if he approves the goods. The implied conditions especially in case
of eatables must be wholesome and sound and reasonably fit for the purpose for which they are
purchased. For eg: ‘A’ purchases milk that contains typhoid germs and because of its
consumption he dies. His wife can claim damages.

In G Pillai v K.M Mani 1984 it was held that Cow is considered as Goods under Sales of Goods
act. And the buyer has a right to return back the cow and calf as he had specifically mentioned
about certain quantity of milk from the cow. And as the cow was unable to fetch him that milk,
he could treat it as breach of condition and return back the cow and get the money back.

3. Implied condition as to sale by sample

In the light of Section 17 of the Act, in a contract of sale by sample, there may be following
implied conditions:

• That the actual products would correspond with the sample with respect to the quality,
size, colour etc.
• That the buyer gets a reasonable opportunity to compare the goods with the sample.
• Further, the goods are free from any defect rendering them unmerchantable.

For example, A company sold certain shoes made of a special kind of sole by sample sale for
the French Army. Later when the bulk was delivered it was found that they were not made
from the same sole. The buyer was entitled to the refund of the price and damages.

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 4. Implied condition as to Sale by sample as well as a description

Referring to Section 15 of the Sale of Goods Act, 1930, in a sale by sample as well as
description, the goods supplied must be in accordance with both the sample as well as the
description. In Nichol v. Godis(1854), there was a sale of foreign refined rape-oil. The
delivered oil was the same as the sample but it was having a mixture of other oil too. It was
held in this case that the seller was liable to refund the amount paid.

5. Condition As To Quality Or Fitness

Generally, there is no implied condition as to the quality or fitness of the goods that are sold for
a particular purpose. However, the condition as to the reasonable fitness of goods for a particular
purpose may be implied on the part of the seller for which the buyer wants them. Following are
the conditions to be satisfied:
a. If the buyer had made known to the seller the purpose of his purchase
b. and the buyer relied on the seller’s skill and judgment, and
c. seller’s business to supply goods of that description. [Section 16]
For example, A purchases a hot water bottle from a chemist. The bottle burst and injured A’s
wife. A breach of condition as to the fitness was thus committed. Hence A is liable for a refund
of the price and also the damages.

6. Condition As To Merchantability

This is implied only where the sale is by description and the goods should be of ‘merchantable
quality’ i.e. the goods must be such as are reasonably saleable under the description by which
they are known in the market. [Section 16(2)]

For example, A purchases a certain quantity of black yarn from B who is a dealer in yarn. A
finds the black yarn to be damaged by the white ants. Thus the condition as to merchantability
has been broken and A is entitled to reject it as unmerchantable.

7. Conditions As To Wholesomeness

In the case of eatables and provisions, there is another implied condition that the goods shall be
wholesome, in addition to the implied condition as to merchantability.

For example, A supplies B with milk. The milk contains bacteria and B’s wife consumes the
milk and is diagnosed with a disease. She later succumbs to the disease. Hence, there was a
breach of condition as to the fitness of the supplies and A was liable to pay damages to B in this
case.

Doctrine of Caveat Emptor

Caveat Emptor” is a Latin phrase that translates to “let the buyer beware”. It is specifically
defined in Section 16 of the act “there is no implied warranty or condition as to the quality or the
fitness for any particular purpose of goods supplied under such a contract of sale “The maxim
provides that the buyer must take care of the quality and fitness of the goods which he intends
to buy and for which he can’t blame the seller for his own wrong choice. A seller offers his

Sales of Goods Act : Notes By Prof. Madhura Bhangle Page | 14

products to the open market. The buyer considers all of his possibilities before making a
decision. Let's now say that the product is found to be faulty or of subpar quality. According
to this doctrine, the seller won't be held accountable for this. The decision the consumer made
is his own fault. The doctrine therefore aims to increase the buyer's awareness of his
decisions. The purchaser has a responsibility to investigate the worth and quality of the item
he is buying. The seller will not be held liable if the goods turns out to be flawed or falls short
of expectations.

illustration : B sold a horse to A. A desired to enter the horse in a competition. It turned out
that the horse's disability prevented it from competing in a race. But A didn't let B know what
he was planning. B will therefore not be held accountable for the horse's flaws. The Caveat
Emptor doctrine will be in effect.

The following conditions must all be met for the buyer to transfer liability to the seller: [
Exceptions to the Doctrine]

1. Section 16(1) – Fitness for buyers’ purpose

Sub section (1) of Section 16 of the said Act prescribes the circumstances in which the seller
is obliged to supply goods to the buyer as per the purpose for which he intends to make a
purchase. It states that when the seller either expressly or by necessary implication is aware of
the purpose for which buyer makes purchase thereby relying on seller’s skill and judgment and
the goods to be purchased are of a description which the seller in his ordinary course of business
supply, then there is as implied condition that the goods shall be reasonably in accordance with
the purpose

Requirements of the Section 16(1) are as follows:-

- The buyer should make the seller aware of the particular purpose for which he is making
purchase;
- The buyer should make purchase on the basis of seller’s skill or judgment;
- The goods must be of a description which it is in the course of the seller’s business to supply.

2. Sale under Trade Name [Proviso to S. 16 (1)]

Sometimes a buyer purchases goods not on the basis of skill and judgment of the seller but by
relying on the trade name of the product. In such case, it would be unfair to burden the seller
with the responsibility for quality. The proviso to Section 16 of the Sale of Goods Act, 1930
deals with such cases. The proviso says: “Provided that, in the case of a contract for the sale
of a specified article under its patent or other trade name, there is no implied condition as to
the fitness for any particular purpose.”

3. Merchantable quality [Section 16(2)]

The second important exception to the doctrine of caveat emptor is incorporated in Section
16(2) of the Act. The Section provides that the dealer who sells the goods has a duty to deliver
the goods of merchantable quality. Sub-Section (2) which contains this exception says: “Where
the goods are bought by description from a seller who deals in goods of that description

Sales of Goods Act : Notes By Prof. Madhura Bhangle Page | 15

(whether he is the manufacturer or producer or not), there is an implied condition that the
goods shall be of the merchantable quality.”

Meaning of Merchantable Quality: Merchantable quality means that if the goods are
purchased for resale they must be capable of passing in the market under the name or
description by which they are sold. Merchantable quality depends on two factors:-

- Marketability- Merchantability does not merely mean that the goods shall be
marketable, but that they shall be marketable at their full value.
- “ Reasonable fitness for general purposes- “Merchantable quality” means, in the
second place, that if the goods are purchased for self-use, they must be reasonably fit
for the purpose for which they are generally used.
-
Examination by buyer [Proviso to S.16(2] The proviso to section 16(2) declares that “if the
buyer has examined the goods, there shall be no implied condition as regards defects which
such examination ought to have revealed. The requirement of the proviso is satisfied when the
seller gives the buyer full opportunity to examine the goods and whether the buyer made any
use of the opportunity or not should make no difference

4. Conditions implied by trade usage [ Sec. 16(3)]

• Sub-Section (3) of section 16 gives statutory force to conditions implied by the usage
of a particular trade. It says:

• “An implied warranty or condition as to the quality or fitness for the particular
purpose may be annexed by the usage of trade.”

5. Express Terms [ Section 16(4)]

It is open to the parties to include any express conditions or warranties in their contract. But
an express warranty or condition does not negative a warranty or condition implied by the Act
unless the express terms are inconsistent with the implied conditions.

The exceptions to the caveat emptor rule have gained greater attention than the rule itself in the
twentieth century thanks to the passage of the English Sale of Goods Act, 1893 and its later
revision by the English Sale of Goods Act, 1979. Additionally, only the sellers can guarantee
the contents and quality of the goods due to the complicated structures of modern goods. These
reasons made it necessary to limit the caveat emptor rule by grafting a few exceptions onto its
application. Delivering acceptable goods and giving relevant information about them are now
obligations. As a result, in contrast to caveat emptor, it gave rise to the phrase "caveat venditor,"
which means "let the seller beware." There has been a change in the Doctrine of Caveat Emptor
to Caveat Venditor which means ‘let the seller beware’. The maxim fosters consumer welfare
by making the seller, manufacturer, and service providers accountable for the quality of goods
produced or services offered. Recently, the Central Government enforced the Consumer
Protection Act, 2019 to strengthen the consumer rights framework. The new Act has introduced
comprehensive regulations in e-commerce and advertisements and set up a central regulatory

Sales of Goods Act : Notes By Prof. Madhura Bhangle Page | 16

body. While this has tried to address concerns that consumers have with a changing
marketplace there by introducing the new concept.

Warranty

Meaning- A warranty is a stipulation (stipulation means to demand something) (Section 12(3)):

-

Features:

- Which is not essential to the main purpose of the contract

- The breach of warranty gives the aggrieved party a right to claim for damages but not
the right to reject the goods
- Even if there is breach of warranty, the main contract can be completed
- Breach of warranty can’t be treated as breach of condition

A warranty is a stipulation collateral to the main purpose of the said contract. The breach of
warranty gives rise to a claim for damages. However, it does give a right to reject the goods or
treat the contract as repudiated. (Sec 12(3)).

Identification of a Stipulation as a Condition or Warranty

Whether a stipulation is a condition or a warranty is a very important aspect to have the

knowledge about. A stipulation in a contract of sale is either a condition or is a warranty
depending in either case on the construction of the contract

Types of Warranties :

Implied Warranties

Implied Warranties are disclosed in Section 14 and 16 of the Sale of Goods Act, 1930 and are
the warranties which the law implies into the contract.

Implied warranty of quiet (undisturbed) possession of goods (Section 14(b): Once the
goods are sold to buyer then there should be no disturbance by the seller or any third party to
the buyer.

Example: A sells goods to B despite the fact that he does not have the right to sell them. C
claims to be the owner of the goods and files a case against B to recover them. The Court orders
B to deliver the possession of goods to C.B (the buyer) can sue A (the seller) for the breach of
implied warranty under Section 14(b).

Implied warranty to disclose the dangerous nature of the goods (Section 14(a)): In case
of selling the goods of dangerous nature to the buyer, there is an implied warranty that seller
should disclose all the relevant information to the buyer. If seller fails to do the same, then

Sales of Goods Act : Notes By Prof. Madhura Bhangle Page | 17

seller will be liable to pay for the damages to the buyer. Example of dangerous goods:
Disinfectant, chemicals etc.

Implied warranty as to quality/ fitness (Section 16(4)): An implied warranty as to the quality
or the fitness for a particular purpose should be made know to the buyer in advance

Example: any damage to goods which can happen should be made known to the buyer in
advance, otherwise it will be considered breach of warranty.

Implied Warranty against Encumbrances [Section 14(c)]

In a contract of sale, unless the circumstances of the contract are such as to show a different
intention, there is an implied warranty that the goods shall be free from any charge or
encumbrance in favour of any third party not declared or known to the buyer before or at the
time when the contract is made.

Example:

a) A took loan from bank for Rs. 1,00,000 by pledging the bike with bank. There was a
loan going on and A sold the bike to C, here in this case there is an implied warranty
that A can’t sell the bike to C as the bike is not free from liability/ loan. So, C has the
right to recover the damages from A.
b) A sell his Car to B for Rs. 10 Lakhs. At the time of sale, the Car is hypothecated to a
Bank, but this fact is concealed by A from Brive B (the buyer) is required by the Bank
to discharge the liability under the hypothecation agreement, he can claim
compensation for the same from A (the seller). But if the charge or encumbrance is
known to the buyer at the time of sale, he becomes bound by the same.

When Condition is to be treated as Warranty (Section 13)

Where a contract of sale is subject to any condition to be fulfilled by the seller, the buyer may
waive the condition or elect to treat the breach of the condition as a breach of warranty and not
as a ground for treating the contract as repudiated. Where a contract of sale is not severable
and the buyer has accepted the goods or part thereof, the breach of any condition to be fulfilled
by the seller can only be treated as a breach of warranty and not as a ground for rejecting the
goods and treating the contract as repudiated, unless there is a term of the contract, express or
implied, to that effect

1. Acceptance of Goods by Buyer -Where a contract of sale is not severable and the buyer has
accepted the goods or part thereof, the breach of any condition to be fulfilled by the seller can
only be treated as a breach of warranty and not as a ground for rejecting, the goods and treating
the contract as they repudiated unless there is a term of the contract express or implied to that
effect - Section 13(2).

Kailash Sharma vs Patna Municipal Corporation & Others (AIR 2009 Patna 10)

Sales of Goods Act : Notes By Prof. Madhura Bhangle Page | 18

The Appellant sold a certain number of fogging machines (used for killing mosquitoes) to the
Respondent Corporation for which the payment had to be made within one week of delivery.
The Respondents did not pay within one week and did not communicate with the appellant
w.r.t. the payment. After 6 months of using the machines, the Respondents communicated with
the appellant, but only to complain about the fogging machines’ inefficiency. They said that
the machines were defective and intended to return them. The Appellant filed a suit to recover
the payment of machines from the respondents.

Issue : Whether the Respondents are liable to pay for the machines or whether they should be
allowed to repudiate the transaction?

Held: The Patna High Court held that the respondents were liable to pay for the fogging
machines and they could not legitimately return the machines after using them for 6 months. A
s per Section 42 of the Sale of Goods Act, the act of receiving the machines after demonstration,
using them, and retaining them for a long-time amount to valid acceptance. Section 13(2) of
the Sale of Goods Act, 1930, clearly states that where there is a warranty then at best the
purchaser can file a claim for damage but cannot repudiate the transaction itself as is being
sought to be done by the Corporation. This Section was read with Section 59 of the Act which
lays down that a buyer is not by reason of a breach of warranty (by the seller) entitled to reject
the goods. He may sue for damages or for breach of warranty.

2. Voluntary Waiver of Condition -Where a contract of sale is subject to any condition to be

fulfilled by the seller, the buyer may, Waive the condition or Elect to treat the breach of the
condition as a breach of warranty (Section 13(1)). If the buyer once decides to waive the
condition he cannot afterwards insist on its fulfillment.

3. Conversion of Condition into Warranty -Where the buyer elect to treat breach of the
condition as a breach of warranty, e.g. he claims damages instead of repudiating the contract.

Performance of Contract of Sale

The parties to a contract of sale of goods (buyer and seller) are bound to perform their
obligations under the contract. Sections 31 to 44 of The Sale of Goods Act, 1930, deal with the
rules regarding the Performance of Contract.

Duty of Seller and Buyer (Section 31)

Seller’s main duty:-
→ Is to deliver the goods to the buyer
Buyer’s main duty:-
→ To accept the goods and pay the price to the seller as per the terms of the contract
The parties are free to provide any terms in their contract regarding time, place, delivery,
payment of goods and so on. But if the parties are silent and no terms are mentioned in the
contract then rules contained in the sale of goods act will be applicable.

Concurrency of Payment and Delivery (Section 32)

The delivery of goods and payment of the price are concurrent conditions as per the law on
sales unless the parties agree otherwise. So, the seller has to be willing to give possession of
the goods to the buyer in exchange for the price. On the other hand, the buyer has to be ready
to pay the price in exchange for possession of the goods.

Sales of Goods Act : Notes By Prof. Madhura Bhangle Page | 19

Rules Pertaining to the Delivery of Goods

The Sale of Goods Act, 1930 prescribes the following rules regarding delivery of goods:
a. Delivery (Section 33)
The delivery of goods can be made either by putting the goods in the possession of the buyer
or any person authorized by him to hold them on his behalf or by doing anything else that the
parties agree to.
This includes all modes of Delivery whether Actual, symbolic or constructive
b. Effect of part-delivery (Section 34)
If a part-delivery of the goods is made in progress of the delivery of the whole, then it has the
same effect for the purpose of passing the property in such goods as the delivery of the whole.
However, a part-delivery with an intention of severing it from the whole does not operate as a
delivery of the remainder.

Example :
• A (the seller) requests B (the buyer) to take the delivery of 1000 bags of Wheat which
he (A) has sold to him (B). B sends his transport which can carry 200 bags in one trip.B
takes away 400 bags in two trips, but the remaining 600 bags are destroyed by fire
before they can be taken away.In this situation, the delivery of a part of the goods has
been made in progress of the delivery of the whole.If the parties agreed to the passing
of property in the goods on delivery, the property in all 1000 bags will pass when the
process of transportation was started by the buyer and he will have to bear the loss of
the remaining 600 bags.

• A (the seller) agrees to sell 1000 bags of Wheat to B (the buyer) for Rs. 5 Lakhs.B
demands the delivery of 200 bags and A delivers them to him. In this situation, the
delivery of a part of the goods has been made with the intention of severing it from the
whole. Hence, it does not operate as delivery of the remaining 800 bags.Later on, the
remaining 800 bags are destroyed by fire before they can be taken away. The loss will
have to be borne by the seller.

c. Buyer to apply for delivery (Section 35)

A seller is not bound to deliver the goods until the buyer applies for delivery unless the parties
have agreed to other terms in the contract.

d. Place of delivery [Section 36 (1)]

When a sale contract is made, the parties might agree to certain terms for delivery, express or
implied. Depending on the agreement, the buyer might take possession of the goods from the
seller or the seller might send them to the buyer. If no such terms are specified in the contract,
then as per law .The goods sold are delivered at the place at which they are at the time of the
sale. The goods to be sold are delivered at the place at which they are at the time of the
agreement to sell. However, if the goods are not in existence at such time, then they are
delivered to the place where they are manufactured or produced.

e. Time of Delivery [Section 36 (2)]

Consider a contract of sale where the seller agrees to send the goods to the buyer, but not time
of delivery is specified. In such cases, the seller is expected to deliver the goods within a
reasonable time. The question what is a reasonable time is a question of fact.

f. Goods in possession of a third party [Section 36 (3)]

Sales of Goods Act : Notes By Prof. Madhura Bhangle Page | 20

If at the time of sale, the goods are in possession of a third party. Then there is no delivery
unless the third party acknowledges to the buyer that the goods are being held on his behalf. It
is important to note that nothing in this section shall affect the operation of the issue or transfer
of any document of title to the goods.

g. Time for tender of delivery [Section 36 (4)]

It is important that the demand or tender of delivery is made at a reasonable hour. If not, then
it is rendered ineffectual. The reasonable hour will depend on the case.

h. Expenses for delivery [Section 36 (5)]

The seller will bear all expenses pertaining to putting the goods in a deliverable state unless the
parties agree to some other terms in the contract.

i. Delivery of wrong quantity (Section 37)

Sub-section 1 – If the seller delivers a lesser quantity of goods as compared to the contracted
quantity, then the buyer may reject the delivery. If he accepts it, then he shall pay for them at
the contracted rate.
Sub-section 2 – If the seller delivers a larger quantity of goods as compared to the contracted
quantity, then the buyer may accept the quantity included in the contract and reject the rest.
The buyer can also reject the entire delivery. If he wants to accept the increased quantity, then
he needs to pay at the contract rate.
Sub-section 3 – If the seller delivers a mix of goods where some part of the goods are mentioned
in the contract and some are not, then the buyer may accept the goods which are in accordance
with the contract and reject the rest. He may also reject the entire delivery.
Sub-section 4 – The provisions of this section are subject to any usage of trade, special
agreement or course of dealing between the parties.

j. Installment deliveries (Section 38)

The buyer does not have to accept delivery in installments unless he has agreed to do so in the
contract. If such an agreement exists, then the parties are required to determine the rights and
liabilities and payments themselves.
Example:
• A (the seller) agrees to supply 1000 pairs of Shoes of a particular brand to B (the buyer)
in 10 instalments. The first instalment delivered by A is not in accordance with the
description and it appears that the subsequent instalments will also be of the same kind.
B can treat it to be a breach of the whole of the contract and repudiate the same.

k. Delivery to carrier [Section 36 (1)]

The delivery of goods to the carrier for transmission to the buyer is prima facie deemed to be
‘delivery to the buyer’ unless contrary terms exist in the contract.

l. Deterioration during transit (Section 40)

If the goods are to be delivered at a distant place, then the liability of deterioration incidental
to the course of the transit lies with the buyer even though the seller agrees to deliver at his
own risk.

m. Buyers right to examine the goods (Section 41)

If the buyer did not get a chance to examine the goods, then he is entitled to a reasonable
opportunity of examining them. The buyer has the right to ascertain that the goods delivered to
him are in conformity with the contract. The seller is bound to honor the buyer’s request for a
reasonable opportunity of examining the goods unless the contrary is specified in the contract.

Sales of Goods Act : Notes By Prof. Madhura Bhangle Page | 21

Acceptance of Delivery of Goods (Section 42)
A buyer is deemed to have accepted the delivery of goods when:

He informs the seller that he has accepted the goods; or

Does something to the goods which is inconsistent with the ownership of the seller; or
Retains the goods beyond a reasonable time, without informing the seller that he has rejected
them.
Return of Rejected Goods (Section 43)
If a buyer, within his right, refuses to accept the delivery of goods, then he is not bound to
return the rejected goods to the seller. He needs to inform the seller of his refusal though. This
is true unless the parties agree to other terms in the contract.

Refusing Delivery of Goods (Section 44)

If the seller is willing to deliver the goods and requests the buyer to take delivery, but the buyer
fails to do so within a reasonable time after receiving the request, then he is liable to the seller
for any loss occasioned by his refusal to take delivery. He is also liable to pay a reasonable
charge for the care and custody of goods.

Rights of Unpaid Seller Against Goods

An unpaid seller has certain rights against the goods and the buyer.

Who is unpaid seller?

He is the seller to whom:-

1. Whole of the price is not paid
2. Conditional payment Bill of exchange/ promissory note/ cheque has been received by seller
but it dishonours.
Till the time bill of exchange/ promissory note/ cheque is with the seller so, till that time he is
only called as seller but when any of the mentioned instruments dishonours then after this seller
is called unpaid seller.

Features of an unpaid seller

1. Seller must sell the goods on cash basis and must be unpaid (in cash transactions
payment becomes due instantly)
2. Seller must be unpaid either wholly or party
3. The decided period has expired and the price has not been paid to seller
4. Seller must not refuse to accept the payment
5. Where the price paid through negotiable instrument (bill of exchange/ promissory
note/ cheque) and the same has been dishonoured
Example:
A sells his bike to B for Rs. 60,000 and receives a cheque for the price. Till this time seller will
only be called as seller. But when subsequently, the cheque is dishonoured due to insufficiency
of funds in B’s bank account, then only A becomes an unpaid seller.

Rights (Remedies) of Unpaid Seller

Sales of Goods Act : Notes By Prof. Madhura Bhangle Page | 22

 a) Rights of Lien:

Seller’s Lien (Section 47)

According to subsection (1) of Section 47 of the Sale of Goods Act, 1930, an unpaid seller,
who is in possession of the goods can retain their possession until payment. This is possible in
the following cases:
- He sells the goods without any stipulation for credit
- The goods are sold on credit but the credit term has expired.
- The buyer becomes insolvent.
Subsection (2) specifies that the unpaid seller can exercise his right of lien notwithstanding that
he is in possession of the goods acting as an agent or bailee for the buyer.
Antim Dubey vs The State of Madhya Pradesh 2018 :where the purchaser after obtaining the
delivery of a property has to pay either the entire or part consideration amount to the seller, if
not then the unpaid seller will have lien over the said property and under these circumstances,
it can be said that by not making the payment of remaining consideration amount and by
constantly using the property so delivered by the seller, the act of buyer would certainly amount
to criminal breach of trust because the position of the buyer would be that of trustee so long as
he does not pay the entire consideration amount.
Part-delivery (Section 48)
Further, Section 48 states that if an unpaid seller makes part-delivery of the goods, then he may
exercise his right of lien on the remainder. This is valid unless there is an agreement between
the buyer and the seller for waiving the lien under part-delivery.
Termination of Lien (Section 49)
According to subsection (1) of Section 49 of the Sale of Goods Act, 1930, an unpaid seller
loses his lien:
- If he delivers the goods to a carrier or other bailee for transmission to the buyer without
reserving the right of disposal of the goods.
- When the buyer or his agent obtain possession of the goods lawfully.
- By waiver.
Further, subsection (2) states that an unpaid seller, who has a lien, does not lose his lien by
reason only that he has obtained a decree for the price of the goods.

Sales of Goods Act : Notes By Prof. Madhura Bhangle Page | 23

 b) Right of Stoppage in Transit

This right is an extension to the right of lien. The right of stoppage in transit means that an unpaid
seller has the right to stop the goods while they are in transit, regain possession, and retain them
till he receives the full price.
If an unpaid seller has parted with the possession of the goods and the buyer becomes insolvent,
then the seller can ask the carrier to return the goods back. This is subject to the provisions of the
Act.
Duration of Transit (Section 51)
Goods are in the course of transit from the time the seller delivers them to a carrier or a bailee for
transmission to the buyer until the buyer or his agent takes delivery of the said goods.
Some scenarios of the transit ending:

• The buyer or his agent obtain delivery before the goods reach the destination. In such
cases, the transit ends once the delivery is obtained.
• Once the goods reach the destination and the carrier of bailee informs the buyer or his
agent that he holds the goods, then the transit ends.
• If the buyer refuses the goods and even the seller refuses to take them back the transit
is not at an end.
• In some cases, goods are delivered to a ship chartered by the buyer. Depending on the
case, it is determined that if the master is functioning as an agent or carrier of the goods.
• If the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his
agent, the transit ends.
• If a part-delivery of the goods has been made and the unpaid seller stops the remaining
goods in transit, then the transit ends for those goods. This is provided that there is no
agreement to give up the possession of all the goods.
How Stoppage is Affected (Section 52)
There are two ways of stopping the transit of goods:

1. The seller takes actual possession of the goods

2. If the goods are in the possession of a carrier or other bailee, then the seller gives a
notice of stoppage to him. On receiving the notice, the carrier or bailee must re-deliver
the goods to the seller. The seller bears the expenses of the re-delivery.
Effect of Stoppage
Even if the unpaid seller exercises his right of stoppage in transit, the contract stays valid. The
buyer can ask for delivery of the goods after making the payment.
c) Pledge by the Buyer (Section 53)
Unless the seller agrees, the right of lien or stoppage is unaffected by the buyer selling or pledging
the goods. The principle is simple: the second buyer cannot be in a better position that the seller

Sales of Goods Act : Notes By Prof. Madhura Bhangle Page | 24

 (first buyer). However, if the buyer transfers the document of title or pledges the goods to a sub-
buyer in good faith and for consideration, then the right of stoppage is defeated.
There are two exceptions to make note of:
a. The seller agrees to resale, mortgage or other disposition of the goods
If the seller agrees to the buyer selling, pledging or disposing of the goods in any other way, then
he loses his right to lien.
b. Transfer of the document of title of goods by the buyer
When the seller transfers the document of title of goods to the buyer and the buyer further transfers
it to another buyer who purchases the goods in good faith and for a price, then:

• If the last mentioned transfer is by way of sale, the original seller’s right of lien and
stoppage is defeated.
• If the last mentioned transfer is by way of a pledge, the original seller’s right of lien or
stoppage can be executed subject to the rights of the pledgee.
d) Right of Resale (Section 54)
The right of resale is an important right for an unpaid seller. If he does not have this right, then the
right of lien and stoppage won’t make sense. An unpaid seller can exercise his right of resale under
the following conditions:

• Goods are perishable in nature: In such cases, the seller does not have to inform the
buyer of his intention of resale.
• Seller gives a notice to the buyer of his intention of resale: The buyer needs to pay the
price of the goods and ask for delivery within the time mentioned in the notice. If he
fails to do so, then the seller can resell the goods. He can also recover the difference
between the contract price and resale price if the latter is lower. However, if the resale
price is higher, then the seller keeps the profits.
• Unpaid seller resells the goods post exercising his right of lien or stoppage: The
subsequent buyer acquires a good title to the goods even if the seller has not given a
notice of resale to the original buyer.
• Resale where the right of resale is reserved in the contract of sale: If the contract of
sale specifies that the seller can resell the goods if the buyer defaults, then the seller
reserves his right of sale. He can claim damages from the original buyer even if he does
not give a notice of resale to him.
• Property in the goods has not passed to the buyer: The unpaid seller can exercise his
right of withholding delivery of goods. This is similar to the right of lien and is called
quasi-lien.

Remedies for Breach

Three kinds of remedies are mentioned under the Sale of Goods Act, relating to the breach of
contract.
- Seller’s Remedies against Buyer
- Buyer’s Remedies against Seller

Sales of Goods Act : Notes By Prof. Madhura Bhangle Page | 25

- Remedies available to both Buyer and Seller

Buyer's Remedies Against Seller For Breach of Contract (Sec 55 – 61 )

A buyer also has certain remedies against the seller who commits a breach. These are:
1. Suit for Damages for Non-Delivery-
When the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may
sue the seller for damages for non-delivery. This is in addition to the buyer's right to recover
the price, if already paid, in case of non-delivery.
2. Suit for price-
Where the buyer has paid the price and the goods are not delivered to him, he can recover the
amount paid.
3. Suit for specific performance-
When the goods are specific or ascertained, a buyer may sue the seller for specific performance
of the contract and compel him to deliver the same goods. The court orders for specific
performance only when the goods are specific or ascertained and an order for damages would
not be an adequate remedy. Specific performance is generally allowed where the goods are of
special significance or value e.g., a rare paining, a unique piece of jewellery, etc.
4. Suit for Breach of Warranty-
Where there is a breach of warranty by the seller, or where the buyer elects or is compelled to
treat the breach of condition as breach of warranty, the buyer cannot reject the goods. The buyer
may, (a) set up the breach of warranty in extinction or diminution of the price payable by him,
or (b) sue the seller for damages for breach of warranty.
5. Suit for Damages for Repudiation of contract before Due date-
Where the seller repudiates the contract before the date of delivery, the buyer may adopt any
of the following two courses of action:
- He may treat the contract as rescinded and sue the seller for damages. This is
also known as 'damages for anticipatory breach'. The damages will be assessed
according to the prices prevailing on the date of breach.
- He may treat the contract as subsisting and wait till the date of delivery. The
contract remains open at the risk and for the benefit of both the parties. If the
seller subsequently chooses to perform there shall be no damages otherwise, he
shall be liable to damages assessed according to the prices on the day stipulated
for delivery.

6. Suit for interest-

The buyer may recover such interest or special damages, as may be recoverable bylaw. He may
also recover the money paid where the consideration for the payment of it has failed. In the
absence of a contract to the contrary, the court may award interest, to the buyer, in a suit by
him for the refund of the price in a case of a breach on the part of the seller, at such rate as it
thinks fit on the amount of the price from the date on which the payment was made. (G Pillai
v K.M Mani: where interest was also awarded by the court along with the refund.)
Seller’s Remedies Against Buyer

Sales of Goods Act : Notes By Prof. Madhura Bhangle Page | 26

 7. Suit for Price (Section 55)
a) Where under a contract of sale the property in the goods has passed to the buyer and the
buyer wrongfully neglects or refuses to pay for the goods according to the terms of the
contract, the seller may sue him for the price of the goods. (Delivery has been done)
b) Where under a contract of sale the price is payable on a day certain irrespective of delivery
and the buyer wrongfully neglects or refuses to pay such price, the seller may sue him for
the price although the property in the goods has not passed and the goods have not been
appropriated to the contract. (Delivery is may or may not be done)

8. Damages for non-acceptance (Section 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
Remedies Available To Both Buyer And Seller
1. Suit for repudiation of contract before date or anticipatory breach
2. Interest by way of damages and special damages

Sales of Goods Act : Notes By Prof. Madhura Bhangle Page | 27