SALE OF GOODS

Contract of sale.
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 [Sec. 4].

Sale and agreement to sell.

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 the contract is called an
agreement to sell. 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.
Contract of sale how made.
A contract of sale is made by an offer to buy or
sell goods for a price and the acceptance of such
offer. It may provide for the immediate delivery of the goods or
immediate payment of the price or both, or for the delivery or
payment by installments or that the delivery or payment or both
shall be postponed. It 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 [Sec. 5].

Subject-matter of sale.
‘Goods’ form the subject of a contract of sale. They mean every
kind of movable property other than actionable claims
and money, and include 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 [Sec. 2(7)].

Cont…..d
Goods may be:
1. Existing goods, i.e. goods which are owned and
possessed by the seller at the time of sale. These
goods may be specific ascertained or unascertained.
2. Future goods, i.e., goods which the seller does not possess at the
time of the contract and which will be acquired, manufactured or
produced by him at some future date.
3. Contingent goods, i.e. goods the acquisition of which by the
seller depends upon a contingency which may or may not happen.
Price.
The price in a contract of sale must be expressed in money. It
[1] May be fixed by the contract itself, or
[2] may be left to be fixed in an agreed manner, or
[3] may be determined from the course of
dealing between the parties. Where the price is
not determined in accordance with these
provisions, the buyer must pay the seller a
reasonable price [Sec. 9].
 CONDITIONS AND WARRANTIES
A stipulation in a contract of sale with reference to goods
which are the subject thereof may be a condition or
a warranty [Sec. 12(1)]. A condition is a stipulation essential to the
main purpose of the contract. Its breach gives a right to the buyer
to treat the contract as repudiated [Sec. 12(2)]. A warranty is a
stipulation collateral to the main purpose of the contract. Its breach
gives rise to a claim for damages but not a right to reject the goods
and treat the contract as repudiated [Sec. 12(3)].

Express and Implied conditions and warranties

In a contract of sale, conditions and warranties may be express or
implied.
Express conditions and warranties are those which
are agreed upon between the parties at the time of the
contract.
Implied conditions and warranties are those which
are implied by law unless the parties stipulate to the
contrary.
Implied Conditions.

1. Condition as to title. In a contract of sale there is an implied

condition on the part of the seller that
a) In the case of a sale, he has a right to sell the goods, and
b) 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
[Sec. 14(1)].

2. Sale by description. Where there is a contract for the sale of

goods by description, there is an implied
condition that the goods shall correspond with the
description. If the sale is by sample as well as by
description, the goods shall correspond both with
the sample and the description [Sec. 15].
3. Condition as to quality or fitness. The condition as
to quality or fitness is implied where
a) The goods sold are such as the seller deals in the
ordinary course of his business;
a) The buyer relies on the seller’s skill or judgment as to the
fitness of the goods for any particular purpose; and
b) The buyer expressly or impliedly makes known to the
seller that he wants the goods for that particular purpose
[Sec. 16(1)].

4. Condition as to merchantability. Where goods are bought by

description from a seller who deals in goods of that
description (whether he is the manufacturer or
producer or not), there is an implied condition
that the goods shall be of merchantable quality
[Sec. 16(2)].
5. Condition implied by custom. An implied
condition as to quality or fitness for a particular
purpose may be annexed by the usage of trade
[Sec. 16(3)].
6. Sale by sample. In the case of a contract for sale by sample
there is an implied condition
a. That the bulk shall correspond with the sample in quality;
b. That the buyer shall have a reasonable opportunity of
comparing the bulk with the sample; and
c. That the goods shall be free from any defect, rendering them
unmerchantable, which would not be apparent on a
reasonable examination of the sample [Sec. 17].
7. Condition as to wholesomeness. In case of
eatables and provisions, there is an implied
condition that the goods shall be wholesome and
fit for human consumption.
Implied Warranties.
In a contract of sale, unless there is a contrary
intention, there is an implied warranty that
[1] the buyer shall have and enjoy quiet possession of the goods
[Sec. 14 (b)].
[2] the goods are free from any charge or encumbrance in favour
of any third party [Sec. 14 (c)].

Caveat Emptor.
This means “let the buyer beware”. The doctrine of caveat emptor
does not apply –
[1] In case of implied conditions and warranties;
[2] When the buyer intimates the purpose
the seller and depends upon his skill or judgment;
[3] When there is a usage of trade;
[4] When there is a fraud by the seller.
 TRANSFER OF PROPERTY

It is important to know the precise moment of time at which the

property in goods passes from the seller to the buyer for the
following reasons:
1. Risk follows ownership whether delivery has been made or not
and whether price has been paid or not. This is, however,
subject to agreement between the parties.
2. When the goods are damaged or destroyed by the action of
the third parties, it is the owner of the goods who can take
action against them.

Cont…..d
3. In the event of insolvency of either the seller or the buyer, the
question whether the Official Receiver or Assignee can take
over the goods or not depends on whether the property in the
goods has passed from the seller to the buyer.
4. The seller can sue for the price, unless otherwise agreed, only
if the goods have become the property of the buyer.
TRANSFER OF PROPERTY
The primary rules for ascertaining when the property
in goods passes to the buyer are as follows:
[1] Where there is a contract for the sale of unascertained
goods, no property in the goods is transferred to the buyer
unless and until the goods are ascertained [Sec. 18].
[2] Where there is a contract for the sale of specific or
ascertained goods, the property in them is transferred to the
buyer at such time as the parties to the contract intend it to
be transferred. For the purpose of ascertaining the intention
of the parties, regard shall be had to the terms of the
contract, the conduct of the parties and the
circumstances of the case [Sec. 19]. Where
the intention of the parties cannot be
ascertained, the following rules shall apply:

Cont…..d
1. Specific goods.
In case of a contract for the sale of specific goods
a) In a deliverable state, if the contract is unconditional,
property passes as soon as the contract is entered into
[Sec. 20].
b) If the seller has to do something to put them in a
deliverable state, property passes only when such
thing is done and notice thereof is given to the buyer
[Sec. 21].
c) In a deliverable state if the seller has to do something
for the purpose of ascertaining the price,
property will pass only when such act
is done and notice thereof is given to the
buyer [Sec. 22].

Cont…..d
 2. Unascertained goods.
In case of unascertained or future goods sold by
description, property passes only when goods
according to the description are unconditionally
appropriated to the contract and the buyer is given a notice
thereof. Delivery to a carrier (the seller not reserving right of
disposal, Sec. 25) amounts to an unconditional appropriation
[Sec. 23].

3. Goods sent on approval.

In case of goods delivered to a buyer on approval or ‘on sale or
return’ property passes when he signifies his approval or
acceptance or when he does some act adopting the
transaction. If he retains the goods without
giving notice of rejection, property passes
when the time agreed for returning the goods
expires or alter a reasonable time has expired
[Sec. 24].
SALE BY NON-OWNERS
The general rule of law is that only the owner of the
goods or any person specifically authorised by him
can sell the goods. If any other person sells them,
the title of the buyer will not be better than that of the seller.
Exceptions. The following are the exceptions to the above rule:
1. Sale by a mercantile agent.
2. Sale under the implied authority of owner or title by estoppel.
3. Sale by one of several joint owners.
4. Sale by a person in possession of goods under a voidable contract.
5. Sale by a seller in possession after sale.
6. Sale by a buyer in possession after having bought or agreed to buy.
7. Sale by an unpaid seller.

In all these cases, the person selling the goods

must be in possession of the goods with the
consent of the seller and the buyer must act bonafide.
 PERFORMANCE OF CONTRACT

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

Delivery of goods.
Delivery means voluntary transfer of possession of goods from
the seller to the buyer. It may be
(i) Actual,
(ii) Symbolic, or
(iii) Constructive
But it must be according to the rules as given below:

Cont…..d
Rules as to delivery.
1. Unless otherwise agreed, delivery of the goods and payment of
the price are concurrent conditions.
2. A delivery of part of the goods, in progress, of the delivery of
whole, amounts to, for the purpose of passing the property in
such goods, as a delivery of the whole.
3. Apart from any express contract, the seller of goods is not
bound to deliver them until the buyer applies for delivery.

Cont…..d
Rules as to delivery.
4. The place of delivery is the place at which they are at the time of
the sale.
5. If the goods are in possession of a third party, there is no
delivery until such third party acknowledges to the buyer that he
holds the goods on his behalf.
6. Where the seller is bound to send the goods to the buyer but no
time for sending them is fixed, they must be sent within a
reasonable time.

Cont…..d
Rules as to delivery.
7. Expenses of making delivery are borne by the
seller and expenses of obtaining delivery by the buyer.
8. If the seller sends to the buyer a larger or a smaller quantity of
goods than he ordered, the buyer may
a) Reject the whole, or
b) Accept the whole, or
c) Accept the quantity he ordered and reject the rest.
9. If the seller delivers, with the goods ordered, goods of a wrong
description, the buyer may accept the goods ordered and reject
the rest or reject the whole.
10.Unless otherwise agreed, the goods are not to
be delivered by installments.
 RIGHTS OF AN UNPAID SELLER
A 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 has
been received as a conditional payment, and the condition on
which it was received has not been fulfilled by reason of the
dishonour of the instrument, or otherwise [Sec. 45].
An unpaid seller has the rights –
1. As against the goods.
(1) Right of lien. It is available to the unpaid seller when
a) The goods have been sold without any stipulation
as to credit;
b) The goods have been sold on credit, but the
term of the credit has expired;
c) The buyer becomes insolvent [Sec. 47].
Cont…..d
(2) Right of stoppage in transit. when the buyer of goods
becomes insolvent the unpaid seller who has parted with the
possession of the goods has the right of stopping them in
transit. The seller may resume possession of the goods, as
long as they are in the course of transit and may retain them
until payment or tender of the price [Sec. 50]. The unpaid
seller may exercise this right of stoppage in transit either by
taking actual possession of the goods, or by giving notice of
his claim to the carrier or other bailee in whose possession
the goods are.

Cont…..d
3) Right of re-sale. The unpaid seller can re-sell the goods
(i) Where the goods are of a perishable nature;
(ii) Where he was exercised his right of lien or stoppage in
transit and given notice to the buyer of his intention to re-
sell the goods and where the buyer has not within a
reasonable time paid the price; and
(iii) Where the seller expressly reserves a right of re-sale in
case the buyer should make default [Sec. 54].
 Right of withholding delivery.
Where the property in goods has not passed to the
buyer, the unpaid seller has, in addition to his other
remedies, a right of withholding delivery similar
to and co-extensive with his rights to lien and stoppage in transit
where the property has passed to the buyer [Sec. 46 (2)].

2. As against the buyer personally.

1) Suit for price. 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 [Sec. 55].
2) Damages for non-acceptance. Where the
buyer wrongfully neglects or refuses to pay for
the goods, the seller may sue him for
damages for non-acceptance [Sec. 56].
Cont…..d
 3) Repudiation of contract before due date. Where
the buyer in a contract of sale repudiates the
contract before the date of delivery, the seller
may either treat the contract as subsisting and
wait till the date of delivery, or he may treat the contract as
rescinded and sue for damages for the breach [Sec. 60].
4) Suit for interest. The seller can recover interest on price from
the date on which the payment became due, if there is a
special agreement to that effect.

AUCTION SALE
A sale by auction is a public sale where different
intending buyers try to outbid each other. The goods
are ultimately sold to the highest bidder. The law
on auction sales is contained in Sec. 64 of the Sale
of Goods Act.