Sales of Goods Act, 1930

Definition• It is a contract by which the ownership of movable

goods is transferred from the seller to the buyer. The term ‘contract of sale’ is defined in Section 4(1) of the Sale of Goods Act as-“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”

The Sale of Goods Act extends to whole of India except the State of Jammu and Kashmir. The State of J&K enjoys a special status under Article 370 of the Indian Constitution.

Essentials of a Contract of Sale(i) All requirements of a valid contract must be

fulfilled (ii) Two Parties – (iii) Goods(iv) Transfer of Property(v) Price(vi) Includes both a ‘sale’ and ‘agreement to sale’(vii) No formalities are required

PricePrice means the money consideration for a sale of goods. [Sec 2(10)]

Mode of determining of price [ section 9(1)]• Fixed by contract• By third parties• Reasonable price

GoodsThe subject matter of a contract of sale of goods is goods. According to Sec 2(7) “goods means every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under contract of sale.ACTIONABLE CLAIM – means a claim which can be enforced through the court of law e.g a debt due from one person to another is an actionable claimA borrows Rs. 5000/- from B at 12% per annum interest on 1st April, 2006 and promises to pay back the amount with interest on 1st July, 2006.  Till 1st July, 2006, the debt is an accruing debt and is an actionable claim

Examples of GoodsGoodwill, Trade Mark, Copyright, Patent right, Water, Gas, Electricity, are all example of goodClassification of Goods(i) Existing Goods(ii) Specific goods (iii)unascertained goods :Eg. Anthony, who owns a TV showroom, has 20 TV sets and agrees to sell any one of them to Bharti. The contract is for unascertained goods, since which particular TV set shall become the subject matter of sale is not individualized at the time of the contract of sale.

(iv) Future Goods- This is applicable to goods which are subject matter of the agreement to saleExample: Kulkarni agrees to sell future crop of a particular agricultural field in the next season. This is an agreement to sell future goods

(v) Contingent Goods- i.e. the goods arriving by ships etc.

Difference BetweenSale

• A sale is an executed contract

• Since the ownership has passed to the buyer, the seller can sue the buyer for the price of the goods, if the latter makes a default in payment

• In case of loss of goods, the loss will fall on the buyer, even though the goods are in the possession of the seller. It is because the risk is associated with ownership

• In case the buyer pays the price and the seller thereafter becomes insolvent, the buyer can claim the goods from the official receiver or assignee as the case may be

Agreement to Sell• It is an executory contract• In case of breach, the seller

can only sue for damages, unless the price was payable at a stated date

• The loss in this case shall be borne by the seller, even though the goods are in the possession of the buyer

• In this case, the buyer cannot claim the goods, but only a ratable dividend for the money paid

Stipulation, Condition & Warranty

A representation which forms part of the contract of sale and affects the contract, is called a stipulation.

A stipulation as to time: not essence of a contract unless a different intention appears from the contract.

A stipulation not relating to time of payment: delivery of goods

ConditionsSection 12(2) of the Sale of Goods Act, 1930 defines condition as, “a condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to

right to treat the contract as repudiated.”

Example: Buyer wanted a Car which has mileage of 90 km/lt. petrol.

Implied Conditions(i) Condition as to Title [Sec 14(a)](ii) Condition as to Description [Sec 15](iii) Condition as to Sample [Sec 17(2)](iv) Condition as to Sample as well as Description [Sec

15](v) Condition as to Quality or Fitness for Buyer’s

purpose [Section 16(1)](vi) Condition as to Merchantability

[Section 16(2)](vii)Condition as to Wholesomeness

Condition Warranties• Sec. 12(2) defines a

‘condition’ as, ‘a stipulation essential to the main purpose of the contract, the breach of which gives rise to a right to treat the contract as repudiated’ (denied),

• Sec 12(3) defines a ‘warranty’ as, ‘stipulation collateral to the main purpose of the contract, the breach of which gives rise to claim for damages but not to a right to reject the goods and treat the contract as repudiated’ .

WARRANTY AS TO QUALITY OR FITNESS BY USAGE OF TRADE

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

WARRANTY TO DISCLOSE DANGEROUS NATURE OF GOODS.When a person sells goods knowing that the goods are inherently

dangerous or they are likely to be dangerous to the buyer and that the buyer is ignorant of the danger, he must warn the buyer of the probable danger, other wise he will be liable in damages

WARRANTY OF FREEDOM FROM ENCUMBRANCESIn addition to the previous warranty, the buyer is entitled to a further

warranty that the goods are not subject to any charge or right in favor of a third party.

If the possession is in any way disturbed by reason of the existence of any charge or encumbrances on the goods in favor of any third party, he shall have a right to claim damages for breach of this warranty.

Doctrine of Caveat Emptor [Sec 16] The doctrine of caveat emptor is a fundamental

principle of law of sale of goods. It means ‘Caution Buyer’ i.e. ‘let the buyer beware’. In other words, it is no part of the seller’s duty to point out defects in his own goods. The buyer must inspect the goods to find out if they will suit his purpose e.g. certain pigs are sold ‘subject to all faults’. These pigs being infected cause typhoid to the other healthy pigs of the buyer. The rule of caveat emptor would apply.

Exceptions to the Doctrine of Caveat Emptor(i) Condition as to Quality or Fitness for Buyer’s purpose(ii) Where the seller makes a false representation or obtains consent of the buyer by fraud (iii) Condition as to Merchantability(iv) Condition as to Wholesomeness(v) Condition implied by the Custom or Trade Usage

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