sales of goods act1

8/2/2019 Sales of Goods Act1

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CONTRACT OF SALES OF

GOODS


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INTRODUCTION

Till 1930, transactions relating to sale and purchase ofgoods were regulated by the Indian Contract Act,1872.Aseparate act called The Indian Sales of Goods Act,1930

was passed.. It came into force on 1st July,1930.With

effect from 22nd September, 1963,the word Indian wasalso removed. Now the present act is called the Sale of

Goods Act,1930. This act extends to the whole of India

except the Stats of Jammu and Kashmir


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1.VALID CONTRACT: All the essential elements of a validcontract should be there.

2.TWO PARTIES: There must be a seller as well as abuyer.

Acc to Sec2(1) Buyer means a person who buys oragrees to buy goods.

Acc to Sec2(13) Seller means a person who sells oragrees to sell goods.

A person cannot be seller as well as a buyer.


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3.TRANSER OF PROPERTY: Property here meansOwnership. There must be either a transfer of

ownership of goods or an agreement to transfer theownership of goods. General propertyin goods means

ownership of the goods. Special property in goodsmeans possession of goods.

4.GOODS: Athe subject-matter of the contract of sale isGOODS.

Acc to Sec 2(7): Goods means every kind of movableproperty other than actionable claim and money; andincludes stock and shares, growing crops,grass,andthings attached to or forming part of the land which are


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agreed to be severed before sale or under the contract of sale.Eg. Of

goods: Goodwill, trademark,copyrights,patent rights, water, gas,electricity,shares,stock,growing crops,grassetc.

Goods may be classified into the following types:

1.Existing goods: Goods which are physically in existence and whichare in sellers ownership and/or possession, at the time of entering

the contract of sale are called existing goods'. Existing goods may

be either:

a. Specific goods: Goods identified and agreed upon at the time of the

making of the contract of sale are called specific goods orascertained goods.

b.Unascertained goods: The goods which are not separately identifiedor ascertained at the time of making the contract are known asunascertained contract.


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2.Future goods: Goods to be manufactures, produced oracquired by the seller after the making of the contract ofsale are called Future Goods'. These goods may be

either not yet in existence or be in existence but not yet

acquired by the seller.

3. Contingent Goods: Goods, the acquisition of which bythe seller depends upon an uncertain contingency arecalled contingent goods. It is important to note that a

contract of sale of contingent goods is enforceable only ifthe event on the happening of which the performance ofthe contract is dependent happens.


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SALE: Where under a contract of sale the property in the goods isimmediately transferred at the time of making the contract from theseller to the buyer, the contract is called a sale[Sec 4(3)]. It refers

to an absolute sale'. It is an executed contract

AGREEMENT TO SELL: Where under a contract of sale the transfer ofproperty in the goods is to take place at a future time or subject tosome condition thereafter to be fulfilled, the contract is calledagreement to sell[Sec4(3)].It is an executory contract.

An agreement to sell becomes sale when the time elapses or theconditions are fulfilled subject to which the property in the goods isto be transferred.[Sec4(4)]


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Difference between Sale and Agreement to Sell

1. Transfer of property (ownership)

2. Risk of loss

3. Consequences of breach4. Right of resale

5. Insolvency of buyer before he pays for the goods

6. Insolvency of seller if the buyer has already paid the

price


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HirePurchase: Under hire purchase agreements the goods aredelivered to the hire purchaser for the use at the time of theagreement but the owner of the goods agrees to transfer theownership of the goods to the hire purchaser only when a certainfixed no. of instalments of price are paid by the hirer. Till that time,the hirer remains the bailee and the instalments paid by him areregarded as the hire-charges for the use of the goods. If there is adefault by the hire purchaser in paying an instalments, the ownerhas a right to take back the possession of goods without returningthe amount received till then.

Hire purchase is different from Instalment PurchaseMethod as this is a sale because in IPM the buyer is bound to buy

with no option to return the ownership passes immediately to thebuyer. In HP there is an option to purchase as well as to return thegoods.


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Difference between Sale and Hire Purchase:

1.In a sale, ownership is transferred immediately, whereasin HP the ownership can be transferred after lastinstalment.

2.In a sale, the position of the buyer is that of the owner ofgoods, but in HP the position of the hirer is that of baileetill he pays the last instalment.

3.In sale, the buyer cannot terminate the contract and isbound to pay the price. In HP, the hirer may terminatethe contract by returning goods to its owner withoutpaying the remaining instalments.


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4.In Sale, the seller takes the risk of any loss resulting fromthe insolvency of the buyer. In HP, the owner takes nosuch risk because if the hirer fails to pay, the owner cantake back the goods.

5. In sale, sales tax is levied at the time of the contractwhereas in a hire-purchase sales tax is not leviable untilthe hirer gets the ownership.


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PRICE

Acc to [Sec 2(10)] :The money consideration for a sale ofgoods is known as Price.

The price should be paid or promised to be paid in in theform of cheque,hundi, bank deposit etc.

Modes of Fixing the price: Acc to Sec 9 the price may befixed in the following modes:

1. It may be expressly fixed by the contract itself

2. It may be fixed in accordance with an agreed mannerprovided by the contract.

3. It may be determined by the course of dealing betweenthe parties.


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4.If the price is not capable of being determined in accordance with anyof the above modes, the buyer is bound to pay to the seller areasonable price. A reasonable price is mostly the prevailing

market price.

Earnest or Deposit

Money deposited with the seller by the buyer as security for duefulfillment of the contract is called earnest or deposit'. Where the

contract is carried through, earnest money counts as a part paymentand only the balance of the price is required to be paid. But if thecontract goes off because of the fault of the buyer, the seller isentitled to forfeit(fine or penalize) it and where it falls throughbecause of the fault of the seller, the buyer is entitled to recover theearnest money in addition to damages for breach.


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Stipulation As To Time

Stipulation as to time in a contract of sale fall under thefollowing two heads:

1.Stipulation relating to time of delivery of goods: To bethe essence of the contract

2. Stipulation relating to time of payment of the price: It is

not deemed to be the essence of the contract.

Document of Title of GoodsA document of title is a proof of the ownership of the goods.

It authorizes its holder to receive goods mentionedtherein or to further transfer such rights to anotherperson by proper endorsement or delivery.


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It is used in the ordinary course of business as proof of thepossession or control of goods.For eg. Railway receipt,delivery order, other receipts are common documents oftitle

sales of goods act1

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