Sales of Goods Act

The Sale of Goods Act, 1939

Essentials of a contract of sale

(A) Two parties(B) Goods – The subject matter of a contract.(C) Transfer of property.(D) Monetary consideration-price.(E) Essential elements of a valid contract.(F) A Contract of sale includes sale as well as an

agreement to Sell.

Goods:(a) Existing goods,(b) Future goods,(c) Contingent goods.

(a) Existing goodsExisting goods are those goods that are owned and possessed by the seller at the time of sale. These may be of three types, which are as follows:

(1) Specific goods : Specific goods are those goods that are identified and agreed upon at the time of a contract of sale is made.

(2) Ascertained goods : Goods identified or which become ascertained subsequent to the formation of the contract of sale.

(3) Unascertained or generic goods : The goods that are not identified and agreed upon at the time of the contract of sale are the unascertained or generic goods. Such goods are defined by description only and may form a part of a lot.

Dr Subhash Gupta1

Sales of Goods Act

Future goodsFuture goods are those that are to be manufactured, produced or acquired. A seller does not actually possess the future goods at the time of the sale. A contract of present sale of future goods purports to operate as an agreement to sell and not a sale.

Contingent goodsContingent goods are a type of future goods. Goods, the acquisition of which by the seller depends upon a certain contingency are called contingent goods.

Effects of destruction of goods or perishing of goods [Sections 7 and 8]

(a) The contract must be an agreement to sell and not of actual sale.

(b) The loss must be specific.(c) The loss is not caused by the wrongful act

or default of either buyer or seller.(d) The goods have been perished before the

risk is passed to the buyer.

Ascertainment of price [Sections 9 & 10]

Stipulation as to time [Section 11]1. Stipulation relating to time of payment and2. Stipulation not relating to time of payment but to

other things like delivery of goods etc.

Transfer of title-Sections 27-30

Sale by mercantile agent Sale by one of the joint owners Sale by a person in possession under a voidable

contract

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Sales of Goods Act

Sale by one who has already sold the goods but continues in position thereof

Sale by buyer opting possession before the property in the goods vested in him

Sale by an unpaid seller Sale under the provisions of other Acts

Transfer ownership and delivery of goods

Passing of property-Sections 18-26Essentials of appropriationReservation of right to disposal-Section 25Passing of risk-Section 26

Exceptions to the doctrine of “Caveat Emptor”

Sale and agreement to sell (points of distinction)

(i) Nature of Contract(ii) Transfer of ownership of property(iii) Types of goods or nature of property

transferred(iv) General and particular property(v) Consequences of breach(vi) Risk of loss(vii) Seller’s right of reselling the goods(viii) Seller’s insolvency(ix) Buyer’s insolvency

Sale and Hire-purchase Agreement Nature of contract and ownership Termination of a contract Implied conditions and warranties Payment in installments Insolvency of the buyer and risk of loss

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Sales of Goods Act

A sale is subject to the imposition of sales tax at the time of a contract of sale while sales tax is not leviable on a hire purchase until it is finally converted into a sale.

Sale and bailment

Sale and barter exchange

Difference between a condition and a warranty

(a) Purpose(b) Difference as to breach(c) Difference as to treatment(d) Essence of the contract of sale(e) Damages

Express & Implied conditions in a contract of sale(Sections 14-17)

a. Condition as to title [Section 14(a)]b. Condition as to sale by description [Sec.15]c. Condition as to sale by description as well as by

sampled. Condition as to sale by sample [Section 17]e. Condition as to quality or fitness [Sec. 16(1)]f. Condition as to merchantability [Section 16(2)]g. Condition as to wholesomenessh. Condition implied by custom [Section 16(3)]

Implied Warranties in a Contract of Sale

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Sales of Goods Act

(1) Implied warranty of quiet possession [Section 14(b)]

(2) Implied warranty of freedom from encumbrance [Section 14(c)]

(3) Implied warranty as to quality or fitness by usage of trade [Section 16(3)]

(4) Implied warranty to disclose dangerous nature of goods

Delivery of goods

(a) Actual delivery(b) Symbolic delivery(c) Constructive delivery or delivery by allotment

Rules regarding delivery of goods

(a) Mode of delivery [Section 33](b) Delivery of goods and payment of price are

concurrent conditions [Section 32](c) Effect of part delivery of goods [Section 34](d) Buyer to apply for delivery [Section 35](e) Place of delivery of goods(f) Risk of delivery [Section 40](g) Time of delivery [Section 36(2) and (4)](h) Goods in possession of a third person or party

[Section 36(3)(i) Cost of delivery of goods [Section 36(5)](j) Delivery of wrong quantity [Section 37](k) Installment deliveries of goods [Section 38](l) Delivery to carrier or wharfinger [Section 39](m) When an acceptance is complete on delivery of

goods [Section 42](n) Buyer not bound to return rejected goods [Sec. 43]

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Sales of Goods Act

(o) Liability of buyer for neglecting or refusing delivery of goods [Section 44]

Rights of unpaid Seller and remedial measures:

The conditions mentioned below must be fulfilled before a seller can be deemed to be an unpaid seller:

(a) He must have sold goods against cash and the price must be due.

(b) He must be unpaid either wholly or partly.(c) He must have an immediate right or action for

the price.(d) He must have not refused payment when

tendered.(e) A bill of exchange or any other negotiable

instrument was received but dishonored.

Rights of an unpaid seller and remedial measures:

Under the Sale of Goods Act, the unpaid seller gets certain rights, which can be broadly classified under the following two heads:

(a) Rights against goods; and(b) Rights against the buyer personally.

(a) Rights of unpaid seller against the goods sold:

Dr Subhash Gupta6

Sales of Goods Act

(i) Where the property in the goods sold has been passed, he has the following rights [Section 46 (1)].

(1) Right of Lien [Section 47 to 49]. (2) Right of stoppage of goods in transit

[Section 50 to 52]. (3) Right of resale [Section 54].

(ii) Where the property in the goods has not been transferred, he gets the following two rights [Section 42(2)].

(1) Withholding the delivery of goods, and (2) Stoppage in transit.

(b) Rights against the buyer personally:

Following four rights, the unpaid seller gets against the buyer:

(1) Suit for price [Section 55]. (2) Suit for damages [Section 56]. (3) Repudiation of contract [Section 60]. (4) Suit for interest [Section 61].

The rights of the unpaid seller also can be shown diagrammatically as follows:

Rights of an unpaid seller against the goods

Dr Subhash Gupta7

Sales of Goods Act

Right of lien [Section 47 to 49]Termination of Lien [Section 49]

The unpaid seller loses his lien on the goods sold:

(a) when he delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer without reserving the right of disposal of the goods;

(b) when the buyer or his agent lawfully obtains possession of the goods;

(c) by waiver of his lien. This means the unpaid seller loses his lien on the goods when the seller voluntarily abandons his right of lien on the goods. He may do this either expressely or impliedly.

Right of stoppage of goods in transit

Duration of transit [Section 51]How stoppage in transit is affected [Section 52]

Distinction between right of lien and right of stoppage in transit

Dr Subhash Gupta8

Sales of Goods Act

Right of lien Right of stoppage in transit1) The right of lien is

exercised by the unpaid seller when the goods are in his possession, actual or constructive. If he loses the possession, he loses the right of lien.

1) The right of stoppage in transit can be exercised when goods are in transit or may be in the possession of the middleman.

2) The right of lien is exercised when the buyer is able to pay but does not pay.

2) Unpaid seller’s right to stop the goods in transit arises only when the buyer is insolvent.

3) Right of lien comes to an end when the seller loses the possession of goods.

3) Right of stoppage in transit commences when the seller loses the possession of the goods sold and it continues until the buyer acquires their possession.

4) In the right of lien, the possession is retained by the seller.

4) In the right of stoppage the goods in transit, possession is regained.

Dr Subhash Gupta9

Sales of Goods Act

Effect of pledge or sub-sale by the buyer [Section 53]

Right of resale [Section 54]

If no notice of re-sale is given to the buyer, the unpaid seller is not entitled:

to recover any loss on re-sale of the goods; and to retain surplus, if any on the resale;

Right to withhold the deliver of goods [Section 46(2)]

Rights of an unpaid seller against the buyer personally

The unpaid seller has the following four rights available against the buyer personally:

(a) Right to sure for prices.(b) Right to sure for damages for non acceptance(c) Right to repudiate the contract(d) Right to sure for interest.

Rights of parties in case of breach of contract

Suit for non-delivery Suit for specific performance-Section 58 Suit for damages for breach of warranty-Section 59 Suit for recovery of price-Section 61

Auction Sale [Section 64]

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Sales of Goods Act

In the case of a sale by auction-

(1) Where goods are put up for sale in lots, each lot is prima facie deemed to be the subject of a separate contract of state;

(2) The sale is complete when the auctioneer announces its completion by the fall of the hammer or in any other customary manner; and, until such announcement is made, any bidder may retract his bid;

(3) A right to bid may be reserved expressly by or on behalf of the seller, and where such right is expressly so reserved, but not otherwise, the seller or anyone person on his behalf may, subject to the provisions hereinafter contained, bid at the auction;

(4) Where the sale- is not notified to be subject to a right to bid on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ any person to bid at such sale, or for the auctioneer knowingly to take any bid from the seller or any such person; and any sale contravening this rule may be treated as fraudulent by the buyer;

(5) The sale may be notified to be subject to a reserved or upset price;

(6) If the seller makes use of pretended bidding to raise the price, the sale is voidable at the option of the buyer.

Dr Subhash Gupta11