Sales of goods act, 1930

SALES OF GOODS
ACT, 1930

AMANPREET KAUR
EKTA VERMA
AKHIL PANCHAL
MANISH MAINI

TOPICS COVERED:
 Formation of contract of sales
 Difference between sale and Agreement to sell,

 Difference between sale and hire purchase,

 Difference between sale and bailment

 Bail agreement

 Conditions and warranties

 Rule of Caveat Emptor

 Rights of unpaid seller.

HISTORY

 Sale of goods act was enacted in 1930.

 Borrowed from the English act.

 Came into force in July, 1930.

 Prior to the act, the law of sale of goods was
contained in chapter VII of the Indian contract
act,1872.

FORMATION
OF
CONTRACT OF SALE

DEFINITION
 Sec 4(1) of the Indian Sale of Goods Act, 1930
defines the contract of he sale of goods in the
following manner:

“ 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 term “Contract of sale of goods‟ is a generic term
and it includes:
a. Sale and
b. An agreement to sell
where the seller transfers the ownership
rights to the buyer immediately on making
the contract, it is the contract of sale, but
where the ownership rights are to pass on
some future date upon the fulfillment of
certain conditions then it is called an
agreement to sell.

ESSENTIALS OF A CONTRACT OF SALE
 Two parties- buyer and seller

 Goods

 Price

 Transfer of general property

 Essential elements of a valid contract

 A contract of sale may be absolute or conditional.

DIFFERENCE BETWEEN
Sale Agreement to sell

 Ownership passes to  Ownership remains
the buyer. with the seller.
 It is a executed  It is a executory
contract. contract.
 Risk of loss falls on the  Risk of loss falls on the
buyer. seller.
 Seller cannot resell the  Seller can sell goods to
third party.
goods.
 It can be in case of
 It can be in case of future and
existing and specific unascertained goods.
goods.

Sale Agreement to sell

 In case of breach of a  In case of breach of a
contract, seller can sue for contract, seller can sue
the price of the goods . only for damages not for
 The seller is only entitled the price.
to the ratable dividend of  The seller may refuse to
the price due if the buyer sell the goods to the buyer
becomes insolvent. w/o payments if the buyer
 The buyer is entitled to becomes insolvent.
recover the specific  Buyer can claim only
property from the ratable dividend for the
assignee if the seller money paid.
becomes insolvent.

DISTINCTION BETWEEN
Sale Hire-purchase agreement

 Property in the goods  The goods passes to
is transferred to the the hirer on the
buyer immediately at payment of the last
the time of the contract. installment.
 The position of the  The position of the
buyer is that of owner buyer is that of a bailee
of the owner of the till he pays the last
goods. installment.

Sale Hire purchase agreement

 The buyer cannot  The hirer may,
terminate the contract terminate the contract,
and is bound to pay the by returning the goods
price of the goods. to its owner without any
liability to pay the
remaining installment.

BAILMENT
 Bailment is the delivery of the goods for some
specific purpose under a contract on the condition
that the same goods are to be returned to the bailor
or are to be disposed of according to the directions
of the bailor.

 For example:-
A guard hired to protect the paintings at a museum.

FEATURES OF BAILMENT

1. Subject is personal property
2. Transfer is temporary possession
3. Transfer is temporary control
4. Both parties intend to return the goods
A bailment must be personal property.
Real property such as land and buildings, cannot be
bailed.

DISTINCTION BETWEEN
Sale Bailment

 The property in goods  There is only transfer
is transferred from the of possession of goods
seller to the buyer. from the bailor to the
bailee for any of the
reasons like safe
custody, carriage etc.
 The return of goods in  The bailee must return
contract of sale is not goods to the bailor on
possible. the accomplishment of
the purpose for which
bailment was made.

Sale Bailment

 The consideration is  The consideration may
the price in terms of be gratuitous or non
money. gratuitous.

CONDITIONS AND WARRANTIES
[SEC 12]

TERMS

 Representation: Statement made by the seller
before entering into a contract.

 Stipulation: If such representation forms an integral
part of the contract and other party relies upon it.

 No Representation: CAVEAT EMPTOR‟
i.e., Let the Buyer Beware – is applied

CONDITION AND WARRANTY

 “A stipulation in a contract of sale with reference to
goods which are subject matter there of, may be a
condition or a warranty.”

 These stipulations forms a part of the contract of
sale and breach of it provides a remedy to the
buyer against the seller.

CONDITION [SEC12(2)]

 “ A condition is 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.”

 It goes to the root of the contract.

 Its non fulfillment upsets the very basis of the
contract.

 Example :- [Behn v. Burness,1863]

 By charter party( a contract by which a ship is hired for
the carriage of goods), it was agreed that ship m of 420
tons “now in port of Amsterdam” should proceed direct
to new port to load a cargo. In fact at the time of the
contract the ship was not in the port of Amsterdam and
when the ship reached Newport, the charterer refused
to load. Held, the words “now in the port of Amsterdam”
amounted to a condition, the breach of which entitled
the charterer to repudiate the contract.

WARRANTY : SEC.12(3)
 A warranty is a stipulation collateral to the main
purpose of the contract the breach of which gives
rise to a claim for damages but not right to reject
the goods and treat the contract as repudiated.

DISTINCTION BETWEEN
Condition Warranty

 It is a stipulation which  It is a stipulation which
is essential for the is collateral to the main
main purpose of the purpose of the
contract. contract.
 In case of breach of a  In case of breach of
condition, the warranty, the aggrieved
aggrieved party can party can claim
repudiate the contract damages only.
of sale.

Condition Warranty

 A breach of condition  The breach of
may be treated as warranty cannot be
breach of warranty. treated as a breach of
a condition.

TYPES

 Express Conditions : Expressely provided in the
contract
 Implied conditions & warranty(sec 14 to 17) : which
the law implies in a contract of sale

IMPLIED CONDITIONS :

 Conditions as to title [Sec.14(a)]
[Rowland v. Divall,(1923)]
 Sale by description [Sec.15]
[Bowes v.shand,(1877)]
 Condition as to quality or fitness.[Sec.16(1)]
 Conditions as to Merchantability [Sec.16(2)]
[R.S.Thakur v. H.G.E. corp., A.I.R.(1971)]
 Conditions implied by custom[Sec.16(3)].
 Sale by Sample (Sec.17)
 Condition as to wholesomeness.

IMPLIED WARRANTIES
 Warranty of Quiet possession-Sec.14(6)
 Warranty against encumbrances-Sec.14(c)

 Warranty to disclose dangerous natures of goods.

 Warranty as to quality or fitness by usage of trade –
Sec.16(4).

CAVEAT EMPTOR
Let the „Buyer Beware‟
The maxim Caveat Emptor does not apply & the
contract will be subject to the implied conditions
under the following circumstances :
1. Sale under fitness for buyers purpose
2. Sale under merchantable quality
3. Sale under usage of trade
4. Consent by Fraud

EXCEPTIONS

 Fitness for buyer‟s purpose.
 Sale under a patent or trade name.

 Merchantable quality

 Usage of trade

 Consent by fraud

UNPAID SELLER (SEC.45)

 A seller of goods is deemed to be an unpaid seller when:-

• The whole of the price has not been paid or tendered;

• 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.

CONDITIONS
 The term "seller" includes any person who is in the position of
a seller, as, for instance, an agent of the seller to whom the
bill of lading has been endorsed, or a consignor or agent who
has himself paid, or is directly responsible for, the price.

 The seller shall be called an unpaid seller even when only a
small portion of the price remains to be unpaid.

 It is for the non payment of the price and not for other
expenses that a seller is termed as an unpaid seller.

 Where the full price has been tendered by the buyer and the
seller refused to accept it, the seller cannot be called as
unpaid seller.

CONTINUED ……..

 Where the goods have been sold on credit, the seller
cannot be called as an unpaid seller. Unless :

 If during the credit period seller becomes insolvent, or

On the expiry of the credit period, if the price remains
unpaid,
Then, only the seller will become an unpaid seller.

1) Right against goods:
Where the property in the goods has passed
 Lien on goods

 A right of stoppage-in-transit

 A right of Re-sale

Where the property in the goods has not passed
 Withholding delivery

 Stoppage in transit

2) Right against the buyer:
 Suit for price

 Suit for damages

 Repudiation o contract

 Suit for interest

RIGHT OF LIEN (SEC.47-49) :
 the goods are not sold on credit
 the goods have been sold on credit, but the period
of credit has expired
 the buyer becomes insolvent

RIGHT OF STOPPAGE IN TRANSIT (SEC.50-52)
 The transit is end in following cases:
 If the buyer obtains the possession of the goods
before its arrival at the destination
 If, after the arrival at their destination, the carrier
acknowledges to the buyer that he holds on his
behalf
 If the carrier wrongfully refuses to deliver the goods
to the buyer

RIGHT OF RE-SALE (SEC.54)
 Where the goods are of perishable nature
 When the buyer does not pay the price

Sales of goods act, 1930

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