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CHAPTER-3
THE SALE OF GOODS ACT, 1930
UNIT – 1: FORMATION OF
THE CONTRACT OF SALE
Sale of Goods before Sale of Goods Act, 1930

1.2 DEFINITIONS

Buyer • ‘Buyer’ means a person who buys or

agrees to buy goods [Section 2(1)].

Seller • ‘Seller’ means a person who sells or

agrees to sell goods [Section 2(13)].

(B) Goods [Section 2(7)]

“Goods” include both tangible goods and intangible goods like goodwill, copyrights, patents, trademarks
etc. Stock and shares, gas, steam, water, electricity and decree of the court are also considered to be
goods.

Classification of Goods

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EXISTING GOODS are such goods which are in existence at

the time of the contract of sale, i.e., those Owned or
Possessed or Acquired by the seller at the time of contract of
sale (Section 6).

(a) SPECIFIC (b) Ascertained (c) Unascertained

GOODS mean goods Goods are those goods are the goods
identified and goods which are which are NOT
agreed upon AT the identified in specifically
time a contract of accordance with the identified or
sale is made agreement AFTER ascertained at the
[Section 2(14)]. the contract of sale time of making of
is made. the contract.

FUTURE GOODS means goods to be The acquisition of goods which

Future Goods

Contigent Goods

Manufactured or Produced or depends upon an UNCERTAIN

Acquired by the seller AFTER CONTINGENCY (UNCERTAIN
making the contract of sale EVENT) are called ‘contingent
[Section 2(6)]. goods’ [Section 6(2)].
Contingent goods also operate as
A contract for the sale of future ‘an agreement to sell’ and not a
goods is always an agreement to ‘sale’.
sell.
It is never actual sale because a
person cannot transfer what is not
in existence.

Delivery - its forms and derivatives:

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Delivery means voluntary transfer of possession from one person to another [Section 2(2)].

(i) Actual delivery: When the goods are Physically Delivered to the buyer. This is the most common
method of delivery.

(ii) Constructive delivery: When transfer of goods is affected without any change in the custody or actual
possession of the thing as in the case of delivery by attornment (acknowledgement)

(iii) Symbolic delivery: When there is a delivery of a thing in token of a transfer of something else, i.e.,
like bill of lading or railway receipt or delivery orders or the key of a warehouse. Where actual delivery is
not possible, there may be delivery of the means of getting possession of the goods.

(D) “Document of title to goods” any other document used in the ordinary course of business as proof of
the possession or control of goods. [Section 2(4)] Example: Bill of lading, dock warrant, warehouse
keeper’s certificate, wharfinger’s certificate, railway receipt, warrant, an order of delivery of goods.

 The list is only illustrative and not exhaustive.

However, there is a difference between a ‘document showing title’ and ‘document of title’.

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A SHARE CERTIFICATE is a ‘document’ showing title but not a document of title.

(E) Mercantile Agent [Section 2(9)]: It means an agent has, as such agent, authority either to sell goods
or to consign goods for the purpose of sale or to buy goods or to raise money on the security of the goods.

(F) Property [Section 2(11)]: ‘Property’ here means ‘Ownership’ or general property. It means the general
property (right of ownership-in-goods) and not merely a special property.

The property in the goods means the general property i.e., all ownership right of the goods. Note that the
‘General Property’ in goods is to be distinguished from a ‘Special Property’.

Example 15: If A who owns certain goods pledges them to B, A has general property in the goods,
whereas B has special property or interest in the goods to the extent of the amount of advance he
has made. In case A fails to repay the amount borrowed on pledging the goods, then B may sell
his goods but not otherwise.

(G) Insolvent [Section 2(8)]: A person is said to be insolvent when he ceases to pay his debts in the
ordinary course of business, or cannot pay his debts as they become due, whether he has committed an
act of insolvency or not.

(H) Price [Section 2(10)]: Price means the Money Consideration for a sale of goods. It is the value of
goods expressed in monetary terms. It is the essential requirement to make a contract of sale of goods.

1.3 SALE AND AGREEMENT TO SELL (SECTION 4)

According to section 4(1),

“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”.

Sale: In Sale, the property in goods is transferred Agreement to Sell: In an agreement to sell, the
from seller to the buyer IMMEDIATELY. ownership of the goods is not transferred
immediately. It is intending to transfer at a
future date upon the completion of certain
conditions thereon.

Thus, whether a contract of sale of goods is an absolute sale or an agreement to sell, depends on the fact
whether it contemplates immediate transfer from the seller to the buyer or the transfer is to take place
at a future date.

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The following elements must co-exist so as to constitute a contract of sale of goods under the Sale of
Goods Act, 1930:

At least 2 Movable Price in money

parties Property

All other
Transfer of May be absolute essential
property or conditional elements of a
valid contract

1.4 DISTINCTION BETWEEN SALE AND AN AGREEMENT TO SELL

Basis of difference Sale Agreement to sell

Transfer of property Immediately. Future Date or on fulfilment of
some condition.

Nature of contract It is an Executed Contract It is an Executory Contract

Remedies for breach The seller can sue the buyer for the The aggrieved party can sue for
price. damages only.

Liability of parties liability of the buyer. liability of the seller.

Burden of risk Risk of loss is that of buyer Risk of loss is that of seller.

Nature of rights Creates Jus in rem means right Creates Jus in personam
against the whole world.
Right of resale The seller cannot resell the goods The seller may resell

In case of insolvency of The official assignee will not be The official assignee will acquire
Seller able to take over the goods. control over the goods.

1.5 SALE DISTINGUISHED FROM OTHER SIMILAR CONTRACTS

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(i) Sale and Hire Purchase:

Hire purchase agreements are governed by the Hire-purchase Act, 1972.

periodical ownership transfers right to terminate

instalments on payment of last the agreement
instalment

Basis of difference Sale Hire- Purchase

Time of passing immediately. upon payment of the last instalment.
property
Position of the party buyer is the owner of the goods. hirer is that of a bailee till he pays the
last instalment.
Termination of The buyer cannot terminate the The hirer may, if he so likes, terminate
contract contract the contract by returning the goods.

Burden of Risk of The seller takes the risk of any loss The owner takes no such risk.
insolvency of the resulting from the insolvency of the
buyer buyer
Transfer of title The buyer can pass a good title to a The hirer cannot pass any title even to a
bona fide purchaser. bona fide purchaser.

Resale The buyer in sale can resell. The hire purchaser cannot resell.

(ii) Sale and Bailment: A ‘bailment’ is the delivery of goods for some specific purpose under a contract
on the condition that the same goods are to be returned when the purpose is accomplished.

Basis of Sale Bailment

difference
Transfer of transfer of general property. transfer of special property.
property
Return of goods The return is not possible. The bailee must return the goods.

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

1.7 SUBJECT MATTER OF CONTRACT OF SALE

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Goods perishing before making of contract (Section 7): the contract is VOID

Goods perishing before sale but after agreement to sell (Section 8): the agreement is VOID.

Perishing of future goods: contract shall become VOID.

1.8 ASCERTAINMENT OF PRICE (SECTION 9 & 10)

Ascertainment of price (Section 9):

By virtue of Section 9, the price in the contract of sale may be-

(1) Fixed by the contract, or

(2) Agreed to be fixed in a manner provided by the contract, e.g., by a valuer, or

(3) Determined by the course of dealings between the parties.

Agreement to sell at valuation (Section 10):

Section 10 provides for the determination of price by a third party.

1. Where there is an agreement to sell goods on the terms that price has to be fixed by the third party
and he either does not or cannot make such valuation, the agreement will be VOID.

2. In case the third party is prevented by the default of either party from fixing the price, the party at
fault will be liable to the damages to the other party who is not at fault.

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Section Description
UNIT- 1

2 (1) Definition of Buyer

2 (2) Definition of Delivery
2 (3) Definition of deliverable state
2 (4) Definition of document of title of goods
2 (6) Definition of Future goods
2 (7) Definition of Goods
2 (8) Definition of Insolvent
2 (9) Definition of Mercantile Agent
2 (10) Definition of Price
2 (11) Definition of Property
2 (12) Definition of Quality goods
2 (13) Definition of Seller
2 (14) Definition of Specific goods
4 Sale and Agreement to Sell
4 (2) A contract of sale may be absolute or conditional.
5 Contract of sale how made
6 Existing goods or Future goods
6 (2) Contingent goods
7 Goods Perishing before making of contract
8 Goods perishing before sale but after agreement to sell
9 Ascertainment of price
10 Agreement to sell at valuation

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CHAPTER-3
THE SALE OF GOODS ACT, 1930
UNIT – 2:- CONDITIONS &
WARRANTIES

2.2 INTRODUCTION - CONDITIONS AND WARRANTIES

At the time of selling the goods, a seller usually makes certain statements or representations with a
view to induce the intending buyer to purchase the goods. Such representations are generally about
the nature and quality of goods, and about their fitness for buyer’s purpose.

A representation which forms a part of the

contract of sale and affects the contract, is called
a Stipulation.

However, every stipulation is not of equal importance.

Some of these may be very vital while others may be of
somewhat lesser significance.

The more significant stipulations while the less significant

contained in a contract of sale of stipulation have been given the
goods have been called as name “Warranties”.
“Conditions”,

“A condition is a stipulation essential to the “A warranty is a stipulation collateral to the

main purpose of the contract, the breach of main purpose of the contract, the breach of
which gives rise to a right to treat the contract which gives rise to a claim for damages but not
as repudiated”. [Sub-section (2)] to a right to reject the goods and treat the
contract as repudiated”. [Sub-section (3)].

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Difference between conditions and warranties:

Point of differences Condition Warranty

Meaning
A condition is a stipulation essential to the A warranty is a stipulation
main purpose. collateral to the main purpose.

Right in case of The aggrieved party can repudiate the The aggrieved party can claim
breach contract. only damages .
Conversion of A breach of condition may be treated as a A breach of warranty cannot be
stipulations breach of warranty. treated as a breach of condition.

2.3 WHEN CONDITION IS TO BE TREATED AS WARRANTY (SECTION 13)

In the following cases, a contract is not avoided even on account of a breach of a condition:

(i) Where the buyer altogether waives the performance of the condition. A party may for his own benefit,
waive a stipulation. It should be a voluntary waiver by buyer.

(ii) Where the buyer elects to treat the breach of the conditions, as one of a warranty. That is to say, he
may claim only damages instead of repudiating the contract. Here, the buyer has not waived the
condition but decided to treat it as a warranty.

(iii) Where the contract is non-severable and the buyer has accepted either the whole goods or any part
thereof. For Eg. If basmati rice and lower quality rice mixed together, the contract becomes non severable.

(iv) Where the fulfilment of any condition or warranty is excused by law by reason of impossibility or
otherwise.

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2.4 EXPRESS AND IMPLIED CONDITIONS AND WARRANTIES (SECTION 14-17)

IMPLIED CONDITIONS

• means he should be the REAL OWNER

(i) Condition as to
title • In Case of Sale- Has the Right to Sell
• Agreement of Sale- Will have the Right to Sell

• goods shall correspond with the description.

(ii) Sale by • The Act, however, does not define ‘DESCRIPTION’.
description • Class or the Kind to which the good belong
• Certain Characterstics essential to their Identification

• Bulk shall correspond with the sample in quality

• Buyer shall have a reasonable opportunity
(iii) Sale by sample • Goods shall be free from any Latent Defect, rendering
them un-merchantable.

• Goods supplied shall correspond both

(iv) Sale by sample • with Sample &
as well as by • With Description
description

• Buyer should have made known to the seller the

Particular purpose.
(v) Condition as to • Buyer should rely on the skill and judgement of the seller.
quality or fitness • Seller must be deling with goods of such description
• Exception: if goods are bought by Trade name.

• Bought by Description
(vi) Condition as to • Seller should be a dealer in the goods of that description.
Merchantability

• Goods must be Healthy to consume

(vii) Condition as to
wholesomeness

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IMPLIED WARRANTIES

Implied Warranties: It is a warranty which the law implies into the contract of sale. In other words, it is
the stipulation which has not been included in the contract of sale in express words. But the law
presumes that the parties have incorporated it into their contract

1. Warranty as to undisturbed possession [Section 14(b)]: An implied warranty that the buyer shall have
and enjoy quiet possession of the goods. That is to say, if the buyer having got possession of the goods, is
later on disturbed in his possession, he is entitled to sue the seller for the breach of the warranty.

2. Warranty as to non-existence of encumbrances [Section 14(c)]: An implied warranty that the goods
shall be free from any charge or encumbrance in favour of any third party not declared or known to the
buyer before or at the time the contract is entered into.

3. Warranty as to quality or fitness by usage of trade [Section 16(3)]: An implied warranty as to quality
or fitness for a particular purpose may be annexed or attached by the usage of trade.

Regarding implied condition or warranty as to the quality or fitness for any particular purpose of goods
supplied, the rule is ‘let the buyer beware’ i.e., the seller is under no duty to reveal unflattering truths
about the goods sold, but this rule has certain exceptions.

4. Disclosure of dangerous nature of goods: Where the goods are dangerous in nature and the buyer is
ignorant of the danger, the seller must warn the buyer of the probable danger. If there is a breach of
warranty, the seller may be liable in damages.

2.5 CAVEAT EMPTOR

In case of sale of goods, the doctrine ‘Caveat Emptor’ means ‘let the buyer beware’. When sellers display
their goods in the open market, it is for the buyers to make a proper selection or choice of the goods. If
the goods turn out to be defective, he cannot hold the seller liable. The seller is in no way responsible for
the bad selection of the buyer. The seller is not bound to disclose the defects in the goods which he is
selling.

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Exceptions: The doctrine of Caveat Emptor is, however, subject to the following exceptions:

1. Fitness as to quality or use: Where the buyer makes known to the seller the particular purpose for
which the goods are required, so as to show that he relies on the seller’s skill or judgment and the
goods are of a description which is in the course of seller’s business to supply, it is the duty of the
seller to supply such goods as are reasonably fit for that purpose [Section 16 (1)].

Condition as to quality or fitness [Section 16(1)]

(a) The buyer should (c) The goods must be of

have made known to the (b) The buyer should a description dealt in by
seller the particular rely on the skill and the seller, whether he be
purpose for which goods judgement of the seller. a manufacturer or not.
are required.

2. Goods purchased under patent or brand name: In case where the goods are purchased under its
patent name or brand name, there is no implied condition that the goods shall be fit for any particular
purpose [Section 16(1)]. Here, the buyer is relying on the particular brand name. (No Exception)

3. Goods sold by description: Where the goods are sold by description there is an implied condition that
the goods shall correspond with the description [Section 15]. If it is not so, then seller is responsible.

4. Goods of Merchantable Quality: Where the goods are bought by description from a seller who deals
in goods of that description there is an implied condition that the goods shall be of merchantable
quality. The rule of Caveat Emptor is not applicable for latent defects.

5. Sale by sample: Where the goods are bought by sample, this rule of Caveat Emptor does not apply if
the bulk does not correspond with the sample [Section 17].

6. Goods by sample as well as description: Where the goods are bought by sample as well as
description, the rule of Caveat Emptor is not applicable in case the goods do not correspond with both
the sample and description or either of the condition [Section 15].

7. Trade Usage: An implied warranty or condition as to quality or fitness for a particular purpose may
be annexed by the usage of trade and if the seller deviates from that, this rule of Caveat Emptor is not
applicable [Section 16(3)].

8. Seller actively conceals a defect or is guilty of fraud: Where the seller sells the goods by making
some misrepresentation or fraud and the buyer relies on it or when the seller actively conceals some
defect in the goods so that the same could not be discovered by the buyer on a reasonable
examination, then the rule of Caveat Emptor will not apply.

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UNIT- 2
11 Stipulation as to time
12 Condition & warranty
12 (2) Definition of Condition
12 (3) Definition of Warranty
13 When condition to be treated as warranty
14 Condition as to title
14 (b) Warranty as to undisturbed possession
14 (c) Warranty as to non-existence of encumbrances
15 Sale by Description
16 Implied conditions as to quality or fitness
16 (1) Conditions as to quality or fitness
16 (2) Condition as to Merchantability
16 (3) Warranty as to quality or fitness by usage of trade
17 Sale by Sample

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CHAPTER-3
THE SALE OF GOODS ACT, 1930
UNIT – 3:- TRANSFER OF
OWNERSHIP AND DELIVERY
OF GOODS

INTRODUCTION
Sale of goods involves transfer of ownership of property from seller to buyer. It is essential to determine
the time at which the ownership passes from the seller to the buyer. The general rule is that risk prima
facie passes with the property.

3.1 PASSING OF PROPERTY (SECTIONS 18 – 26)

Passing of property implies passing of ownership. If the property has passed to the buyer, the risk in
the goods sold is that of buyer and not of seller, though the goods may still be in the seller’s possession.

The rules regarding transfer of property in goods depend on two basic factors:

(a) Identification of Goods: Section 18 provides that where there is a contract of sale for Unascertained
Goods, the property in goods cannot pass to the buyer unless and until the goods are ascertained. The
buyer can get the ownership right on the goods only when the goods are specific and ascertained.

(b) Intentions of parties: The property in goods is transferred to the buyer at such time as the parties to
the contract intend it to be transferred. [section 19(1)]

Section 19(2) further provides that for the purpose of ascertaining the intention of the parties regard
shall be:

i. To the terms of the contract

ii. To the conduct of the parties and
iii. To the circumstances of the case

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A. Property (Specific or ascertained goods) passes when intended to pass (Section 19):

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. [sub-
section (1)]

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. [sub-section (2)]

Unless a different intention appears, the rules contained in Sections 20 to 24 are rules for ascertaining
the intention of the parties as to the time at which the property in the goods is to pass to the buyer.
[sub-section (3)]

Stages of goods while passing of property

Specific goods in a deliverable state

Specific goods to be put into a deliverable state

Specific goods in a deliverable state when seller has to

ascertain price.

1. Specific goods in a deliverable state (Section 20): Where there is an Unconditional Contract for the sale
of Specific Goods in a deliverable state, the property in the goods passes to the buyer when the contract
is made, and it is immaterial whether the time of payment of the price or the time of delivery of the
goods, or both, is postponed. Here, the condition is goods must be ready for delivery.

2. Specific goods to be put into a deliverable state (Section 21): Where there is a contract for the sale of
Specific Goods and the seller is bound to do something to the goods for the purpose of putting them into a
deliverable state, the property does not pass until such thing is done and the buyer has NOTICE thereof.

3. Specific goods in a deliverable state, when the seller has to do anything thereto in order to ascertain
price (Section 22): Where there is a contract for the sale of specific goods in a deliverable state, but the
seller is bound to weigh, measure, test or do some other act or thing with reference to the goods for the
purpose of ascertaining the price, the property does not pass until such act or thing is done and the buyer
has NOTICE thereof.

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B. Unascertained goods

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. [Section 18]

The rules in respect of passing of property of unascertained goods are as follows:

1. Sale of unascertained goods by description and Appropriation [Section 23(1)]: Appropriation of goods
involves selection of goods with the intention of using them in performance of the contract and with the
mutual consent of the seller and the buyer.

2. Delivery of the goods to the carrier [Section 23(2)]: Where, in pursuance of the contract, the seller
delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) for the
purpose of transmission to the buyer, and does not reserve the right of disposal, he is deemed to have
unconditionally appropriated the goods to the contract.

C. Goods sent on approval or “on sale or return” (Section 24)

When goods are delivered to the buyer on approval or “on sale or return” or other similar terms, the
property therein passes to the buyer-

(a) when he (Buyer) signifies his approval or acceptance to the seller or does any other act adopting
the transaction;

(b) if he does not signify his approval or acceptance to the seller but retains the goods without giving
notice of rejection, then, if a time has been fixed for the return of the goods, on the expiration of
such time, and, if no time has been fixed, on the expiration of a reasonable time; or

(c) he does something to the good which is equivalent to accepting the goods e.g. he pledges or sells
the goods.

Sale for cash only or Return

It may be noted that where the goods have been delivered by a person on “sale or return” on the terms
that the goods were to remain the property of the seller till they are paid for, the property therein does
not pass to the buyer until the terms are complied with, i.e., cash is paid for.

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D. Reservation of right of disposal (Section 25)

This section preserves the right of disposal of goods to secure that the price is paid before the property in
goods passes to the buyer.

Where there is contract of sale of specific goods or where the goods have been subsequently appropriated
to the contract, the seller may, by the terms of the contract or appropriation, as the case may be, reserve
the right to dispose of the goods, until certain conditions have been fulfilled.

3.2 RISK PRIMA FACIE PASSES WITH PROPERTY (SECTION 26)

According to section 26, “unless otherwise agreed, the goods remain at the seller’s risk until the
property therein is transferred to the buyer, but when the property therein is transferred to the
buyer, the goods are at the buyer’s risk whether delivery has been made or not”.

The aforesaid rule is, however, subject to Two Qualifications:

i. If delivery has been delayed by the fault of the seller or the buyer, the goods shall be at the risk of
the party in default, as regards loss which might not have arisen but for the default.
ii. The duties and liabilities of the seller or the buyer as bailee of goods for the other party remain
unaffected even when the risk has passed generally.

3.3 TRANSFER OF TITLE BY NON-OWNERS (SECTIONS 27 – 30)

Sale by person not the owner (Section 27): The general rule regarding the transfer of title is that the
seller cannot transfer a better title to the buyer for goods than he himself has. This rule is expressed in
the Latin maxim “Nemo dat quod non habet” which means that no one can give what he has not got.

If this rule is enforced rigidly then the innocent buyers may be put to loss in many cases. Therefore, to
protect the interests of innocent buyers, a number of exceptions have been provided to this rule.

Exceptions: In the following cases, a non-owner can convey better title to the bona fide purchaser of
goods for value.

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(1) Sale by a Mercantile Agent: A sale made by a mercantile agent of the goods for document of title to
goods would pass a good title to the buyer in the following circumstances; namely;

(a) If he was in possession of the goods or documents with the consent of the owner;
(b) If the sale was made by him when acting in the ordinary course of business as a mercantile
agent; and
(c) If the buyer had acted in good faith and has at the time of the contract of sale, no notice of
the fact that the seller had no authority to sell (Proviso to Section 27).

(2) Sale by one of the joint owners (Section 28): If one of several joint owners of goods has the sole
possession of goods by permission of the co-owners.

(3) Sale by a person in possession under voidable contract: A buyer would acquire a good title to the
goods sold to him by a seller who had obtained possession of the goods under a contract voidable on the
ground of coercion, fraud, misrepresentation or undue influence provided that the contract had not been
rescinded until the time of the sale (Section 29).

(4) Sale by one who has already sold the goods but continues in possession thereof: If a person has sold
goods but continues to be in possession of them or of the documents of title to them, he may sell them to
a third person, and if such person obtains the delivery thereof in good faith .

(5) Sale by buyer obtaining possession before the property in the goods has vested in him: Where a buyer
with the consent of the seller obtains possession of the goods before the property in them has passed to
him, he may sell, pledge or otherwise dispose of the goods to a third person, and if such person obtains
delivery of the goods in good faith and without notice of the lien or other right of the original seller in
respect of the goods, he would get a good title to them [Section 30(2)].

However, a person in possession of goods under a ‘hire-purchase’ agreement which gives him only an
option to buy is not covered within the section unless it amounts to a sale.

(6) Effect of Estoppel: Where the owner is estopped by the conduct from denying the seller’s authority to
sell, the transferee will get a good title as against the true owner.

(7) Sale by an unpaid seller: Where an unpaid seller who had exercised his right of lien or stoppage in
transit resells the goods, the buyer acquires a good title to the goods as against the original buyer.

(8) Sale under the provisions of other Acts:

i. Sale by an Official Receiver or Liquidator of the Company will give the purchaser a valid title.
ii. Purchase of goods from a finder of goods will get a valid title under circumstances
iii. A sale by pawnee can convey a good title to the buyer

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(3) Sale by a (4) Sale by one

(1) Sale by a (2) Sale by one of person in who has already
Mercantile Agent: the joint owners possession under sold the goods but
(Section 28) voidable contract continues in
possession thereof

(5) Sale by buyer

obtaining (8) Sale under the
possession before (6) Effect of (7) Sale by an provisions of other
the property in the Estoppel unpaid seller Acts
goods has vested in
him

Official Receiver or finder of goods pawnee

Liquidator

3.4 PERFORMANCE OF THE CONTRACT OF SALE (SECTIONS 31 – 44)

The performance of a contract of sale implies acceptance of the delivery of goods and payment
delivery of goods by the seller and of price for them by the buyer in accordance of
the terms of the contract.

Definition of Delivery [Section 2(2)]: Delivery means voluntary transfer of possession

Delivery of goods is of three types: (a) Actual Delivery (b) Symbolic delivery (c) Constructive Delivery

Rules Regarding Delivery of goods (Section 33-41)

The Sale of good Act, 1930 prescribes the following rules of delivery of goods:

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(i) Delivery (Section 33): Delivery of goods sold may be made by doing anything which the parties agree
shall be treated as delivery or which has the effect of putting the goods in the possession of the buyer or
of any person authorised to hold them on his behalf.

(ii) Effect of part delivery: A delivery of part of goods, in progress of the delivery of the whole has the
same effect. (Section 34)

(iii) Buyer to apply for delivery: Apart from any express contract, the seller of goods is not bound to
deliver them until the buyer applies for delivery. (Section 35)

(iv) Place of delivery: Whether it is for the buyer to take possession of the goods or for the seller to send
them to the buyer is a question depending in each case on the contract, express or implied, between the
parties.

(v) Time of delivery: Where under the contract of sale, the seller is bound to send the goods to the buyer,
but no time for sending them is fixed, the seller is bound to send them within a REASONABLE TIME.

(vi) Goods in possession of a third party: Where the goods at the time of sale are in possession of a third
person, there is no delivery unless and until such third person acknowledges to the buyer that he holds
the goods on his behalf.

(vii) Time for tender of delivery: Demand or tender of delivery may be treated as ineffectual unless made
at a reasonable hour. What is reasonable hour is a question of fact. [Section 36(4)].

(viii) Expenses for delivery: The expenses of and incidental to putting the goods into a deliverable state
must be borne by the seller in the absence of a contract to the contrary. [Section 36(5)].

(ix) Delivery of wrong quantity [Section 37]: Where the seller delivers to the buyer a quantity of goods
less than he contracted to sell, the buyer may reject them, but if the buyer accepts the goods so delivered
he shall pay for them at the contract rate. [Subsection (1)]

Where the seller delivers to the buyer a quantity of goods larger than he contracted to sell, the buyer may
accept the goods included in the contract and reject the rest, or he may reject the whole. If the buyer
accepts the whole of the goods so delivered, he shall pay for them at the contract rate. [Sub-section (2)]

(x) Instalment deliveries: Unless otherwise agreed, the buyer is not bound to accept delivery in
instalments.

(xi) Delivery to carrier: Subject to the terms of contract, the delivery of the goods to the carrier for
transmission to the buyer, is prima facie deemed to be delivery to the buyer. [Section 39(1)]

(xii) Deterioration during transit: Where goods are delivered at a distant place, the liability for
deterioration necessarily incidental to the course of transit will fall on the buyer, though the seller agrees
to deliver at his own risk. (Section 40)

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(xiii) Buyer’s right to examine the goods: Where goods are delivered to the buyer, who has not previously
examined them, he is entitled to a reasonable opportunity of examining them in order to ascertain
whether they are in conformity with the contract.

Rule related to Acceptance of Delivery of Goods (Section 42):

Acceptance is deemed to take place when the buyer-

(a) intimates to the seller that he had accepted the goods; or

(b) does any act to the goods, which is inconsistent with the ownership of the seller; or
(c) retains the goods after the lapse of a reasonable time, without intimating to the seller that
he has rejected them.

Buyer not bound to return rejected goods (Section 43): Unless otherwise agreed, where goods are delivered
to the buyer and he refuses to accept them, having the right so to do, he is not bound to return them to
the seller, but it is sufficient if he intimates to the seller that he refuses to accept them.

Liability of buyer for neglecting or refusing delivery of goods (Section 44): When the seller is ready and
willing to deliver the goods and requests the buyer to take delivery, and the buyer does not within a
reasonable time after such request take delivery of the goods, he is liable to the seller for any loss
occasioned by his neglect or refusal.

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UNIT- 3

18 Goods must be ascertained

19 Property passes when intended to pass
20 Specific goods in a deliverable state
21 Specific goods to be put into a deliverable state
Specific goods in a deliverable state, when the seller has to do anything therto
22 in order to ascertain price
23 (1) Sale of unascertained goods by description
23 (2) Delivery to the carrier
24 Goods sent on approval or " on sale or return"
25 Reservation of right of disposal
26 Risk Prima facie passes with property
27 Sale by person not the owner
28 Sale by one of the joint owners
29 Sale by person in possession under Voidable Contract
30 (1) Sale by one who has already sold the goods but continues in possession therof
Sale by buyer obtaining possession before the property in the goods has vested in
30 (2) him
31 Duties of seller and buyer
32 Payment and delivery are concurrent conditions
33 Delivery
34 Effect of part delivery
35 Buyer to apply for delivery
36 Rules as to delivery
36 (1) Place of delivery
36 (2) Time of delivery
36 (3) Goods in possession of a third party
36 (4) Time for tender of delivery
36 (5) Expenses for delivery
37 Delivery of wrong quantity
38 Instalment deliveries
39 Delivery to carrier
40 Deterioration during transit
41 Buyer's right to examine the goods
42 Rule related to acceptance of Delivery of goods
43 Buyer not bound to return rejected goods
44 Liability of buyer for neglecting or refusing delivery of goods

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HAPTER- 3
THE SALE OF GOODS ACT, 1930
UNIT – 4:- UNPAID SELLER

4.1 UNPAID SELLER

According to Section 45(1), the seller of goods is deemed to be an ‘Unpaid Seller’ when-

(a) The whole of the price has not been paid or tendered and the seller had an immediate right of
action for the price.

(b) When a bill of exchange or other negotiable instrument has been received as conditional payment,
and the condition on which it was received has not been fulfilled by reason of the DISHONOUR of the
instrument or otherwise.

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4.2 RIGHTS OF AN UNPAID SELLER

Unpaid seller’s right (Section 46): Subject to the provisions of this Act and of any law for the time being
in force, notwithstanding that the property in the goods may have passed to the buyer, the unpaid seller
of goods, as such, has by implication of law-

(a) a lien on the goods for the price while he is in possession of them;
(b) in case of the insolvency of the buyer a right of stopping the goods in transit after he has
parted with the possession of them;
(c) a right of re-sale as limited by this Act. [Sub-section (1)]

An unpaid seller has been expressly given the rights against the goods as well as the buyer personally
which are discussed as under:

(a) Rights of an unpaid seller against the goods: The right of unpaid seller against goods can be
categorized under two headings.

Against the goods

Where the property in goods where the property in goods

has passed to the buyer has not passed to the buyer

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4.3 RIGHT OF UNPAID SELLER AGAINST THE GOODS

The unpaid seller has the following rights against the goods:

(1) Seller’s lien (Section 47)

Rights of lien: The unpaid seller’s lien is a possessory lien i.e. the lien can be exercised as long as
the seller remains in possession of the goods.

Exercise of right of lien: This right can be exercised by him in the following cases only:

(a) where goods have been sold without any

stipulation of credit; (i.e., on cash sale)

(b) where goods have been sold on credit

but the term of credit has expired; or

(c) where the buyer becomes insolvent.

Seller may exercise his right of lien even where he is in possession of the goods as agent or bailee
for the buyer.

Part delivery (Section 48): Where an unpaid seller has made part delivery of the goods, he may exercise
his right of lien on the remainder.

Termination of lien (Section 49): The unpaid seller loses his right of lien under the following
circumstances:

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) Where the buyer or his agent lawfully obtains possession of the goods.
c) Where seller has waived the right of lien.
d) By Estoppel i.e., where the seller so conducts himself that he leads third parties to believe that the
lien does not exist.

Exception: The unpaid seller of the goods, having a lien thereon, does not lose his lien by reason only that
he has obtained a decree for the price of the goods. (This means even if the seller has taken a price for
the goods under a court case, he can still exercise his right to lien on those goods.)

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(2) Right of stoppage in transit (Section 50 to 52):

Meaning of right of stoppage in transit (Section 50): The right of stoppage in transit means the right of
stopping the goods while they are in transit, to regain the possession and to retain them till the full price
is paid.

This right is the extension of the right of lien.

However, the right of stoppage in transit is exercised only when the following conditions are fulfilled:

(a) The seller must be Unpaid.

(b) He must have parted with the possession of goods.
(c) The goods are in transit.
(d) The buyer has become Insolvent.
(e) The right is subject to provisions of the Act. [Section 50]

When does the transit come to an end?

The right of stoppage in transit is lost when transit comes to an end. Transit comes to an end in the
following cases:

 When the buyer or other bailee obtains delivery.

 Buyer obtains delivery before the arrival of goods at destination.
 Where the carrier or other bailee acknowledges to the buyer.
 If the carrier wrongfully refuses to deliver the goods to the buyer.
 Where goods are delivered to the carrier hired by the buyer, the transit comes to an end.
 Where the part delivery of the goods has been made to the buyer, the transit will come to an
end for the remaining goods which are yet in the course of transmission.
 Where the goods are delivered to a ship chartered by the buyer, the transit comes to an end.

How stoppage in transit is affected (Section 52):

(1) The Unpaid Seller may exercise his 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.
Such notice may be given either to the person in actual possession of the goods or to his principal. In the
latter case, the notice, to be effectual, shall be given at such time and in such circumstances, that the
principal, by the exercise of reasonable diligence, may communicate it to his servant or agent in time to
prevent a delivery to the buyer.

(2) When notice of stoppage in transit is given by the seller to the carrier or other bailee in possession of
the goods, he shall re-deliver the goods to, or according to the directions of, the seller. The expenses of
such re-delivery shall be borne by the seller.

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Distinction between Right of Lien and Right of Stoppage in Transit

(i) The essence of a right of lien is to Retain possession whereas the right of stoppage in transit is
right to Regain possession.
(ii) Seller should be in possession of goods under lien while in stoppage in transit (i) seller should
have parted with the possession (ii) possession should be with a carrier & buyer has not acquired
the possession.
(iii)Right of lien can be exercised even when the buyer is not INSOLVENT but it is not the case with
right of stoppage in transit.
(iv) Right of stoppage in transit begins when the right of lien ends.
(v) Right of lien comes to an end as soon as the goods go out of the possession of the seller but the
right of stopping in transit comes to an end as soon as the goods are delivered to the buyer.

Exceptions where unpaid seller’s right of lien and stoppage in transit are defeated:

(a) When the seller has assented to the sale, mortgage or other disposition of the goods made by the
buyer.

(b) When a document of title to goods has been transferred to the buyer and the buyer transfers the
documents to a person who has bought goods in good faith and for value i.e. for price.

(3) Right of re-sale [Section 54]

The right of resale is a very valuable right given to an unpaid seller. In the absence of this right, the
unpaid seller’s other rights against the goods that is lien and the stoppage in transit would not have been
of much use.

The unpaid seller can exercise the right to re-sell the goods under the following conditions:

(i) Where the goods are of a perishable nature: In such a case, the buyer need not be informed of the
intention of resale.

(ii) Where he gives notice to the buyer of his intention to re-sell the goods: If after the receipt of such
notice the buyer fails within a reasonable time to pay or tender the price, the seller may resell the goods.
It may be noted that in such cases, on the resale of the goods, the seller is also entitled to:

(a) Recover the difference between the contract price and resale price, from the original buyer, as
damages.
(b) Retain the profit if the resale price is higher than the contract price.

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(iii) Where an unpaid seller who has exercised his right of lien or stoppage in transit resells the goods:
The subsequent buyer acquires the good title thereof as against the original buyer, despite the fact that
the notice of re-sale has not been given by the seller to the original buyer.

(iv) A re-sale by the seller where a right of re-sale is expressly reserved in a contract of sale: Sometimes,
it is expressly agreed between the seller and the buyer that in case the buyer makes default in payment
of the price, the seller will resell the goods to some other person. It may be noted that in such cases, the
seller is not required to give notice of resale.

(v) Where the property in goods has not passed to the buyer: The unpaid seller has in addition to his
remedies a right of withholding delivery of the goods. This right is similar to lien and is called “quasi-
lien”. This is the additional right used in case of agreement to sell.

4.4 RIGHTS OF UNPAID SELLER AGAINST THE BUYER (SECTIONS 55-61)

Rights of unpaid seller against the buyer personally: The rights of the seller against the buyer personally
are called rights in personam and are in addition to his rights against the goods.

1. Suit for price (Section 55)

(a) 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. [Section 55(1)] (This is the case of contract of
sale)
(b) Where under a contract of sale, the price is payable on a certain day irrespective of delivery and
the buyer wrongfully neglects or refuses to pay such price, the seller may sue him for the price
although the property in the goods has not passed and the goods have not been appropriated to
the contract. [Section 55(2)]. (This is the case of agreement to sell)

2. Suit for damages for non-acceptance (Section 56)

Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may sue him
for damages for non-acceptance.

3. Repudiation of contract before due date (Section 60)

Where the buyer repudiates the contract before the date of delivery, the seller may treat the contract as
rescinded and sue damages for the breach. This is known as the ‘rule of anticipatory breach of contract’.

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4. Suit for interest [Section 61]

Where there is specific agreement between the seller and the buyer as to interest on the price of the
goods from the date on which payment becomes due, the seller may recover interest from the buyer.

In the absence of a contract to the contrary, the Court may award interest to the seller in a suit by him
at such rate as it thinks fit.

4.5 REMEDIES OF BUYER AGAINST THE SELLER

If the seller commits a breach of contract, the buyer gets the following rights against the seller:

1. Damages for non-delivery [Section 57]: Where the seller wrongfully neglects or refuses to deliver the
goods to the buyer, the buyer may sue the seller for damages for non-delivery.

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2. Suit for Specific Performance (Section 58): Where the seller commits of breach of the contract of sale,
the buyer can appeal to the court for specific performance. The court can order for specific performance
only when the goods are ascertained or specific.

This remedy is allowed by the court subject to these conditions:

(a) The contract must be for the sale of specific and ascertained goods.

(b) The power of the court to order specific performance is subject to provisions of Specific Relief
Act of 1963.

(c) It empowers the court to order specific performance where damages would not be an adequate
remedy.

(d) It will be granted as remedy if goods are of special nature or are unique.

3. Suit for breach of warranty (Section 59): Where there is breach of warranty on the part of the seller,
or where the buyer elects to treat breach of condition as breach of warranty, the buyer is not entitled to
reject the goods only on the basis of such breach of warranty. But he may –

(i) sue the seller for the breach of warranty in diminution or extinction of the price; or

(ii) sue the seller for damages for breach of warranty.

4. Repudiation of contract before due date (Section 60): Where either party to a contract of sale
repudiates the contract before the date of delivery, the other 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.

5. Suit for interest:

1) Nothing in this Act shall affect the right of the seller or the buyer to recover interest or special
damages, in any case where by law interest or special damages may be recoverable, or to recover
the money paid where the consideration for the payment of it has failed.
2) In the absence of a contract to the contrary, the court may award interest at such rate as it
thinks fit on the amount of the price to the buyer in a suit filed by him for the refund of the price.

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4.6 AUCTION SALE (SECTION 64)

An ‘Auction Sale’ is a mode of selling property by inviting bids publicly and the property is sold to the
highest bidder. An auctioneer is an agent governed by the Law of Agency.

Legal Rules of Auction sale: Section 64 of the Sale of Goods Act, 1930 provides following rules to regulate
the sale by auction:

(a) Where goods are sold in lots: Where goods are put up for sale in lots, each lot is prima facie deemed
to be subject of a separate contract of sale.

(b) Completion of the contract of sale: The sale is complete when the auctioneer announces its
completion by the fall of hammer or in any other customary manner. Until such announcement is made,
any bidder may retract from his bid.

(c) Right to bid may be reserved: Right to bid may be reserved expressly by or on behalf of the seller and
where such a right is expressly reserved, but not otherwise, the seller or any one person on his behalf may
bid at the auction.

(d) Where the sale is not notified by the seller: 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.

(e) Reserved price: The sale may be notified to be subject to a reserve or upset price; and

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

4.7 INCLUSION OF INCREASED OR DECREASED TAXES IN CONTRACT

OF SALE (SECTION 64A)
Where after a contract has been made but before it has been performed, tax revision takes place. Where
tax is being imposed, increased, decreased or remitted in respect of any goods without any stipulations to
the payment of tax, the parties would become entitled to read just the price of the goods accordingly.
Following taxes are applied on the sale or purchase of goods:

 Any duty of customs or excise on goods,

 Any tax on the sale or purchase of goods

The buyer would have to pay the increased price where the tax increases and may derive the benefit of
reduction if taxes are curtailed.

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UNIT- 4
45 UNPAID SELLER
46 UNPAID SELLER'S RIGHT
47 SELLER'S LIEN
48 PART DELIVERY
49 TERMINATION OF LIEN
50 RIGHT TO STOPPAGE IN TRANSIT
51 DURATION OF TRANSIT
52 HOW STOPPAGE IN TRANSIT IS EFFECTED
53 EFFECTS OF SUB-SALE OR PLEDGE BY BUYER
54 RIGHT OF RE-SALE
55 SUIT FOR PRICE
56 SUIT FOR DAMAGE FOR NON-ACCEPTANCE
57 DAMAGES FOR NON-DELIVERY
58 SUIT FOR SPECIFIC PERFORMANCE
59 SUIT FOR BREACH OF WARRANTY
60 REPUDIATION OF CONTRACT BEFORE DUE DATE
61 SUIT FOR INTEREST
64 AUCTION SALE
64 (a) INCLUSION OF INCREASED OR DECREASED TAXES IN CONTRACT OF SALE

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