Indian Sale of Goods Act, 1930

Indian Sale of Goods Act 1930

Definition of contract of sale of goods:
“A contract of sale of goods is a contract whereby the seller transfers or agree to
transfer the property in goods to the buyer for a price”.
A contract of sale may provide for”
a) Transfer of property (sale) or
b) Agreement to transfer the property (Agreement to sell)

Section 4(2): A contract of sale may be absolute or conditional

In an ‘absolute contract of sale’ the property in goods passes immediately to the

buyer and nothing more remains to be done by the seller of absolute sale in goods
sold.

In a ‘conditional contract of sale’, the property in goods does not pass to the buyer
immediately, but it passes on the fulfilment of certain conditions.
Essentials of a contract of sale:
In a contract of sale there should be:
a) There must be a contract and all the essential elements of a valid contract must be
present in the contract of sale.
b) There must be at least two parties, the seller and the buyer
c) The subject matter of the contract must necessarily be goods covering only movable
property.
d) A price in money (not in kind) should be paid or promised
e) A transfer of property in goods from seller to the buyer must take place.
f) A contract of sale must be absolute or conditional

Stipulations:
In a contract of sale of goods, stipulation refers to represent action made by the buyer and
the seller reciprocally as part of negotiation between them before they enter into a contract.
Stipulation means a requirement or a specified item in an agreement .
If there are no such representations or stipulations, the principle of caveat emptor (let the
buyer beware) applies.
• “buyer” means a person who buys or agrees to buy goods;
• “delivery” means voluntary transfer of possession from one person to another;
• goods are said to be in a “deliverable state” when they are in such state that the buyer would
under the contract be bound to take delivery of them;
• “document of title to goods” includes a bill of lading, dockwarrant, warehouse keeper’s
certificate, wharfingers’ certificate, railway receipt, [multimodal transport document,]
warrant or order for the delivery of goods and any other document used in the ordinary
course of business as proof of the possession or control of goods, or authorising or
purporting to authorise, either by endorsement or by delivery, the possessor of the document
to transfer or receive goods thereby represented;
• “goods” means every kind of moveable 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 the contract of sale;
• a person is said to be “insolvent” who has ceased 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;
• “mercantile agent” means a mercantile agent having in the customary course of business as
such agent authority either to sell goods, or to consign goods for the purposes of sale, or to
buy goods, or to raise money on the security of goods; (10) “price” means the money
consideration for a sale of goods;
Goods
• One of the most crucial terms to define is the goods that are to be included in the contract for
sale. The Act defines the term “Goods” in its sec 2(7) as all types of movable property. The
sec 2(7) of the Act goes as follows:
• “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 the contract of sale will be
considered goods”
• As you can see, shares and stocks are also defined as goods by the Act. The term actionable
claims mean those claims which are eligible to be enforced or initiated by a suit or legal
action. This means that those claims where an action such as recovery by auction, suit,
refunds etc. could be initiated to recover or realize the claim.
Rights of a buyer:
1. Right of delivery of goods within stipulated time
2. Right to repudiation on breach of condition
3. Right to verify the goods with sample
4. Right to take delivery on payment of price
5. Right to reject the goods
6. Right to demand a notice for insurance of goods in transit
7. Right not to accept instalment delivery
8. Right not to take risk of deterioration of goods.
9. Right to examine the goods
10. Right not to return rejected goods
11. Right to damages for non-delivery
12. Right to claim for specific performance
13. Right to keep the contract subsisting
14. Right to claim interest or special damages
15. Right in connection with auction sale
16. Right to demand for reduction of price
Duties of a buyer:
1. Duty to treat breach of condition as breach of warranty
2. Duty to accept unconditional appropriation
3. Duty to pay price and to accept goods
4. Duty to apply for delivery
5. Duty to demand delivery at a reasonable hour
6. Duty to accept and pay for instalment delivery
7. Duty to pay for excess
8. Duty to accept delivery to carrier or what finger
9. Duty to be liable for neglecting or refusing delivery
10. Duty to pay price in advance
11. Duty to pay increased tax
 Unpaid seller:
Definition:
“ A seller who has not received the whole of the price of the goods sold to the buyer is
known as unpaid seller.”

According to Section 45(a) of the Sale of Goods Act, 1930, 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) A bill of exchange or other negotiable instrument was given as payment, but the same
has been dishonoured, unless this payment was an absolute, and not a conditional
payment.

Thus, a seller is said to be unpaid seller when the following conditions are satisfied:
c) The goods have been sold
d) The price of goods sold is due
e) The price has not yet been paid or tendered
f) A negotiable instrument has been received as payment but has dishonoured.
 Rights of an unpaid seller

Against goods Against the buyer

Property in goods Property in goods Suit for price

has passed to the has not passed to
buyer the buyer
Suit for damages
Lien Lien
Suit for interest
Stoppage in transit Stoppage in transit
Repudiation of
Resale contract before
Resale
due date
With holding
delivery
 Right of lien
Right of lien can be exercised in the following cases:
a) Where goods have been sold without any stipulation of credit
b) Where goods have been sold on credit but the term of credit has expired
c) Where the buyer becomes insolvent

Loses right of lien under the following circumstances:

d) 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.
e) Where the buyer or his agent lawfully obtains possession of the goods
f) Where seller has waived the right of lien
g) By estoppel
 Right of stoppage of goods in transit
The right of stoppage of goods 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

Right of resale
The right of resale can be exercised under the following circumstances:
f) Goods are perishable in nature: - Buyer need not be informed of the intention
of resale
g) Gives notice to the buyer of his intention to resell: - Buyer does not within a
reasonable time pay or tender the price.
 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
2. Suit for specific performance
3. Suit for breach of warranty
4. Suit for damages for repudiation of contract by the seller before the due date
5. Suit for interest
Sale by person not the owner.—
• Subject to the provisions of this Act and of any other law for the time being in force, where
goods are sold by a person who is not the owner thereof and who does not sell them under
the authority or with the consent of the owner, the buyer acquires no better title to the goods
than the seller had, unless the owner of the goods is by his conduct precluded from denying
the seller’s authority to sell:
• Provided that, where a mercantile agent is, with the consent of the owner, in possession of
the goods or of a document of title to the goods, any sale made by him, when acting in the
ordinary course of business of a mercantile agent, shall be as valid as if he were expressly
authorised by the owner of the goods to make the same; provided that the buyer acts in good
faith and has not at the time of the contract of sale notice that the seller has not authority to
sell.
Types of Stipulations:
A stipulation in a contract of sale are:
a) A condition or
b) A warranty

Condition:
According to Section 12(2) of the Act, “a condition is a stipulation essential to the
main purpose of the contract the breach of which gives rise to the right to treat the
contract as repudiated”.

Warranty:
According to Section 12(3) of the Act, “a warranty is a stipulation collateral to the
main purpose of the breach of which gives rise to claim for damage but not a right
to reject goods and treat the contract as repudiated”.
Express conditions: express conditions are those, which are agreed upon between
the parties at the time of contract and are expressly provided in the contract.
Implied conditions: Implied conditions are those which are presumed by law to be
present in the contract. However, an implied condition may be negated or waived
by an express agreement.

Implied conditions: Following conditions are implied in a contract of sale of

goods unless the circumstances of the contract show a different intention:
1) Condition as to title
2) Sale by description
3) Sale by sample
4) Sale by sample as well as by description
5) Condition as to quality or fitness
6) Condition as to wholesomeness
Implied warranties:
1) Warranty as to undisturbed possession
2) Warranty as to non-existence of encumbrances
3) Disclosure of dangerous nature of goods
4) Warranty as to quality or fitness by usage of trade

Distinction between Condition and Warranty:

Condition Warranty
It is a stipulation which is primary and It is a stipulation which is secondary
essential to the contract and collateral to the condition
If the seller breaches the condition, If the seller breach the warranty, the
the buyer can repudiate the contract. buyer cannot repudiate the contract
He can claim damages in certain but he may either reduce the price or
cases. claim damages or both
A breach of condition may be treated A breach of warranty cannot be treated
as a breach of warranty or becomes or cannot become a breach of
breach of warranty condition