1

Sale of Goods Act 1930

Introduction
In India the contract of sale of goods act 1930 deals
with sale of goods.
This act came into force on 1st July 1930. It extends to
whole part of India except J & K. it deals with all
contracts of sale of goods,
but does not deals with contract of Sale of Services or
Pledge of goods, Mortgage of property or Barter of
goods.
A contract of sale of goods is a contract whereby the
Seller transfers or offers to transfer the property in
goods to the Buyer for a specific Price (Section 4(1))

Essentials of Contract of Sale

Two parties: A contract of sale is made between two parties. They are known as seller and
buyer.
(Sec 2 (2) A buyer means a person who buys or agrees to buy the goods.
(Sec 2 (12). A seller means a person who sells or agrees to sell goods.
Goods: In order to make a contract of sale, there must be some goods. Goods must be
every kind of Movable property but other than actionable claims, and money.
It includes shares, patents rights, copyrights, trademarks, growing crops,
grass, fruits, minerals, water, electricity etc.
But Immovable property cannot be a subject matter of sales of goods under
this law.

Price Sec. 2 (10): Price means the money consideration for a sale of
goods. Generally it is a consideration paid or agreed
to be paid by a buyer to the seller. However price
may be paid partly in cash or in goods.
.
Transfer of goods: In a contract of sale, the seller must transfer or
agree to transfer the goods to the buyer.
Free consent: A contract of sale must be by the free consent of the
parties. Free consent means the consent should not
be caused by fraud, misrepresentation, undue
influence, coercion, and mistake.
All essential elements of contract are needed.

SALE OR AGREEMENT TO SALE

Sale Sec. 4 (3) : Under a contract of sale the property in the goods is
transferred from seller to the buyer, the contract is called sale.
According to Blackstone: - Sale is a transformation of property
from one man to another in consideration of some prices.
Agreement to sale Sec. 4 (3): Where the transfer of the property in the goods is to take place
at a future time or subject to some conditions thereafter to be
fulfilled, the contract is called an agreement to sell.

Difference between sale and agreement to sale

Basis

Sale

Agreement to sale

Type of
contract

Executed contract

Executory contract.

ownership of
the goods

transferred Immediately

transfer at a future time or on

fulfillment of some conditions

subject matter

existing and specific goods

uncertain or contingent based

on future

risk

passes with the ownership

Lies always with seller

Unpaid seller

sue the buyer for price,.

can sue the buyer for damages.

Basis

Sale

Agreement to sale

Rights of seller
against buyers
breach

Seller can sue the buyer

for the price even though
the goods are in his
possession

Seller can sue the buyer for

damages even though the goods
are in buyers possession

Effect of
insolvency of
seller having
possession of
goods

Buyer can claim the goods

from the official receiver

Buyer cannot claim the goods

even when he has paid the price
because ownership has not
transferred to the buyer. Can
claim only ratable dividend.

Effect of
insolvency of
buyer before
paying the price

Seller must deliver the

goods to the official
receiver because
ownership has been
transferred.

Seller can refuse to deliver the

goods unless he is paid full
price.

Definition and Meaning of goods

According to section 2(7) of this act,

Goods means every kind of movable property
other than actionable claims and money, and it
includes share, stock and growing crops, grass,
and things attached to the land.
Following things are Not included: Actionable claim
Money
Immovable property

Classification of Goods
1.

Existing goods: It is those which are possessed by the seller at the

time of contract of sale. It have following
categories: Specific goods, Ascertained goods

2.

Future goods: It is those which will be manufactured or

produced or acquired by the seller after making of
the contract of sale.

3.
Contingent goods: It is that quality of goods, where there acquisition
is depends on some happening or non happening
of some contingency.

10

Conditions and Warranties

It is matter of common experience that a sales
person while dealing with a prospective buyer makes a
number of statements and representations with
reference to his goods in order to induce the
prospective buyer. Similarly a prospective buyer may
also make certain requirements and expectations
from the goods he intends to buy.
Out of these some are puffing statements and have
no value. But some statements and representations
are very important and both the parties intend to
make them part of the contract of sale.
The statements and representations which are
made part of contract of sale are known as
stipulations.

11

Condition
Sec. 12 (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.
Remedies for Breach of Conditions
1. Buyer can repudiate the contract.
2.The buyer has an option to waive/ surrender the conditions.
3.The buyer can reject the goods.
4.Options to treat conditions as warranty and claim for damages.
5.No remedy when the seller is excused by law.

12

Remedies for Breach of Conditions

1. Buyer can repudiate the contract.
2. The buyer has an option to waive/ surrender the
conditions.
3. The buyer can reject the goods.
4. Options to treat conditions as warranty and claim
for damages.
5. No remedy when the seller is excused by law.

13

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
to a right to reject the goods and treat the
contract as repudiated.
An analysis of the definition revels the following: A warrant is a stipulation in a contract.
The stipulation is collateral to the main purpose
of the contract.

14

Remedies for Breach of Warranty

1. Buyer can sue or claim for damages.
2. Buyer can refuse to pay the price.
3. The buyer may diminish or reduce the price of
goods by the amount of damages.
4. In case where the loss exceeds the price of goods,
the buyer can sue for excess prices against the
seller.

15

Difference between Conditions and Warranties

1.

A condition is a stipulation which is essential to the main

purpose of the contract. On the other side warranty is a
stipulation which is collateral to the main purpose of the
contract.

2.

Condition is essential to the purpose of the contract, its not

performance may be considered as failure to perform the
contract. On the side of warranty, it is not so essential that a
failure to perform it cannot be considered as failure to
perform the contract.

3.

A breach of conditions may be treated as breach of warranty,

but breach of warranty cannot be treated as breach of
conditions.

4.

In the case of breach of condition, the aggrieved party may

treat the contract as repudiated. But in the case of breach of
warranty the aggrieved party cannot repudiate the contract,
but they can claim for claim.

16

When condition to be treated as

warranty

Where the buyer waives a condition, once the buyer

waives a condition ,he cannot insist on its fulfillment.
Where the buyer elects to treat breach of the condition as
a breach of warranty.
Where the contract is not severable and the buyer has
accepted the goods or part thereof , the breach of any
condition by the seller can only be treated as a breach of
warranty. Thus, where the buyer after purchasing the
goods finds that some condition is not fulfilled, he
cannot reject the goods.

Types of Implied Conditions

Following points may be assumed as Implied
Conditions in case of Sale of Goods act 1930: 1.Implied Conditions as to title
2.Sale by Description
3.Sale by sample
4.Condition as to quality or fitness
5.Condition as to merchantable quality
6.Conditions as to wholesomeness

1. Condition as to Title
According to section 14(a) of sale of goods act
1930, that this is an implied condition on that
part of the seller that, buyer can assume : Seller has the right to sell the goods.
In the case of agreement to sell, seller will have
a right to sell the goods at the time when the
property is to pass.

2. Sale by Description
According to sec 15 of Indian sale of
goods act 1930, where some sale is made
by description, in that case buyer has the
right to assume it that the sale quantity
will
definitely
match
with
the
description which was earlier given by
seller, and even he will properly get
chance to match the goods.

3. Sale by Sample
Sec. 17 of Indian sale of goods act
simplifies that, in case of sale when it is
done on the basis of some sample, buyer
has the right to assume the implied
condition that the bulk which is
purchased by him is definitely according
to quality and description of sample,
which was earlier shown to him.

5. Conditions of Merchantable quality

Section 16(2) of Indian sale of goods act
deals that this is implied condition to buyer that
whatsoever he is going to buy he will get surely
merchantable quality of goods from seller.
The expression merchantable quality
means that the quality and conditions of the
goods must be such that a man of ordinary
prudence would accept them as the goods of
that description and it has purely some resale
value.

6. Conditions as to Wholesomeness
In case of eatables or provisions or
foodstuffs, there is an implied condition
as to wholesomeness. It means that the
goods
shall
be
fit
for
human
consumption.

Implied Warranties

1. Warrant as to quiet possession

According to section 14(b), there is an implied
warranty that the buyer shall have and enjoy quiet
possession of the goods. The reach of this warranty
gives a right to claim damages from the seller.
Example: S sold a second hand radio to Y who spends Rs 100
on the repairs of this radio. This Radio was seized
by the police as it was a stolen one. Y filed a suit
against X for the recovery of damages for breach of
warranty of quite possession including the cost of
repairs. It was held that Y was entitled to recover
the same.

2. Warranty of Freedom from Encumbrances

Section 14(c) simplifies that there is an implied
warranty that the goods are free from any charge or
encumbrance in favor of any third person if the
buyer is not aware of such charge or encumbrance,
the breach of this warrant gives buyer a right to
claim damages from the seller.
Example: X borrowed Rs 500 from Y and hypothecated his
Radio with y as security. Later on X sold this Radio
to Z who bought in good faith. Here Z can claim for
damages from X because his possession is disturbed
by Y having a charge.

Unpaid Seller and his Rights

Meaning of Unpaid Seller

A seller will be deemed as unpaid seller, in the
following given conditions: 1. When the whole sale price has not paid to him, in
the case of cash sale.
2.When the sale was made on the basis of credit for a
specific tenure and that period has been
completed, still amount is unpaid to seller.
3.When the sale has been made on the basis of some
negotiable instruments like bill of exchange,
cheque etc, and the main condition of these
instruments has not been fulfilled by the buyer, so
here also seller will deemed as unpaid.

Various Rights of Unpaid Seller

Generally in that case where seller is
deemed or actually unpaid he has
following two categories of rights: 1.Against the Goods
2.Against the Buyer

Right of Unpaid Seller against the

Goods

1. Right of Lien

(Section 47, 48 & 49)

It is the right to retain the possession of goods until the

full price is received, where: The goods have been sold without any stipulation as to
credit sale.
Where the goods have been sold on credit, but the term
of credit has expired.
The right of lien is always based on the possession of
the goods not even with the title of the goods. This right
will not be affected if the title has been transferred to
buyer but still goods are in the possession of the unpaid
seller.

Termination of Right of Lien

In following cases unpaid seller will lose the
right of lien
When he delivers the goods to a carrier or
transport for transmission to the buyer.
Where the buyer or buyers agent has lawfully
obtains the possession of the goods.
Where buyer has paid the remaining price to
unpaid seller.

2. Right of Stoppage of Goods in Transit

It 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. Generally this right occurs when unpaid seller
has shifted his goods to some carrier or transportation for the
purpose of delivery to buyer, and now he need to retain back
the goods under his possession. Commonly this right is
available when buyer becomes insolvent or bankrupt and still
seller is unpaid.
According to section 50 of Indian sales of goods act, following
conditions should be fulfilled if unpaid seller wants to exercise
this right: The seller must have parted with the possession of goods, i.e.
the goods must not be in the possession of seller.
The goods must be in the course of transit.
The buyer must have become insolvent.

Difference between
Right of Lien & Right of stoppages in transit
1. In case if right of lien, it can be exercise, when goods
are in actual possession of the unpaid seller. But on
the side of stoppage of goods in transit, the goods
should be in the possession of carrier or
transportation.
2. In case of right of lien, this is not required that buyer
should declared himself as an insolvent, but in case
of right of stoppage of goods in transit, insolvency of
the buyer is the main criteria.
3. The purpose of the right of lien is to retain the
possession of goods. But in case of right of stoppage
of goods in transit, purpose is to regain the
possession of goods from the carrier or transport.

3. Right of Resale the Goods

Section 54 of Indian sale of goods act is entitled unpaid
seller to resell the goods in following given conditions: 1. When the goods are of perishable nature, there seller
can resale it without giving any notice to buyer.
2. In case of other goods, after giving a notice of
reasonable times to the buyer for intention of resale the
goods.
3. Where the seller has expressly received the right of
resale in contract, in that cases no notice is required to
deliver to buyer.
4. In case of finder of lost goods the finder can resale it, if
he has tried his hard to locate the original owner.

Right of Unpaid Seller against the Buyer

1. Suit for price: According to section 55(1), where buyer
wrongfully neglects to pay the price to seller, and
already goods has been transferred by the seller
to him, in that case seller can make a suit against
the buyer for the price of goods.
2. Suit for damages for non-acceptance: According to section 56, where the buyer has
wrongfully neglects or refuses to accept the goods
and pay for the goods, the seller may sue him for
damages for non acceptance of the goods.

3. Suit for damages for repudiation of contract: Section 60 of Indian sale of goods act, simplifies
that where buyer repudiates the contract before
the date of delivery, in that case seller may also
the right to repudiate from contract, and even he
can make a claim against the buyer for specific
damages.
4. Suit for interest: According to section 60, unpaid seller has also a
right to make a claim against buyer for special
damages regarding interest on amount of unpaid
sales.

37

Transfer of property
Transfer of possession of goods
Transfer of ownership of goods
Transfer of property means the transfer of
ownership of the goods from the seller to buyer.
Ownership passes fro the seller to buyer is
important for the following reasons:
Risk of loss
Only owner can sue
Insolvency of buyer or seller
Suit for price

38

Time when property passes

It is open to the parties to fix any time when
property may pass from seller to buyer. When
the parties express their intention clearly no
problem arises. Certain rules are laid down in
the Act for determining when property passes in
a contract of sale.
In case of unascertained goods
In case of ascertained goods

39

In the case of unascertained goods

Section 18 provides that 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. A contract to sell
unascertained goods is not a complete sale, but
agreement to sell.
An agreement to sell 50 kgs out of a large
quantity of rice in a godown does not make the
buyer the owner of anything. He can become
owner of 50 kgs of rice only after this quantity of
rice has been separated out from other rice in the
godown.

40

In the case of ascertained goods

Where there is a contract for 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.

41

Rules as regards passing of

property
In many cases, the intention of parties cannot

be

judged as to pass the property, so the rules for

that are:
Specific goods in deliverable state: In it the
property passes to the buyer when the contract is
made. Deliverable state means they are in such a
state that the buyer would under the contract be
bound to take delivery of them.
B offers sell A his horse for Rs. 1000.A accepts
the offer. The horse becomes Bs property as soon
as the offer is accepted.

42

Specific goods not in a deliverable

state

Section 21 lays down that 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." Something means Collecting,
packing, loading or filling in containers etc.
There was a contract for the sale of machine. A part
of machine was destroyed while being removed. It
was held that the buyer was entitled to refuse to take
the machine as it was not in deliverable state.

43

When the goods have to be

measured, tested etc.
Section 22 lays down that 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(some act requires to be done by the seller for
ascertaining the price, such as weighing, measuring etc.
Eg. A the owner of a wagon of hay contracts to sell it to B. It
was to be weighted and delivered at Rs 1000 per ton. B
agrees to it. A part is weighted and delivered to B, the
ownership of the residue is not transferred to B until it has
been weighted.

44

Unascertained goods and its

appropriation
Section 23 lays down with the question of
passing of property in the case of a contract for
sale of unascertained goods by descripation.