SALES OF GOODS ACT Introduction This Act came into force on first July 1930. The provisions of this Act extends to the whole of India except the state of J&K. certain minor amendments where made in this Act in 1963
Transfer of property (ownership): - In a ‘sale’ the property in goods passes to the buyer immediately at the time of making the contract In ‘an agreement to sell’ there is no transfer of property to the buyer at the time of the contract.
Risk of loss. The general rule is that unless otherwise agreed, the risk of loss prima facie passes with property (Sec. 26). Thus in case of sale, if the goods are destroyed the loss falls on the buyer even though the goods may never have come into his possession because the property in the goods has already passed to the buyer. On the other hand, in case of an agreement to sell where the ownership in the goods is yet to pass from the seller to the buyer, such loss has to be borne by the seller even though the goods are in the possession of the buyer.
Consequences of breach: - In case of sale, if the buyer wrongfully neglects or refuses to pay the price of the goods, the seller can sue for the price, even though the goods are still in his possession. In case of an agreement to sell, if the buyer fails to accept and pay for the goods, the seller can only sue for damages and not for the price, even though the goods are in the possession of buyer.
Right of resale : - In a sale, the property is with the buyer and as such the seller (in possession of goods after sale) cannot resell the goods. If he does so, the subsequent buyer having knowledge of the previous sale does not acquire a title to the goods. The original buyer can sue and recover the goods from the third person as owner, and can also sue the seller for the breach of contract as well as for the tort of conversion. The right to recover the goods from the third person is, however, lost if the subsequent buyer had bought them bonafide without notice of the previous sale (Sec. 30).
5. Insolvency of buyer before he pays for the goods: - In a sale, if the buyer is adjudged insolvent before he pays for the goods, the seller, in the absence of a ‘right of lien’ over the goods, must deliver the goods to the Official Receiver or Assignee. The seller is entitled only to a ratable dividend for the price of the goods. But in an agreement to sell, in these circumstances, the seller may refuse to deliver the goods to the Official Receiver or Assignee unless paid for, as ownership has not passed to the buyers.
6. Insolvency of seller: - If the buyer has already paid the price In a sale, if the seller is adjudged insolvent, the buyer is entitled to recover the goods from the Official Receiver or Assignee, as the property in the goods rests with the buyer. On the other hand, in an agreement to sell, if the buyer has already paid the price and the seller is adjudged insolvent, the buyer can only claim a ratable dividend (as a creditor) and not the goods because property in them still rests with the seller
Ownership is transferred from the seller to the buyer as soon as the contract is entered into. Ownership is transferred from the seller to the hire-purchaser only when a certain agreed number of installments are paid.
The position of the buyer is that of the owner. The position of the hire-purchaser is that of the bailee.
The buyer cannot terminate the contract and as such is bound to pay the price of the goods. The hire-purchaser has an option to terminate the contract at any stage, and cannot be forced to pay the further installments.
If the buyer makes the payment in installments, the amount payable by the buyer to the seller is reduced, for the payment made by the buyer is towards the price of the goods. The installments paid by the hire-purchaser are regarded as hire charges and not as payment towards the price of the goods till option to purchase the goods is exercised.