The document discusses the key aspects of the law of sales of goods in Sri Lanka. It contains 3 main points: 1. It defines what constitutes a contract of sale of goods and distinguishes it from a contract for the sale of goods. A contract of sale involves the immediate transfer of title, while a contract for sale involves transfer of title at a future time or when conditions are met. 2. It outlines the essential elements and implied conditions in a valid contract for the sale of goods based on the Sales of Goods Ordinance, including requirements around title, description, fitness for purpose, and quality. It also discusses exceptions to the caveat emptor rule through implied warranties. 3. It

1. By:Mr.M.R.M.Nowfeek
MCS(SL),MSc in IT, PGD in IT, BSc in MIT, BSc in IT, HNDE, BTEC ,ICDL,DICAP
Certified Facilitator :IPICT/ASAP/EPASS
Dip in ICT , Dip in IT , Dip in Hardware & Networking
Higher Diploma in Business
Management
BM103-Business Law

2. Law of Sales of Goods
• The law related to Sales of goods contained in Sales of
Goods Ordinance No 11 of 1896 also the other requirements
applied for the contracts is apply for sales of goods contract.
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3. Law of Sales of Goods
• Unless otherwise agreed between the parties, the Seller shall hand
over the goods in exchange for the price and the Buyer shall pay the
price in exchange for the goods. Much of the Sale of Goods Act is
codified in the Sale of Goods Act 1979, as amended by the Sale and
Supply of Goods to Consumers Regulations 2002.
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4. What is a contract of sales of goods?
• Sales of goods Ord. Sec.2 (1) define ‘A contract of sale of goods is
a contract where by the seller transfers or agrees to transfer the
property of goods to the buyer for a money consideration, called
the price’.
• According to the above definition there are two types of contracts
have governed by the Sales of goods ord.
• a) Contract of sale
• b) Contract for an agreement to sell
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5. a) Contract of sale
• A contract of sale refers to the transfer of property in goods from the
seller to the buyer which takes place at the time of the contract
without conditions or under certain conditions at some time in the
future. Under the Sale of Goods Act 1979, a contract of sale includes
a sale and an agreement to sell.
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6. b) Contract for an agreement to sell
In an agreement to sell, the contract clearly states the price a buyer
agrees to pay for either goods or the fulfillment of some kind of
condition stipulated.
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7. Distinguish the Contract of sale and contract
for an agreement to sell
I. under a contract of sale at the moment they create the contract ,
the title in goods is passed from the seller to the buyer the
contract is called a 'sale' S.2 (3).
II. Where the transfer of the title of the goods is to take place at a
future time or subject to some condition later to be fulfilled the
contract is called an 'agreement to sell'.S.2(3).
III. An agreement to sell becomes a sale when the time elapses or the
conditions subject to which the property in the goods is to be
transferred are fulfilled S.2(4)
Therefore, if the property in the goods is to transfer from the seller to
the buyer at the time when contract is entered into; the contract is
called a 'sale', where however if the parties agree to transfer the
property in goods later or subject to some conditions thereafter to be
fulfilled, the transaction is treated as an 'agreement to sell'.
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8. Essentials of valid contract of Sale
1.All the requirements of a valid contract must be fulfilled
2.There must be a seller and a buyer
• According to S.59 (1) 'seller' means, a person who sells or agrees to sell goods,
'buyer' means, a person who buys or agrees to buy goods.
3.There must be goods as a subject matter
• According to S.59 (1) 'goods' include all movables except money. The term
includes growing crops and things attached to or forming part of the land which
are agreed to be severed before sale or under the contract of sale
• Goods can divided as existing goods (These are goods owned or possessed
by the seller at the time of making the contract) and future goods (These are
goods which are not in existence at the time of the contract is made but they are
goods to be manufactured or acquired by the seller after the making of the
contract of sale.)
• The existing goods can divide as specific goods and unascertained goods
4.The title of the goods must be transferred to the buyer
5.There must be a consideration called the price.
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9. Caveat Emptor rule and implied conditions
and warranties of the sales of goods contract
• Caveat Emptor means ‘buyer beware’. It is an established principle
that the buyer should be careful and responsible for his conduct
when he buys a good. He should check the goods and buy them and
the seller is not liable for the defects in the good. This is a common
law rule.
• But there are some exceptions to be found in the act itself.
• These exceptions are found in the form of implied conditions of the
sales of goods contract. There are 06 implied conditions.
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10. 1. Implied condition regarding title -Section 13 (a)
• There is an implied condition on the part of the seller that in the case
of a sale he has a right to sell the goods, and that, in the case of an
agreement to sell, he will have a right to sell the goods at the time
the property is to pass
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11. 2. Goods shall correspond with the description-
Section 14
• Where there is a contract for the sale of goods by description, there
is an implied condition that the goods shall correspond with the
description. Goods are said to be sold by description when they are
described in the contract either by the buyer or by the seller and the
buyer contracts in reliance of the description.
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12. 3. Goods shall correspond with sample &
description –Section 14
• If the sale is doing by sample as well as by description, the good
should correspond not only with the sample but also with the
description
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13. 4. The goods should fit to the purpose –Section
15(1)
• Where the buyer expressly or impliedly makes known to seller the purpose for
which the goods are required and thus showing that he relies on the seller's skill
or judgment, there is an implied condition that the goods shall be reasonably fit
for such purpose.
• The principal requirements for the application of this condition may be analysed
as follows:
• a. The buyer should have either expressly or impliedly informed the
• seller the particular purpose for which he required the goods.
• b. The seller is aware that the buyer has relied on the seller's skill
• and judgment.
• c. It is the general business of the seller to sell goods of that type. But
• it is not necessary that the goods should be manufactured by him.
• d. If the buyer relies partly on his own judgment and partly on that of
• the seller, this condition is implied when his reliance on the seller
• was substantial and effective.
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14. 5. Goods should be in merchantable quality -
Section 15 (2)
• Where goods are bought by description from a seller who deals in
goods of that description (whether he is the manufacturer or not)
there is an implied condition that the goods shall be of a
merchantable quality.
• By merchantable quality, it is meant that they must be fit for the
purpose for which goods of that kind are commonly bought and it
must be free from any defect which is not apparent on the
reasonable examination of the good.
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15. 6. Goods shall correspond with sample – Section
16
• In a contract for sale by sample there is an implied condition that ,
• a)The bulk shall correspond with the sample in quality- ESS Ruben ltd
Vs.Fair Brothers
• b)The buyer shall have a reasonable opportunity of comparing the
bulk with the sample
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16. Implied Warranties contained in Sales of Goods
Ord.
• 1. The buyer shall have right to enjoy quiet possession of the
goods, therefore if somebody oppose to his possession he can file an
action -Section 13 (b)
• 2. The goods shall be free from any charge or encumbrance in
favor of any third party
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17. Unfair Contract Terms Act No.26 of 1997
• According to this act any exemption clause purporting to exclude or
restrict liability arising from sections 13, 14, 15, and 16 of the Sale of
Goods Ordinance is void and of no effect as against a person dealing
as a consumer. But such exemption clause shall have effect against a
person who is not a consumer. This means if the buyer is a consumer
and not a trader then the implied conditions found in the Sale of
Goods Ordinance cannot be excluded from the contract even though
the buyer and seller expressly agree to avoid them.
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18. Rights of a Seller and a Buyer
• Rights of an unpaid Seller
• Who is an unpaid seller?
• An unpaid seller means a person to whom the whole price has not
been paid or tendered or who has been paid by means of a bill of
exchange c which is subsequently
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19. Rights over the goods
• I . Power of Lien –S 40
• Lien means the right to keep the goods as security for his payment. The
• right of lien is available only to an unpaid seller who is in possession of
• the goods. The exercise of the lien would permit the unpaid seller to
• retain possession until payment or tender of the price. Also Lien can be exercised
when the possession of goods is with the agent of the seller.
According to S.40 a lien over the goods is available where-
(i) The goods have been sold without any stipulation as to credit
(ii) The goods have been sold on credit but the term of credit has expired; and
(iii) The buyer has become insolvent
• The power of lien has loss in the following instances
• a. When he delivers the goods to a carrier or the purpose of transmission to the
buyer without reserving the right of disposal of the goods.
• b. When the buyer or his agent lawfully obtains possession of the goods .
• c. By waiving of right of lien.
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20. Right of stoppage in transitive
• If the seller is unpaid, he is entitled to resume possession of the goods if they are
still in transit and may retain the same until payment or tender of the price.
• This remedy is available to an unpaid seller who has parted with the possession
of the goods but the goods are still in transit and have not yet reached the buyer.
However it must be noted that this remedy is available only if, the buyer has
become insolvent
• According to S.44 (1) goods would be deemed to be in the course of transit from
the time when they are delivered to a carrier by land or water or other bailee for
the purpose of transmission to the buyer until the buyer or the buyer's agent
takes delivery of them from the carrier or other bailee. If however the buyer or
his agent obtains delivery before the goods arrive at the appointed destination
the transit would end.
• According to section 43 three conditions have to be satisfied before the seller
exercises his right of stoppage in transitu
• (a) The seller must be unpaid
• (b) The buyer must be insolvent
• (c) The goods must be in course of transit
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21. iii.Right of Resale
• According to S.47 the unpaid seller is entitled to re sell the goods to
an outsider, in the following circumstances
• (i) If the goods are of a perishable nature; or
• (ii) Where the seller has given notice to the buyer of his intention to
re sell and even after such notice if the buyer does not pay within a
reasonable time.
• (iii) The seller has expressly reserved the right to re sell in the original
contract of sale if he is not paid.
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22. 2. Rights against the buyer
i. Action for the price – S.48
ii. Action for damages for non-acceptance –S.49
Rights of the buyer who did not received the goods
i. Damages for non-delivery -S. 50
ii. Decree of specific performance -S 51
iii. Remedy for breach of warranty -S 52
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24. Questions?
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