Sale Of Goods Act, 1930Came into force on 1st July 1930It extends to the whole of India [except the State ofJammu and Kashmir].Section4(1) defines contract of sale as under A contract of sale of goods is a contract wherebythe seller transfers or agrees to transfer theproperty in the goods to the buyer for a price.
The essentials of a valid contract of sale:1.Two parties2.The seller should transfer the property in the goods to thebuyer3. The subject matter of the contract is ‘goods’Sec 2(7) "goods" means every kind of movable propertyother than actionable claims and money; and includes stockand shares, growing crops, grass, and things attached to orforming part of the land which are agreed to be severedbefore sale or under the contract of sale4. The transfer of property in the goods from seller to thebuyer is for consideration known as price.5.Includes both sale and agreement to sell6.No formalities to be observed.
“buyer" means a person who buys or agrees tobuy goods. "seller" means a person who sells or agrees tosell goods ."price" means the money consideration for a saleof goods.
Classification of goods1.Existing goods: are such goods as are owned orpossessed by the seller at the time of making of contract.These goods are of three types specific goods- these are the goods which are actuallyidentified and agreed by the parties at the time of contractof sale. Unascertained goods- not specifically identified orascertained at the time of contract of sale.
2.“Future goods“: means goods to bemanufactured or produced or acquired by the sellerafter making of the contract of sale;3.Contingent goods-The acquisition of goods by the seller depends uponthe uncertain contingencies .
Agreement to sell“Where under a contract of sale the transfer ofproperty in the goods is to take place at a future timeor subject to some condition thereafter to be fulfilled,the contract is called agreement to sell”
Sale and Agreement to sellProperty in the goods is transferred from the seller to the buyer- saleTransfer of the property in the goods is to be taken place at some future date or after fulfillment of some condition, -AGREEMENT TO SALE 8
Difference between Sale and agreement to sellTransfer of ownershipRisk of lossConsequences of breachRight of sale.Insolvency of buyer before he pays for the goodsInsolvency of seller if the buyer has already paidthe price.Section 26, the goods are at the risk of the personwho is their owner at the relevant time
Earnest money:Money deposited with the seller by the buyer assecurity for due fulfillment of the contract .Stipulations as to time:1.Stipulations relating to time of delivery of goods2. Stipulations relating to time of payment of theprice.
Effect of goods perishingPerishing is not just physical destruction of the goods,but it covers :(a)Damage to goods so that the goods have ceased toexist in the commercial sense(b)Loss of goods by theft(c)Where the goods have been lawfully requisitioned bythe government- Perishing of specific and ascertained goods effect thecontract of sale.
1.Goods perishing before making of contractwhere there is a contract for the sale of specific goods, the contract is void if the goods without the knowledge of the seller have, at the time when the contract was made, perished or become so damaged as no longer to answer to their description in the contract.
2) Goods perishing before sale but after agreement tosaleWhen there is an agreement to sell specific goodsand subsequently the goods without any fault on thepart of the seller or buyer perish or become sodamaged as no longer to answer their description inthe agreement before the risk passes to the buyer,the agreement is thereby avoided.
Condition And Warranty Condition: Condition is a stipulation essential to the main purpose of the contract, the breach of which gives the aggrieved party a right to repudiate the contract itself. - can maintain a action for damages. Warranties: is a stipulation collateral to the main purpose of the contract, the breach of which gives the aggrieved party a right to sue for damages only. Cannot avoid the contract
Difference1. As to value2. As to breach3. As to treatment
When breach of condition can be treated as breach of warranty1.Voluntary waiver by buyer2.Acceptance of goods by the buyerMeaning of acceptance: Taking possession or delivery of the goods does not by itself amount to acceptance.1. When he intimates to the seller that he has accepted them2. When he does any act in relation to goods which is inconsistent with the ownership of the seller.3. When, after the lapse of reasonable time he retains goods without intimating the seller that he has rejected them.
EXPRESS AND IMPLIED CONDITIONS AND WARRANTIESCondition and warranty may be either express or implied.- They are said to be express when at the will of the parties they are inserted in the contract.- They are said to be implied when the law presumes their existence in the contract automatically.
IMPLIED CONDITIONS 1. Condition as to title: In a contract of sale, unless the situation of the contract are such as to show a different intention, there is an implied condition on part of the seller that— In sale, he has right to sell goods. In agreement to sell, he will have a right to sell at the time when property is to pass. 18
Condition in a Sale By Description In sale by description there is an implied condition that the goods shall correspond with description. This means “if you contract to sell peas, you cannot oblige the party to take beans.” Hence if the description of the article tendered is different then the buyer may not buy the goods. 19
Condition in a Sale By Sample A contract of sale is a contract for sale by sample where there is a term in the contract, express or implied, to that effect.1. That bulk shall correspond with the sample in quality.2. That the buyer shall have a reasonable opportunity of comparing the bulk with the sample.3. That the goods shall be free from any defects, rendering them unmerchantable. 20
Condition in a Sale by Description and Sample If the sale is by sample as well as by description, it is not sufficient that the bulk of goods corresponds with the sample, if the goods do not also correspond with the description. This means goods must match with the description and sample. 21
Condition As To Quality Or Fitness Normally, in a contract of sale there is no implied condition as to quality or fitness for particular purpose. The buyer must test the goods before he buys them in order to satisfy him self that the goods shall be suitable for him. 22
Condition Of Merchantability Where goods are bought by description from a seller who deals in goods of that description there is an implied condition that the goods are of merchantable quality. This means goods should be such that they are commercially saleable, as per the description by which they are known in the market at their full value. 23
Condition As To Wholesomeness In the case of eatables and provisions, in addition to the implied condition as to merchantability, there is another implied condition that the goods shall be wholesome. 24
Implied warranties1.Warranty of quiet possession:In a contract of sale, unless there is a contrary intention, there is an implied warranty that the buyer shall have and enjoy quite possession of the goods.If the buyer is in any way disturbed in the enjoyment of the goods in consequence of the seller’s defective title to sell, he can claim damages from the seller. 25
2.Warranty Of Freedom From EncumbrancesIn addition to the previous warranty, the buyer is entitled to a further warranty that the goods are not subject to any charge or right in favor of a third party.Ifthe possession is in any way disturbed by reason of the existence of any charge or encumbrances on the goods in favor of any third party, he shall have a right to claim damages for breach of this warranty. 26
3.Warranty To Disclose Dangerous NatureOf Goods.When a person sells goods knowing that the goods are inherently dangerous or they are likely to be dangerous to the buyer and that the buyer is ignorant of the danger, he must warn the buyer of the probable danger, other wise he will be liable in damages. 27
CAVEAT EMPTOR This means “LET THE BUYER BEWARE” i.e., the seller is under no duty to reveal unflattering truths about the goods sold. Therefore,when a person buys some goods, be must examine them thoroughly. Ifthe goods turn out to be defective or do not suit his purpose or he depends upon his own skills and makes a bad decision, he cannot blame the seller. 28
EXCEPTIONS TO CAVEAT EMPTORSeller makes a misrepresentationSeller makes a false representation amounting to fraudWhere the goods purchased by description but theydont correspond with the descriptionWhere the goods are not of merchantable qualityBulk does not correspond with the sample.Where the buyer relies on sellerTrade usages
Performance of the contract of sale Itis the duty of the seller to deliver the goods Buyer to accept and pay for them Performance of the contract of sale implies the delivery of goods by the seller and acceptance of the delivery of goods and payment of price by the buyer
Delivery Delivery of goods means voluntary transfer of possession of goods from one person to another.Modes of delivery:1.Actual delivery2.Symbolic delivery3.Constructive delivery
Rules as to delivery of goods1.Delivery may be either actual, symbolic or constructive 2. Delivery and payment are concurrent conditions 3.Effect of part delivery, when property in goods is to pass on delivery4.Buyer to apply for delivery5.Time of delivery6.Place of delivery
7.Delivery of goods where they are in possession of a third party8.Expenses on delivery9.Delivery of wrong quantity or different quality10.Installment deliveries11.Delivery to carrier or wharfinger12.Liability of buyer for neglecting or refusing to take delivery of goods.
unpaid seller Section 45 of sales Act defines unpaid seller as“ the seller of the goods deemed to be an unpaid seller within the meaning of this act a) when the whole of the price has not been paid or tenderedb) 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 dishonor of the instrument or otherwise.
Rights of unpaid seller Against the goods Against Where the the seller Where the personally property in property the goods in the has not goods has passed passed Stoppage With in transit Stoppage holdingLien in transit delivery Re sale Suit for Repudiation Suit forSuit for price damages of contract interest 35
Rights of unpaid seller1) Against the goods2) Against the buyer personallyAgainst the goodsa) Where the ownership is transferred to the buyerb) where the ownership is not transferred to the buyer
Where the ownership is transferred Right of lien Right of stoppage in transit Right of resale
Right of Lien“The unpaid seller of the goods who is in possession of them, is entitled to retain his possession until the payment or tender of the price in following cases namely:a) Where the goods have been sold without the stipulation as to creditb) where the goods have been sold on credit , but the term of the credit has expiredc) where the buyer becomes insolvent”
When lien is lost? By delivery of goods to the carrier By delivery of goods to the buyer By waiver of lien By the tender of price by the buyer
Right of stoppage in transit It is defined as the state of transmission of goods It means the stopping of goods while they are in the course of transit This right can be exercised if the following conditions are satisfied:a) The buyer has become insolventb) the goods are in the course of transit, but not reached the possession of the buyerc) the unpaid seller can exercise this right only for the payment of the price of the goods
Duration of Transit This is the period between the commencement and the end of transit. The transit commences from the time when the goods are delivered to the middleman and it continues till the buyer or his agent takes the delivery of the goods. If the goods are rejected by the buyer and the carrier continues to have the possession of the goods, the transit does not cone to an end.
If the goods are delivered to a ship chartered by the buyer and the circumstances show that the carrier is acting as an agent of the buyer , then transit comes to an end. When the goods are delivered in parts , the seller may stop the remainder of the goods unless the delivery of the part of the goods shows an intention to give up the possession of the goods.
Modes of exercising the righta)By taking actual possession of the goodsb) By giving notice to the carrier to stop the goods and redeliver them to the seller or according to his directions
Right of resale Is one of the valuable right given to an unpaid seller. If the buyer fails to pay or offer the price within a reasonable time , the unpaid seller has the right to resell the goods in the following circumstances: Where the goods are of perishable nature Where he has exercised his right of lien and stoppage and gives a notice to the buyer of his intention to resell the goods. where the seller has expressly reserved his right of resale
Right wherein the ownership of the goods is not transferredRightof withholding the delivery of the goods sold
Right against the buyer Suit for price Suit for damages Suit for interest Suit for repudiation of contract