Sales of goods act, 1930

SALES OF
GOODS ACT,
1930
-SHIVANI SHARMA
-ASSISTANT PROFESSOR
-SARADR PATEL SUBHARTI INSTITUTE OF

• Until July 1930, the law of sale of goods in India was
governed by chapter VII of the Indian Contract Act,
1872 (sections 76 to 123).
• It was eventually found that the Law contained within
the Indian Contract Act was not adequate to meet the
needs of the community and that, in the light of the new
developments made in mercantile laws, some of the
provisions of this branch of law required alterations.
• Consequently, the Sale of Goods Act was passed in
1930, based upon the English statute of Sale of Goods,
1893.

Buyer and seller
• The Sale of Goods Act, 1930 herein referred to as the
Act, is the law that governs the sale of goods in all
parts of India.
• As per the sec 2(1) of the Act, a buyer is someone
who buys or has agreed to buy goods. Since a sale
constitutes a contract between two parties, a buyer is
one of the parties to the contract.
• The Act defines seller in sec 2(13). A seller is
someone who sells or has agreed to sell goods.

Cont…
• For a sales contract to come into existence, both the buyers
and seller must be defined by the Act.
• These two terms represent the two parties of a sales
contract.
• A faint difference between the definition of buyer and seller
established by the Act and the colloquial meaning of buyer
and seller is that as per the act, even the person who
agrees to buy or sell is qualified as a buyer or a seller.
• The actual transfer of goods doesn’t have to take place for
the identification of the two parties of a sales contract.

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”

GOODS
EXISTING
SPECIFI
C
ASCERTAINE
D
UNASCERTAINE
D
FUTUR
E
CONTINGEN
T

Existing Goods
• The goods that are referred to in the contract of sale are termed
as existing goods if they are present (in existence) at the time of
the contract. In sec 6 of the Act, the existing goods are those
goods which are in the legal possession or are owned by the
seller at the time of the formulation of the contract of sale. The
existing goods are further of the following types:
1. Specific
2. Ascertained
3. Unascertained

Cont…
A) Specific Goods
• According to the sec 2(14) of the Act, these are those goods that are
“identified and agreed upon” when the contract of sale is formed. For
example, you want to sell your mobile phone online. You put an
advertisement with its picture and information. A buyer agrees to the
sale and a contract is formed. The mobile, in this case, is specific
good.
B) Unascertained Goods:
• These are the goods that have not been specifically identified but
have rather been left to be selected from a larger group. For
example, from your 500 apples, you decide to sell 200 apples but
you don’t specify which ones you want to sell. A seller will have the
liberty to choose any 200 apples from the lot. These are thus the
unascertained goods.

Cont…
C) Ascertained Goods:
• This is a type not defined by the law but by the judicial
interpretation. This term is used for specific goods which
have been selected from a larger set of goods. For
example, you have 500 apples. Out of these 500
apples, you decide to sell 200 apples. To sell these 200
apples, you will need to separate them from the 500
(larger set). Thus you specify 200 apples from a larger
group of unspecified apples. These 200 apples are now
the ascertained goods.

Future Goods
• In sec 2(6) of the Act, future goods have been defined as
the goods that will either be manufactured or produced or
acquired by the seller at the time the contract of sale is
made. The contract for the sale of future goods will never
have the actual sale in it, it will always be an agreement to
sell.
• For example, you have an apple orchard with apples in it.
You agree to sell 1000 apples to a buyer after the apples
ripe. This is a sale that has to occur in the future but the
goods have been identified already and the agreement
made. Such goods are known as future goods.

Contingent Goods
• Contingent goods are actually a subtype of future
goods in the sense that in contingent goods the actual
sale is to be done in the future. These goods are part
of a sale contract that has some contingency clause in
it. For example, if you sell your apples from your
orchard when the trees are yet to produce apples, the
apples are a contingent good. This sale is dependent
on the condition that the trees are able to produce
apples, which may not happen.

Delivery of Goods [Sec-2(2)]
• The delivery of goods signifies the voluntary transfer
of possession from one person to another.
• The objective or the end result of any such process
which results in the goods coming into the possession
of the buyer is a delivery process.
• The delivery could occur even when the goods are
transferred to a person other than the buyer but who
is authorized to hold the goods on behalf of the buyer

Cont…
There are various forms of delivery as follows:
1. Actual Delivery: If the goods are physically given into the
possession of the buyer, the delivery is an actual delivery.
2. Constructive delivery: The transfer of goods can be done even
when the transfer is effected without a change in the possession or
custody of the goods. For example, a case of the delivery by
attornment or acknowledgment will be a constructive delivery. If
you pick up a parcel on behalf of your friend and agree to hold on
to it for him, it is a constructive delivery.
3. Symbolic delivery: This kind of delivery involves the delivery of a
thing in token of a transfer of some other thing. For example, the
key of the godowns with the goods in it, when handed over to the
buyer will constitute a symbolic delivery.

Documents of Title of Goods
• From the Sec 2(4) of the act, we can say that this
“includes the bill of lading, dock-warrant, warehouse
keeper’s 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 authorizing or purporting to authorize, either
by endorsement or by delivery, the possessor of the
document to transfer or receive goods thereby
represented.”

Other Definitions
Mercantile Agent [Section 2(9)]
• Mercantile agent is someone who has authority in the
customary course of business, either to sell or consign goods
under the contract on behalf of the one or both of the parties.
Examples include auctioneers, brokers, factors etc.
Property [Section 2(11)]
• In the Act, property means ‘ownership’ or the general property
i.e. all ownership right of the goods. A sale constitutes the
transfer of ownership of goods by the seller to the buyer or an
agreement of the same.

Cont…
Insolvent [Section 2(8)]
• The Act defines an insolvent person as someone who ceases 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.
Price [Section 2(10)]
• In the Act, the price is defined as the money consideration for a
sale of goods.
Quality of Goods [Sec 2(12)]
• In Sec 2(12) of the Act, the quality of goods is referred to as
their state or condition.

Concept of Sale As a Contract
• A sales contract is an agreement between a
buyer and seller covering the sale and delivery of
goods, securities, and other personal property.
• International sales contracts fall under the United
Nations Convention on Contracts for the
International Sale of Goods (CISG), also known
as the Vienna Sale Convention.

Cont…
• Agreement of Sale or the agreement to sell becomes a sale when certain
conditions are met.
• Section – 4 - A contract is a formal or verbal agreement that is
enforceable by law. Every contract must have an agreement but every
agreement is not a contract.
• The section 4(1) of the Sale of Goods Act, 1930 states that –
‘A contract of sale of goods is a contract whereby the seller either transfers
or agrees to transfer the property in goods to the buyer for a decided price.’
• In Section 4(4) of the Act, it is maintained that for an agreement of sale to
become a sale, the time has to elapse or the conditions have to be
fulfilled subject to which the property in the goods is to be is to be
transferred.

Sale
• Here the property in goods is transferred at once to the buyer from
the seller.
• The Section 4(3) of the Act says that “where under a contract of sale
the property in the goods is transferred from the seller to the buyer,
the contract is then known as a sale.”
• A sale is carried out on deliverable goods.
• Goods are said to be in a deliverable state when they are in such a
condition that the buyer would, under the contract, be bound to take
delivery of them [Section 2(3)].
• The transfer of goods may be affected directly, after the fulfillment of
a contingency or to a party authorized by the seller

Agreement to Sale
• We saw that in a sale the property in the goods is
transferred from the seller to the buyer.
• However, in an agreement to sell, the ownership of the
property in goods is not transferred immediately.
• The objective of the agreement is to transfer the goods at a
future date, once some contingent clauses in the
agreement or certain conditions are satisfied.
• The Act in Section 4(3), defines what an agreement to sell
is.

Cont…
• The section 4(3) of the sale of Goods Act defines it as, “where the
transfer of the property in the goods is to take place at a future time
or subject to some condition thereafter to be fulfilled, the contract is
called an agreement to sell.”
• Thus we see that a contract for the sale of goods may be either sale
or agreement to sell.
• This depends on the condition whether it postulates an immediate
transfer of property from the seller to the buyer or whether it
postulates the transfer to take place at some future date.
• The agreement to sell will become a sale if and only when the time
elapses or the conditions are fulfilled subject to which the contract of
sale is to be fulfilled.

Elements of Contract of Sale
• From the Sale of Goods Act, 1930, we see that certain
elements must co-exist for a contract of sale to be constituted.
they are as follows:
1. The presence of two parties is a must. As is the case with a
contract, there must be at least two parties in the contract of sale.
One shall become the seller and the other a buyer.
2. The clauses therein present in the contract of sale must limit
their scope to only the movable property. This “movable
property” may constitute existing goods, goods in
the possession or the ownership of the seller or future goods.

Cont…
3. One of the important elements is
the consideration of price. A price in value
(currency and not in kind) has to be paid or
promised. The price consideration or the actual
payment could be partly in kind and partly in
money but never in kind alone.
4. The ownership of the property of goods must
change from the seller to the buyer.
5. The contract of sale may be absolute or
conditional.

Cont…
6. In the contract of sale, like we saw in the
elements of a contract, an offer has to be made
and then accepted. The offer is made by a seller
and then accepted by the buyer.
7. The other essential elements of a contract, that
we have already seen must also be present here.
The crucial elements of a contract like
competency of parties, the legality
of object and consideration etc. have to be
present like in any other contract.

CONCEPT
OF
CONDITION
AND WARRANTY

Conditions and Warranties
• In a contract of sale, parties may make certain
statements about the stipulation or the course of trade.
These stipulations in the contract of sale are made with
reference to the subject matter of the sale. These
stipulations may either be a condition or in the form of a
warranty.
• The provisions of the conditions and warranty are
provided in the sections 11 to 17 of the Act. The
stipulations are the essence of the contract of sale and
a breach of these stipulations provides a remedy to the
grieved party.

Cont…
Stipulations As To Time – Sec 11
• To understand the concept of warranty and conditions,
we need to learn about the stipulation as to time. The
stipulation as to time may be with regards to the
delivery of goods or it may be with regards to the
payment of the price.
• However, it may be noted that stipulations as to the
time of delivery of the goods are usually the essence
of the contract. In Section 11 of the Act, the topic of
the stipulation as to time has been discussed.

Cont…
The Sec 11 states the follows:
• Stipulations as to time: Unless a different intention can be
ascertained from the contract, stipulations as to the time
of payment are not considered to be of the essence of a
contract of sale. Whether any other stipulation as to time is
of the essence of the contract or not will ultimately depend
on the terms of the contract.
• This means that whether the stipulations as to the time of
payment of the price is of the essence of the contract or not
depends on the terms of the contract. Unless the terms of
the contract specify something different than this.

Section-12. Condition and warranty—
(1) A stipulation in a contract of sale with reference to goods
which are the subject thereof may be a condition or a
warranty.
(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.
(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.
(4) Whether a stipulation in a contract of sale is a condition or a
warranty depends in each case on the construction of the
contract. A stipulation may be a condition, though called a
warranty in the contract.

Section- 13. When condition to be treated as warranty.—
(1) Where a contract of sale is subject to any condition to be
fulfilled by the seller, the buyer may waive the condition or elect to
treat the breach of the condition as a breach of warranty and not
as a ground for treating the contract as repudiated.
(2) Where a contract of sale is not severable and the buyer has
accepted the goods or part thereof, 1 *** the breach of any
condition to be fulfilled by the seller can only be treated as a
breach of warranty and not as a ground for rejecting the goods and
treating the contract as .repudiated, unless there is a term of the
contract, express or implied, to that effect.
(3) Nothing in this section shall affect the case of any condition or
warranty fulfilment of which is excused by law by reason of
impossibility or otherwise

Conditions
• A condition is a stipulation essential to the main purpose of
the contract, the breach of which gives the right to repudiate
the contract and to claim damages. [Sec 12 (2)]. We can
understand this with the help of the following example:
Say ‘X’ wants to purchase a car from ‘Y’, which can have a
mileage of 20 km/lt. ‘Y’ pointing at a particular vehicle says
“This car will suit you.” Later ‘X’ buys the car but finds out
later on that this car only has a top mileage of 15 km/ liter.
This amounts to a breach of condition because the seller
made the stipulation which forms the essence of the contract.
In this case, the mileage was a stipulation that was essential
to the main purpose of the contract and hence its breach is a
breach of condition.

Warranty
• A warranty is a stipulation collateral to the main purpose of the
said contract. The breach of warranty gives rise to a claim for
damages. However, it does give a right to reject the goods or
treat the contract as repudiated. [Sec 12(3)]. Let us understand
this with the help of an example below.
• A man buys a particular car, which is warranted to be quite to
drive and very comfortable. It turns out that after some days the
car starts to make a very unpleasant noise every time it is
operated. Also sitting inside it is also not very comfortable.
• Thus the buyer’s only remedy is to claim damages. This is not a
breach of the condition but rather a breach of warranty, because
the stipulation made by the seller was only a collateral one.

Identification of a Stipulation as a Condition or
Warranty
• Whether a stipulation is a condition or a warranty
is a very important aspect to have the knowledge
about.
• A stipulation in a contract of sale is either a
condition or is a warranty depending in either
case on the construction of the contract.
• A stipulation may be a condition, though called a
warranty in the contract.

DIFFERENCE
BASIS
WARRANTY CONDITION
Nature
A warranty is only collateral to
the main purpose of the
contract.
It is essential to the
main purpose of the
contract.
Exemption
from
performance in
case of a
breach of the
stipulation.
In this case, the aggrieved
party can’t rescind the contract
but can claim damages only.
The aggrieved party can
repudiate the contract
and is exempted from
performance and can
also claim damages.
Treatment
Breach of warranty can’t be
treated as a breach of
condition.
A breach of contract
may be treated as a
breach of warranty.

Implied Warranties
• In case the buyer is content is content with his right to
damages or can’t reject the goods,
a condition (implied or express) may reach to the level
of a warranty.
• Implied Warranties are disclosed in Section 14 and
16 of the Sale of Goods Act, 1930 and are the
warranties which the law implies into the contract.
• In case the parties don’t want any of the implied
warranties to be included, they will have to expressly
mention that in the contract.

• Implied Warranties are as follows:
1. Warranty As To Undisturbed Possession
• Well once you buy the goods, they shouldn’t be taken away from
you. This warranty means that the buyer should have and enjoy
quiet possession of the goods after having gotten the possession of
the goods. If he is disturbed in his possession, he is entitled to sue
the seller for the breach of the warranty.
• For example, A buys a laptop from B. After the purchase, A spends
some money on its repair and uses it for some time. Unknown to the
parties, it turns out that the laptop was stolen and was taken from A
and delivered to its rightful owner. B shall be held responsible for a
breach and A is entitled to damages of not only the price but also the
cost of repairs.

2. Warranty As To Non-Existence Of Encumbrances
• This is an implied warranty which maintains that the goods are
free from any encumbrance or charge from any third party who
has not been introduced or known to the buyer at or before the
time of the contract of sale is entered into.
• For example, a person A pledges his computer to another
person B against a loan of Rs. 30,000. “A” also promises B that
A will produce the laptop and give it to B the next day. Later that
day, A goes on to sell the laptop to C who is unaware of the
course of dealings between A and B. In this case, C can ask A to
clear the loan immediately or clear the loan by himself or herself
and then proceed to file a suit against A for the recovery of the
money spent including the interest.

3. Disclosure Of Dangerous Nature Of Goods
• In case the goods are inherently dangerous or they are likely to be
dangerous to the buyer and the buyer is ignorant or unaware of the
danger, an implied warranty on the part of the seller emerges. The
seller must warn the buyer duly about the dangerous nature of the
goods if any. In case of a breach of this warranty, the seller will be
liable in damages.
• For example, a person X purchases a bottle of disinfectant from a
person Y. Y knows that the cap of the bottle is defective or cheap
and if opened by a novice without care, it may spill and result in
partial burning or other damages of the person. When X opens the
bottle, he is injured. In this case, X is liable in damages to Y as Y
should have been duly warned of the probable danger.

4. Warranty As To Qualify Or Fitness By Usage Of Trade
• An implied warranty as to the quality or the fitness for a
particular purpose may be annexed by the usage of the
trade. For example, consider the following example:
• A drug was sold through an auction and according to the
usage of trade. It was to disclose in advance any sea-
damage, otherwise, it will be taken as a breach of warranty if
no such disclosure has been made and the goods found to
be defective.
• This concludes the topic of the Implied Warranties. We can
say that any warranty that is not expressed becomes an
implied warranty. Let us now understand the Express
Warranties.

Express Warranties
•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. [Section 12(3)]
•Warranties that are inserted into the contract at
the will and knowledge of the parties are said to
be expressed warranties or the Express
Warranties.

Implied Conditions
• Conditions and Warranties may be either express
or implied. The implied conditions and warranties
are those which are presumed by law to be
present in the contract though they have not been
put into it in expressed words. Implied conditions
are dealt with in Sections 14 to 17 of the Sale of
Goods Act, 1930.

• Unless otherwise agreed, the law incorporates into a contract of a sale of
goods the following implied conditions:
1. Condition As To Title:
• In every contract of sale, the first implied condition on the part of the seller is
that:
• in case of a sale, he has a right to sell the goods,
• and in the case of an agreement to sell, he will have the right to sell the
goods at the time when the property is to pass. Buyer is entitled to reject the
goods and to recover the price if the title turns out to be defective. [Section
14(a)].
• Let us say that person A bought a tractor from another person B. The person
B had no title to the tractor. Person A then goes on to use the tractor for
three months. Three months later, the legal owner of the tractor spots it and
demands it back from A. In this, the law holds that A is bound within the law
to hand over the tractor to the real owner of the tractor. A has the right to sue
B, for the recovery of the purchase price.

2. Condition As To Description
• If there is a contract of sale of goods by description, a
default implied condition is that these goods must
correspond with this description. The buyer is not bound
to accept and pay for the goods which are not in
accordance with the description of goods. [Section
(15)]
• Let us consider an example. Suppose a ship was
contracted to be sold as “copper-fastened vessel” but
actually it was only partly copper-fastened. This means
that the goods did not correspond to the description and
hence they can be returned or if the buyer took the
goods, he could claim damages for breach.

3. Sale By Sample
• In a contract of sale by sample, there is an implied condition that:
• the bulk shall correspond with the sample in the quality;
• the buyer shall have or shall be given a reasonable
opportunity/chance of comparing the bulk with the sample, and
• the goods shall be free from any defect that may render them
unmerchantable, which would not be apparent on a reasonable
examination of the sample. [Section (17)]
• For example, a company sells certain belts made up of a special
material by sample for the Indian Army. The belts are found to be
made up of plastic of cheaper quality, not discoverable by ordinary
inspection. In this case, the buyer is entitled to the refund of the price
plus damages.

4. Sale By Sample As Well As By Description
• Where the goods are sold by a sample as well as by
description the implied condition is that the bulk of the
goods supplied must correspond both with the sample and
the description. In case the goods correspond with the
sample but do not tally with the description or vice versa,
the buyer can repudiate the contract. [Section 15]
• For example, A agrees to sell a certain oil described as
refined rapeseed oil to B, warranted only equal to sample.
The goods that A tenders are found to be equal to the
sample but containing a mixture of hemp oil. In such a case
B can reject the goods.

5. Condition As To Quality Or Fitness
• Generally, there is no implied condition as to the quality or fitness of the
goods that are sold for a particular purpose. However, the condition as
to the reasonable fitness of goods for a particular purpose may be
implied on the part of the seller for which the buyer wants them.
Following are the conditions to be satisfied:
• If the buyer had made known to the seller the purpose of his purchase
• and the buyer relied on the seller’s skill and judgment, and
• seller’s business to supply goods of that description. [Section 16]
• For example, A purchases a hot water bottle from a chemist. The bottle
burst and injured A’s wife. A breach of condition as to the fitness was
thus committed. Hence A is liable for a refund of the price and also the
damages.

6. Condition As To Merchantability
• This is implied only where the sale is by description and
the goods should be of ‘merchantable quality’ i.e. the
goods must be such as are reasonably saleable under
the description by which they are known in the market.
[Section 16(2)]
• For example, A purchases a certain quantity of black
yarn from B who is a dealer in yarn. A finds the black
yarn to be damaged by the white ants. Thus the
condition as to merchantability has been broken and A
is entitled to reject it as unmerchantable.

7. Conditions As To Wholesomeness
• In the case of eatables and provisions, there is
another implied condition that the goods shall be
wholesome, in addition to the implied condition as
to merchantability.
• For example, A supplies B with milk. The milk
contains bacteria and B’s wife consumes the milk
and is diagnosed with a disease. She later
succumbs to the disease. Hence, there was a
breach of condition as to the fitness of the
supplies and A was liable to pay damages to B in
this case.

Express Condition
•An express condition is any stipulation,
essential to the main function of the contract,
which is put in the contract at the will of the
two parties.

Introduction
•A Latin maxim says: ‘Nemo dat quod non
habet’ which means that no one can give
what he doesn’t have.
•This is the ground principle regarding the
transfer of title. Sections 27 to 30 of the Sale
of Goods Act, 1930 specify these laws about
the transfer of title.

Transfer of Title
• Section 27 deals with the sale by a person who is not the
owner. Imagine a sale contract where the seller –
oIs not the owner of the goods
oDoes not have consent from the owner to sell the goods
oHas not been given authority by the owner to sell the goods
on his behalf
• In such cases, the buyer acquires no better title to these goods
than the seller had, provided the conduct of the owner
precludes the seller’s authority to sell.

Cont…
• Let us see an example. Peter steals a mobile phone from his
office and sells it to John, who buys it in good faith. However,
John will get no title to the phone and will have to return it to the
owner when he demands, i.e. there is no transfer of title.
• Now, this seems to be a really straight-forward rule. However,
enforcing this rule can mean that innocent buyers might suffer
losses in most cases. Therefore, to protect the interest of the
buyers, certain exceptions are provided.

Cont…
• Exceptions to Section 27
• In the following scenarios a non-owner of goods can
transfer a better title to the buyer:
1. Sale by a Mercantile agent (Proviso to Section 27)
• Consider a mercantile agent, who is in possession of the
goods or a document to the title of the goods, with the
consent of the owner. Such an agent can sell the goods
when acting in the ordinary course of business of a
mercantile agent. The sale shall be valid provided the buyer
acts in good faith and has no reason to believe that the
seller doesn’t have any right to sell the goods. The transfer
of title is valid in such a case.

Cont…
2. Sale by one of the Joint Owners (Section 28)
• Many times goods are purchased in joint ownership. In many cases, the
goods are kept in the possession of one of these joint owners by the
permission of the co-owners. If this person (who has the sole possession
of the goods) sells the goods, the property in the goods is transferred to
the buyer. This is provided the buyer acts in good faith and has no reason
to believe that the seller does not have a right to sell the goods.
• Example: Peter, John, and Oliver are three friends to buy a 42-inch
television set to watch the upcoming cricket World Cup. They
unanimously decide to keep the television set at Oliver’s house. Once the
World Cup is over, the TV is still at his house.
• One day, Oliver’s office colleague Julia visits his house and he sells the
TV to her. She buys it in good faith and has no knowledge about the fact
that it was purchased jointly. In this case, she gets a good title to the TV.

Cont…
3. Sale by a Person in Possession of Goods under a
Voidable Contract (Section 29)
• Consider a person who acquires possession of certain goods
under a contract voidable on grounds of coercion,
misrepresentation, fraud or undue influence. If this person sells
the goods before the contract is terminated by the original
owner of the goods, then the buyer acquires a good title to the
goods.
• Example: Peter fraudulently obtains a gold diamond ring from
Olivia. Olivia can void the contract whenever she wants. Before
she realizes the fraud, Peter sells the ring to Julia – an innocent
buyer. In this case, Olivia cannot recover the ring from Julia
since she didn’t void the contract before the sale was made.

Cont…
4. Sale by a Person who has already sold the Goods
but Continues to have Possession [Section 30 (1)]
• Consider a person who has sold goods but continues to
be in possession of them or of the documents of title to
them. This person might sell the goods to another
buyer.
• If this buyer acts in good faith and is unaware of the
earlier sale, then he will have a good title to the goods
even though the property in the goods was passed to
the first buyer. A pledge or other disposition of the goods
or documents of title by the seller in possession are
valid too.

Cont…
5. Sale by Buyer obtaining possession before the
Property in the Goods has Vested in him [Section 30
(2)]
• Consider a buyer who obtains possession of the goods
before the property in them is passed to him, with the
permission of the seller. He may sell, pledge or dispose
of the goods to another person.
• If the second buyer obtains delivery of the goods in
good faith and without notice of the lien or any other
right of the original seller, he gets a good title to them.

Cont…
• This rule does not hold true for a hire-purchase agreement
which allows a person the possession of the goods and an
option to buy unless the sale is agreed upon.
• Example: Peter takes a car from John under the conditions that
he will pay Rs. 5,000 every month as rent of the vehicle and
that he can choose to purchase it for Rs. 100,000 to be paid in
24 equal installments. Peter pays Rs. 5,000 for three months
and then sells the car to Oliver. In this case, John can recover
his car from Oliver since Peter had neither purchased the car
nor agreed to purchase it. He only had an option to buy the car.

Cont…
6. Estoppel
• If an owner of goods is stopped by the conduct from denying the
seller’s authority to sell, the buyer gets a good title. However, to get a
good title by estoppel, it needs to be proved that the original owner
had actively suffered or held out the seller in question as a person
authorized to sell the goods.
• Let us see an example. Peter, John, and Oliver are having a
conversation. Peter tells John that he owns the BMW car parked
nearby which actually belongs to Oliver. However, Oliver remains
silent. Subsequently, Peter sells the car to John.
• In this case, John will get a good title to the car even though the
seller is Peter who has no title to it. This is because, Oliver, by his
conduct, did not deny Peter’s authority to sell the car.

Cont…
7. Sale by an Unpaid Seller [Section 54 (3)]
•If an unpaid seller exercises his right of lien
or stoppage in transit and sells the goods to
another buyer, then the second buyer gets a
good title to the goods as against the original
buyer. So in such a case transfer of title will
occur.

Cont…
8. Sale under the Provisions of other Acts
• Sale by an Official Receiver or Liquidator of
the Company will give the purchaser a valid title.
• Purchase of goods from a finder of goods will get a
valid title under circumstances [Section 169 of the
Indian Contract Act, 1872]
• A sale by a pawnee can convey a good title to the
buyer [Section 176 of the Indian Contract Act, 1872]

Passing of Risk (Section 26)
• When goods are sold, they remain at the seller’s risk until the property in
the goods is transferred to the buyer. Once the property is passed, the
goods are at the buyer’s risk even if the delivery has not been made.
• There are some points that you need to remember about the passing of
risk:
1. It holds true unless the buyer and seller have agreed to some other
terms.
2. In cases where the delivery has not been made, if the delay in delivery
is due to the fault of the seller, then the risk lies with the seller. If the
delay is due to a fault of the buyer, then the goods are at the buyer’s
risk.
3. Regardless of the buyer or the seller bearing the risk, the duties
and responsibilities of both of them as a bailee of goods for the other
party, remain unaffected.

Cont…
• Hence, we can say that under ordinary circumstances, the seller
bears the risk until the property is passed to the buyer which also
passes the risk to him. The parties may, however, decide to pass the
risk before or after passing the property in the goods to the buyer.
• Let us take a look at an example. Peter is auctioning his great-
grandfather’s wristwatch at a function. In a true auctioneer style, he
manages to get a gavel (hammer used by auctioneers) and sets up a
table inviting bids for the historical watch. He manages to get the
highest bid of Rs 25,000.
• As he strikes the gavel to signify acceptance of the bid, he
accidentally damages the watch. In this case, the property had not
passed to the bidder. Hence, the risk was Peter’s and he will have to
bear the loss.

Who is Unpaid Seller?
Section - 45. “Unpaid seller” defined.—
(1)The seller of goods is deemed to be an “unpaid seller”
within the meaning of this Act—
(a) when the whole of the price has not been paid or tendered;
(b) 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.
(2)In this Chapter, the term “seller” includes any person who
is in the position of a seller, as, for instance, an agent of
the seller to whom the bill of lading has been endorsed, or
a consignor or agent who has himself paid, or is directly
responsible for, the price.

Rights of Unpaid Seller
• Seller’s Lien (Section 47)
oAccording to subsection (1) of Section 47 of the Sale of
Goods Act, 1930, an unpaid seller, who is in possession of the
goods can retain their possession until payment. This is
possible in the following cases:
oHe sells the goods without any stipulation for credit
oThe goods are sold on credit but the credit term has expired.
oThe buyer becomes insolvent.
oSubsection (2) specifies that the unpaid seller can exercise his
right of lien notwithstanding that he is in possession of the
goods acting as an agent or bailee for the buyer.

Cont…
• Part-delivery (Section 48)
oFurther, Section 48 states that if an unpaid seller
makes part-delivery of the goods, then he may
exercise his right of lien on the remainder. This is
valid unless there is an agreement between the
buyer and the seller for waiving the lien under
part-delivery.

Cont…
• Termination of Lien (Section 49)
oAccording to subsection (1) of Section 49 of the Sale of Goods
Act, 1930, an unpaid seller loses his lien:
oIf he delivers the goods to a carrier or other bailee for
transmission to the buyer without reserving the right of disposal
of the goods.
oWhen the buyer or his agent obtain possession of the goods
lawfully.
oBy waiver.
oFurther, subsection (2) states that an unpaid seller, who has a
lien, does not lose his lien by reason only that he has obtained
a decree for the price of the goods.

Cont…
• Right of Stoppage in Transit
oThis right is an extension to the right of lien. The right of
stoppage in transit means that an unpaid seller has the
right to stop the goods while they are in transit, regain
possession, and retain them till he receives the full
price.
oIf an unpaid seller has parted with the possession of the
goods and the buyer becomes insolvent, then the seller
can ask the carrier to return the goods back. This is
subject to the provisions of the Act.

Cont…
• Duration of Transit (Section 51)
oGoods are in the course of transit from the time the seller
delivers them to a carrier or a bailee for transmission to the
buyer until the buyer or his agent takes delivery of the said
goods.
oSome scenarios of the transit ending:
oThe buyer or his agent obtain delivery before the goods reach the
destination. In such cases, the transit ends once the delivery is
obtained.
oOnce the goods reach the destination and the carrier of bailee informs
the buyer or his agent that he holds the goods, then the transit ends.
oIf the buyer refuses the goods and even the seller refuses to take them
back the transit is not at an end.

Cont…
oIn some cases, goods are delivered to a ship chartered
by the buyer. Depending on the case, it is determined
that if the master is functioning as an agent or carrier of
the goods.
oIf the carrier or other bailee wrongfully refuses to deliver
the goods to the buyer or his agent, the transit ends.
oIf a part-delivery of the goods has been made and the
unpaid seller stops the remaining goods in transit, then
the transit ends for those goods. This is provided that
there is no agreement to give up the possession of all the
goods.

Cont…
• How Stoppage is Affected (Section 52)
• There are two ways of stopping the transit of goods:
1. The seller takes actual possession of the goods
2. If the goods are in the possession of a carrier or other
bailee, then the seller gives a notice of stoppage to
him. On receiving the notice, the carrier or bailee
must re-deliver the goods to the seller. The seller
bears the expenses of the re-delivery.
• Effect of Stoppage
oEven if the unpaid seller exercises his right of stoppage in
transit, the contract stays valid. The buyer can ask for delivery
of the goods after making the payment.

Right of Lien vs. Rights of Stoppage in Transit
Right of Lien
Rights of Stoppage in
Transit
Essence Retain possession Regain possession
Who has the
possession of the
goods?
The seller.
The carrier or other
bailee. The buyer
should not have
received the goods.
Buyer insolvent
Not a mandatory
requirement
The right can be
exercised only when
the buyer becomes
insolvent.
In simple words, the right of stoppage in transit begins when the right of
lien ends

Cont…
• Pledge by the Buyer (Section 53)
• Unless the seller agrees, the right of lien or stoppage is
unaffected by the buyer selling or pledging the goods.
The principle is simple: the second buyer cannot be in a
better position that the seller (first buyer). However, if
the buyer transfers the document of title or pledges the
goods to a sub-buyer in good faith and
for consideration, then the right of stoppage is defeated.

Cont…
There are two exceptions to make note of:
a. The seller agrees to resale, mortgage or other disposition of
the goods
• If the seller agrees to the buyer selling, pledging or disposing of the
goods in any other way, then he loses his right to lien.
b. Transfer of the document of title of goods by the buyer
• When the seller transfers the document of title of goods to the buyer
and the buyer further transfers it to another buyer who purchases the
goods in good faith and for a price, then:
o If the last mentioned transfer is by way of sale, the original seller’s right of
lien and stoppage is defeated.
o If the last mentioned transfer is by way of a pledge, the original seller’s right
of lien or stoppage can be executed subject to the rights of the pledgee.

Cont…
• Right of Resale (Section 54)
• The right of resale is an important right for an unpaid seller. If he
does not have this right, then the right of lien and stoppage
won’t make sense. An unpaid seller can exercise his right of
resale under the following conditions:
oGoods are perishable in nature: In such cases, the seller does not
have to inform the buyer of his intention of resale.
oSeller gives a notice to the buyer of his intention of resale: The
buyer needs to pay the price of the goods and ask for delivery within
the time mentioned in the notice. If he fails to do so, then the seller can
resell the goods. He can also recover the difference between the
contract price and resale price if the latter is lower. However, if the
resale price is higher, then the seller keeps the profits.

Cont…
oUnpaid seller resells the goods post exercising his right of lien
or stoppage: The subsequent buyer acquires a good title to the
goods even if the seller has not given a notice of resale to the
original buyer.
oResale where the right of resale is reserved in the contract of
sale: If the contract of sale specifies that the seller can resell the
goods if the buyer defaults, then the seller reserves his right of sale.
He can claim damages from the original buyer even if he does not
give a notice of resale to him.
oProperty in the goods has not passed to the buyer: The unpaid
seller can exercise his right of withholding delivery of goods. This is
similar to the right of lien and is called quasi-lien.

REMEDIES
FOR
BREACH OF
CONTRACT

REMEDIES SELLER’S REMEDY AGAINST BUYER
(SECTION 55-56)
BUYER’S REMEDY AGAINST SELLER
(SECTION 57-59)
REMEDIES AVAILABLE TO BOTH
(SECTION 60-61)

SELLER’S REMEDY AGAINST BUYER
• The suits that may be instituted by the seller against the buyer
under the Act can be roughly divided into two types:
REMEDY
Suit for
Price
(Section 55)
Damages for
non-
acceptance
(Section 56)

Suit for Price
Section 55
• (1) Where under a contract of sale the property in the goods
has passed to the buyer and the buyer wrongfully neglects or
refuses to pay for the goods according to the terms of the
contract, the seller may sue him for the price of the goods.
• (2) Where under a contract of sale the price is payable on a day
certain irrespective of delivery and the buyer wrongfully
neglects or refuses to pay such price, the seller may sue him for
the price although the property in the goods has not passed and
the goods have not been appropriated to the contract.

Cont…
• In the case of Colley V. Overseas Exporters there was a
contract for the sale of some unascertained leather goods to the
buyer f.o.b Liverpool. In this case, though the seller sent the
goods, yet they could not be put on board as no definite ship
had been named by the buyer. When an action was brought by
the buyer against the seller, it was held that the seller was not
entitled to pay the price as the goods had not yet moved into
the possession of the buyer. In the absence of an agreement
relating to the payment of price on a certain day, irrespective of
the delivery, the seller is not entitled to sue the buyer for
payment, but can bring about an action for damage.

Cont…
• Where there is a contract for sale wherein the price is payable on a
certain date, irrespective of delivery and the buyer wrongfully
neglects or refuses to pay such price the seller may sue for the price
even though the property has not been passed and the goods have
not been appropriated to the contract. This can be seen in Dunlop v
Grote, according to the facts of the case, there was a contract for
the delivery of Iron between 3rd March and 30th April as per the
requirements of the buyer. The price was to be paid on the 30th of
April. However, only a part of the consignment was received by the
buyer on April 30th as he did not require anymore. In the action
brought by the seller, it was held that the seller could recover the
whole price and was not required to show that the goods were
appropriated to the contract.

Damages for non acceptance
Section 56
• Where the buyer wrongfully neglects or refuses to accept and
pay for the goods, the seller may sue him for damages for non-
acceptance.
• The damages are assessed on the basis of the principles
contained in sections 73 and 74 of the Indian Contract Act,
1872. According to section 73 of the Indian Contract Act, when
a contract has been broken, the party who suffers by the breach
is entitled to receive, from the party who has broken the
contract, compensation for any loss caused to him thereby,
which naturally arose, in the usual course of things from such a
breach, or which the parties knew when they entered into the
contract, to be likely to result from the breach of it.

Cont…
• Furthermore, in estimating the loss or damage caused by a breach
of contract, the means which existed of remedying the
inconvenience caused by the non-performance of the contract must
be taken into account.
• The date at which the market price is to be ascertained is the day on
which the contract ought to have been performed by delivery and
acceptance as fixed by the contract or, where no time is fixed, at the
time of the refusal to perform.
• By virtue of the provisions of sections 55 and 63 of the Indian
Contract Act, where the time for the performance is fixed by the
contract but it is extended and another date substituted for it by
agreement between the parties, the substituted date must be taken
as the date for ascertaining the measure of damages.

Cont…
• In the case of Suresh Kumar Rajendra Kumar v K Assan
Koya & sons, the plaintiff sold, through the commission
agents, the goods and claimed compensation from the
buyer who had rejected them. While doing so the plaintiff
had taken all the measures necessary to sell the goods
urgently in the ordinary course of business. In the absence
of any records to show that the sale was conducted in an
improper manner, it was held by the court that the plaintiff
was entitled to claim the difference between the price at
which the rice was supposed to be sold to the defendants,
and the price at which it was finally sold.

BUYER’S REMEDY AGAINST SELLER
REMED
Y
Damages for
non-delivery
(Section 57)
Remedy for
breach of
Warranty
(Section 59)
Specific
Performance
(Section 58)

Damages for Non- Delivery
Section 57
• Where the seller wrongfully neglects or refuses to deliver the
goods to the buyer, the buyer may sue the seller for damages
for non-delivery.
• When the property in the goods has passed, the buyer,
provided that he is entitled to the immediate possession, has all
the remedies of an owner against those that deal with the goods
in a manner inconsistent with his rights. If, therefore, the seller
wrongfully re-sells them, he may sue the seller in trover, and
also against the second buyer, though as against him the rights
may be cut down by the provisions in sections 30 and 54.

Cont…
• In the case of non-delivery, the true measure of damages will be
the difference between the contract price and the market price
at the time of the breach. The market value of the goods means
“the value in the market, independently of any circumstances
peculiar to the plaintiff (the buyer)”.
• Where he, the seller, is guilty of breach of an agreement to sell,
the following remedies may be available to the buyer:
(i) The buyer may sue for damages for non-delivery under Section 57 of
the Sale of Goods Act
(ii) In case the price has been paid by the buyer, he may recover it in a
suit for money had and received for a consideration which has totally
failed.

Cont…
• Where however the buyer has failed to prove the alleged
damages caused due to short supply of goods by seller and has
also not served to seller a notice under Section 55 of the Indian
Contracts Act, the buyer cannot claim damages - Gujarat Agor
Oil Enterprises Ltd. V Arvind H Pathak, Air 1993 Gij. 47, 52
• In a case where the seller failed to deliver Finnish timber, and
the nearest substitute which the buyer could obtain was English
timber which involved more expenditure, in cutting and also
more wastage, it was held that the buyer was entitled to claim
the extra cost since the buyer had acted reasonably in
mitigating his claim - Blackburn Bobbin Co Ltd v TW Allen &
Sons Ltd [1918] 1 KB 540

Remedy for Breach of Warranty
Section 59
• (1) Where there is a breach of warranty by the seller, or where the
buyer elects or is compelled to treat any breach of a condition on the
part of the seller as a breach of warranty, the buyer is not by reason
only of such breach of warranty entitled to reject the goods; but he
may-
• (a) Set up against the seller the Brach of warranty in diminution or
extinction of the price; or
• (b) Sue the seller for damages for breach of warranty.
• (2) The fact that a buyer has set up a breach of warranty in
diminution or extinction of the price does not prevent him from suing
for the same breach of warranty if he has suffered further damage.

Cont…
• A breach of warranty does not entitle the buyer to reject the goods
and his only remedy would be those provided in s. 59 namely, to set
up against the seller the breach of warranty in diminution or
extinction of the price or to sue the seller for damages for breach of
warranty. From the definition of warranty given in s. 12(3) it is clear
that a breach of it gives rise to a claim for damages only on the part
of the buyer. It is also laid down by s. 13 that, even in the case of a
breach of condition, if the buyer has accepted the goods, or, in the
case of entire contracts, part of them, either voluntarily, or by acting
in such a way as to preclude himself from exercising his right to
reject them, he must fall back upon his claim for damages as if the
breach of the condition was a breach of warranty. - Commr of
Income Tax v Profulla Kumar Malik AIR 1969 Ori 187

Cont…
• It must be noted here that in such cases, damages are assessed in
accordance with the provisions contained in section 73 of Indian
Contract Act, 1872. This was also observed by a division bench of
the Bombay High Court in City And Industrial Development
Corporation of Maharashtra ltd., Bombay v Nagpur steel and
alloys, Nagpur:
“Remedies under Section 59 are not absolute and cannot be resorted
to at any point or strategical point suitable to the buyer. He is duty
bound to give notice of his intention. Its proper time, form and manner
will, of course, depend upon the facts and circumstances of each
case. To hold otherwise, would amount to placing the seller in an
awkward and indefinite position — not warranted either by law or by
equity.”

Specific Performance
Section 58
• Subject to the provisions of the Specific Relief Act, 1877, in
any suit for breach of contract to deliver specific or
ascertained goods, the court, may, if it deems fit, on the
application of the plaintiff, by its decree direct that the
contract shall be performed specifically, without giving the
defendant the option of retaining the goods on the payment
of damages. The decree may be unconditional, or upon
such terms and conditions as to damages, payment of the
price, or otherwise, as the Court may deem just, and the
application of the plaintiff may be made at any time before
the decree.

Cont…
• This section may best be explained by an illustration; there was a
contract to sell a ship to a German ship owner. The ship was an old
ship but her engines and boilers were new, so as to satisfy the
German regulations, and the buyer could have her registered
immediately in Germany. In view of these facts and the price, the
ship was of peculiar value to the buyer, and there was only one other
ship on the market that would suit his requirements. The court
granted specific performance of the contract.- Behnke v Bede
Shipping Co [1927] 1 KB 649
• Originally, the provisions relating to sale of goods were part of the
Indian Contract Act, 1872 which as such did not provide for the
equitable remedy of specific performance. Subsequently, a separate
Act namely Specific Relief Act, 1877, was enacted to provide for
equitable remedies including the remedy of specific performance.

REMEDIES AVAILABLE TO BOTH SELLER AND
BUYER
REMEDY
Suit for repudiation of
contract before date
or anticipatory breach
(SECTION-60)
Interest by way of
damages and special
damages
(SECTION-61)

Suit for repudiation of contract before date or
anticipatory breach
Section 60
• Where either party to a contract of sale repudiates the contract
before the date of delivery, the other may either treat the
contract as subsisting and wait till the date of delivery, or he
may treat the contract as rescinded and use for damages for
the breach.
• This section, does not appear in the English act, and deals with
anticipatory breach of a contract, that is to say, a manifested
intention, by either party, to not be bound by the promise to
perform that part of the contract when the time of performance
arrives. Whether or not there has, in fact, been repudiation
depends on the facts of each particular case.

Cont…
• In Hochster v De la Tour it was held that where one of the
parties repudiates the contract before the time of the
performance under the contract, the other party becomes
entitled to sue for damages for the breach before the date
of performance of contract was due. In this case, the
defendant had employed the services of the plaintiff, to go
with him on tour. The service of the plaintiff was to begin
from the 1st June, but on 11th May the defendant informed
him that his services were no longer required. The plaintiff
filed the suit to recover damages for breach of contract
before the arrival of the time of performance of the contract.

Interest by way of damages and special damages
Section 61
• (1) Nothing in this Act shall affect the right of the seller or the buyer
to recover interest or special damages in any case whereby law
interest or special damages may be recoverable, or to recover the
money paid where the consideration for the payment of it has failed.
• (2) In the absence of a contract to the contrary, the Court may award
interest at such rate a it think fit one the amount of the price-
• (a) to the seller in a suit by him for the amount of the price.- from the
date of the tender of the goods or from the date on which the price
was payable.
• (b) to the buyer in a suit by him for the refund of the price in a case
of a breach of the contract on the part of the seller- from the date on
which the payment was made.

Cont…
• This section preserves the right of a party to a contract of sale
to recover special damages, that is to say, compensation for
any loss or damage caused to him by either party’s breach
‘which the parties knew when they made the contract to be
likely to result from the breach of it’.
• These damages are contrasted with those which ‘naturally
arose in the usual course of things’ from the breach. Generally
speaking, the latter alone are recoverable by the plaintiff.
However, his rule is subject to limitations where the breach has
occasioned a special loss, which was actually in contemplation
of the parties at the time of entering into the contract, that
special loss happening subsequently to the breach must be
taken into account.

Cont…
• In the case of President of India v La Pintada
Compania Navigacion SA, the House of Lords
upheld the rule that common law does not permit
interest being awarded by way of general damages for
delay in payment of a debt beyond the date if it
became contractually due. However, special damages
may be awarded in respect of interest paid by the
plaintiff as due to the defendant, if the rule of
remoteness is satisfied.

Sales of goods act, 1930

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Sales of goods act, 1930