This document summarizes key aspects of the Sales of Goods Act 1930 regarding the formation of contracts for the sale of goods in India. It discusses definitions of sales and agreements to sell, how contracts are formed, rules regarding existing or future goods, implications if goods perish before or after an agreement is made, how price is determined, rights of unpaid sellers, and more. Specifically, it outlines the rights of an unpaid seller, including the right of lien on goods, the right of stoppage in transit while goods are in the course of delivery to the buyer, and personal rights of action against the buyer for damages.

1. UNIT 2

2. Sales of Goods Act 1930
Formation of the Contract
Sale and agreement to sell.-
(1) A contract of sale of goods is a contract whereby the seller transfers or
agrees to transfer the property in goods to the buyer for a price. There
may be a contract of sale between one part-owner and another.
(2) A contract of sale may be absolute or conditional
(3) Where under a contract of sale the property in the goods in transferred
from the seller to the buyer, the contract is called a sale, but 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.
(4) An agreement to sell becomes a sale when the time elapses or the
conditions are fulfilled subject to which the property in the goods is to be
transferred.

4. Contract of Sale how made -
(1) A contract of sale is made by an offer to buy or sell goods for a price
and the acceptance of such offer. The contract may provide for the
immediate delivery of the goods or immediate payment of the price
or both, or for the delivery or payment by installments, or that the
delivery or payment or both shall be postponed.
(2) Subject to the provisions of any law for the time being in force, a
contract of sale may be made in writing or by word of mouth, or
partly in writing and partly by word of mouth or may be implied from
the conduct of the parties.

5. Existing or Future goods.-
(1) The goods which form the subject of a contract of sale may be
either existing goods, owned or possessed by the seller, or future
goods.
(2) There may be a contract for the sale of goods the acquisition of
which by the seller depends upon a contingency which may or may
not happen.
(3) Where by a contract of sale the seller purports to effect a present
sale of future goods, the contract operates as an agreement to sell
the goods.

6. Goods perishing before making of contract.-
Where 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.
Goods perishing before sale but after agreement to
sell.-
Where there is an agreement to sell specific goods, and subsequently the
goods without any fault on the part of the seller or buyer perish or become
so damaged as no longer to answer to their description in the agreement
before the risk passes to the buyer, the agreement is thereby avoided.

7. Ascertainment of price.-
(1) The price in a contract of sale may be fixed by the contract or
may be left to be fixed in manner thereby agreed or may be
determined by the course of dealing between the parties.
(2) Where the price is not determined in accordance with the
foregoing provisions, the buyer shall pay the seller a reasonable
price.
What is a reasonable price is a question of fact dependent on the
circumstances of each particular case.

8. Agreement to sell at valuation.-
(1) Where there is an agreement to sell goods on the terms that the
price is to be fixed by the valuation of a third party and such third
party cannot or does not make such valuation, the agreement is
thereby avoided.
Provided that, if the goods or any part thereof have been delivered to,
and appropriated by, the buyer, he shall pay a reasonable price
there for.
(2) Where such third party is prevented from making the valuation by
the fault of the seller or buyer, the party not in fault may maintain a
suit for damages against the party in fault.

9. Stipulations as to time.-
Unless a different intention appears from the terms of the contract,
stipulations as to time of payment are not deemed to be of the
essence of a contract of sale.
Whether any other stipulations as to time is of the essence of the
contract or not depends on the terms of the contract.

10. Sale by description.-
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, and, if the sale is by sample as well as by
description, it is not sufficient that the bulk of the goods
corresponds with the sample if the goods do not also
correspond with the description.

11. Sale by sample.-
(1) 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.
(2) In the case of a contract for sale by sample there is an implied
condition -
(a) that the bulk shall corresponded with the sample in quality.
(b) that the shall have a reasonable opportunity of comparing the
bulk with the sample.
(c) that the goods shall be free from any defect, rendering them un-
merchantable, which would not be apparent on reasonable
examination of the

12. Part delivery.-
Where an unpaid seller has made part delivery of the goods, he
may exercise his right of lien on the remainder, unless such part
delivery has been made under such circumstances as to show
an agreement to waive the lien.

13. Essentials of a Contract of sale
1. Two parties
2. Goods
3. Price
4. Transfer of ownership
5. All essentials of a valid contract of sale
6. Includes both a sale and an agreement to sell

14. Rights of an unpaid seller
"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 conditions on which it was received has
not been fulfilled by reason of the dishonour 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.

15. Rights of an
Unpaid Seller
Rights Against
Goods
Lien on the Goods
A right to Stoppage
in Transit
A right to re-sale
Rights Against the
Buyer Personally
Right to Sue for the
Price
The right to sue the
buyer for damages
for non-
acceptance

16. Rights of an unpaid seller against the goods
1) Lien on Goods.-
(1) Subject to the provisions of this Act, the unpaid seller of goods who is in
possession of them is entitled to retain possession of them until payment
or tender of the price in the following cases, namely :-
(a) where the goods have been sold without any stipulations as to credit.
(b) where the goods have been sold on credit, but the term of credit has
expired.
(c) where the buyer becomes insolvent.
(2) The seller may exercise his right of lien notwithstanding that he in
possession of the goods as agent for the buyer.
Example :-
A buys certain goods from S agrees to pay for them later. A leaves the goods
with S to be sent to him later. S shall have a right of lien if in the meantime
he learns of A’s insolvency.

17. Termination of lien.-
(1) The unpaid seller of goods losses his lien thereon -
(a) when he delivers the goods to a carrier for 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 waiver thereof.
(2) The unpaid seller of goods, having a lien thereon, not lose his
lien by reason only that he has obtained a decree for the price
of the goods.

18. 2) Right of stoppage in transit.-
Subject to the provisions of this Act, when the buyer of goods
becomes insolvent, the unpaid seller who has parted with the
possession of the goods has the right of stopping them in
transit, that is to say, he may resume possession of the goods
as long as they are in the course of transit, and may retain
them until payment or tender of the price.

19. Duration of transit.-
Goods are deemed to be in course of transit from the time when they are
delivered to a carrier for the purpose of transmission to the buyer, until the
buyer or his agent in that behalf takes delivery of them from such carrier.
When does the Transit End?
(1) Once the goods reach the hands of the buyer or his agent or servant the
transit is at an end.
(2) If the buyer or his agent in that behalf obtains delivery of the goods before
their arrival at the appointed destination, the transit is at an end.
(3) The transit will end if after the arrival of the goods at the appointed
destination, the carrier or the other bailee acknowledges to the buyer or his
agent that he holds the goods on behalf of the buyer or the buyers agent. It
is immaterial that a further destination of the goods was indicated by the
contract.

20. (4) If the goods are rejected by the buyer and the carrier or other bailee continues
in possession of them, the transit is not deemed to be at an end, even if the
seller has refused to receive them Back.
For Example :- B at Delhi, order goods of A, at Calcutta. A consigns and forwards
the goods to B. On arrival at Delhi, they are taken to B’s Warehouse and left
there. B refuse to take these goods and stops payment. The goods are in
transit and the unpaid seller can take them back.
(5) When goods are delivered to a ship chartered by the buyer, it is a question
depending on the circumstances of the particular case, whether they are in
the possession of the master as a carrier or as agent of the buyer.
(6) Where the carrier or other bailee wrongfully refuses to deliver the goods to
the buyer or his agent in that behalf, the transit is deemed to be at an end.
(7) Where part delivery of the goods has been made to the buyer or his agent in
that behalf, the remainder of the goods may be stopped in transit, unless such
part delivery has been given in such circumstances as to show an agreement
to give up possession of the whole of the goods.

21. How stoppage in transit is effected.-
(1) The unpaid seller may exercise his right to stoppage in transit either by
taking actual possession of the goods, or by giving notice of his claim to
the carrier or other bailee in whose possession the goods are.
(2) Whether notice of stoppage in transit is given by the seller to the carrier
or other bailee in possession of the goods, he shall re-deliver the goods to,
or according to the directions of, the seller. The expenses of such re-
delivery shall be borne by the seller.

22. Effect to sub-sale or pledge by buyer.-
Subject to the provisions of this Act, the unpaid seller’s right of lien or
stoppage in transit is not affected by any sale or other disposition of the
goods which the buyer may have made, unless the seller has assented
thereto.
For Example :- A sold to B 80 bags of grain, B then sold (out of 80) 60 bags to
C. C after receiving from B the delivery order presented it to A. A told C
that grains would be delivered in due course. B then became insolvent. A’s
right against the 60 bags is lost since A recognized the title of C- the sub –
buyer.
Change of destination :-
Where goods are agreed to be delivered at a particular place but the buyer
then asks the seller to deliver them at a different place, the transit
continues till the goods are taken by the buyer or his agent at that place.

23. 3) Right of Re-Sale
The unpaid seller, who has retained possession of the goods in exercise of his
right of lien or who has resumed possession from the carrier upon
insolvency of the buyer, can resell the goods:
a) If the goods are of perishable nature, without any notice to the buyer
b) In other cases, after notice to buyer calling upon him to pay or tender the
price within reasonable time, upon failure of the buyer to do so.
The seller is entitle to recover from the original buyer damages caused to him
by the resale. But if nay profit accrues from the resale, such profit shall
go to the unpaid seller and not to the buyer.
The measures of damages in case of resale is the difference in the contract
price and the price realized on such resale plus the expenses of resale.
The seller must exercise his right of resale within a reasonable time. What is a
reasonable time will be determined by the facts of the case.

24. Rights against the Buyer personally
1) Right to Sue for Price
Where under a contract of sale the property in the goods has passed to
the buyer, and the buyer wrongfully neglects or refuse to pay the price,
the seller can sue the buyer for the price of the goods.
where under a contract of sale the price is payable on a day fixed
irrespectively of delivery, and buyer wrongfully neglects or refuse to pay
the price, the seller may sue the buyer for the price although the property
in the goods has not passed and the goods have not been appropriated to
the contract.
2) Suit for Damages
where the buyer wrongfully neglects or refuse to accept and pay for the
goods, the seller may sue him for damages for non-acceptance.
where the property in the goods has not been passed to the buyer, and
the price was not payable without passing of property, the seller can only
sue for damages and not for the price.

25. Case Study 1
A written contract to sell fruit mangoes contained the
express stipulation, “shipment to be made in good
condition.” In fact, some of the mangoes were not in
good condition when shipped. However, they were,
on arrival, still fit to be used for the purpose the
buyer had intended and although they were worth
less than they should have been, they could still have
been re-sold at a reduced price.

26. Case Study 2
Ramesh bought a motor-car from Suresh and used it
for four months. Suresh had no title to the car, and
consequently Ramesh had to surrender it to the true
owner. Ramesh sued to recover the total purchase
price he had paid to Suresh.

27. Case Study 3
A buyer responded to an advertisement describing a
car for sale as a “1961” model. He inspected the car
before buying it. After buying it he discovered that
the car consisted of half a 1961 model and half of an
earlier car.