Introduction, terminologies, essentials

2. INTRODUCTION
• Till 1930,transactions relating to sale and
purchase of goods were regulated by the
Indian ContractAct,1872.
• In 1930, the Indian Contract Act, 1872
were cancelled and a separate Act
called ‘The Indian Sale of Goods
Act,1930 was passed. It came into force
on 1st July,1930.

3. ⦿With effect from 22nd
September,1963,the word ‘Indian’was
also removed.
⦿Now,the present Act is called’ The sales
of goods act,1930’

4. DEFINITION OF A CONTRACT OF
SALE
⦿ Section 4 defines a contract of sale as
“a contract whereby a seller transfers or
agrees to transfer the property in goods
to the buyer for a price”

5. Two parties
⦿There must be a seller as well as a
buyer.’
⦿Buyer’ means a person who buys or
agrees to buy goods[Section
29(10)].
⦿’Seller’ means a person who sells or
agrees to sell goods [Section 29(13)]
.

6. ESSENTIALS OF A CONTRACT OF
SALE
⦿ Two parties
⦿ Goods
⦿Transfer of property
⦿ Price
⦿ Essential elements of a valid contract

7. Goods
⦿ 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”
⦿The sale of immovable property is
not covered under Sale of Goods
Act.

8. Transfer of property (ownership)
⦿Here property means ownership. In a
contract of sale, it is the ownership that
is transferred (in the case of sale), or
agreed to be transferred (in the case of
agreement to sell), as against transfer of
mere possession.

9. Price
⦿the consideration in a contract of sale
has necessarily to be ‘money’.
⦿When there is no consideration, it
amounts to gift and not sale.

10. ⦿If for instance, goods are offered as the
consideration for goods, it will not
amount to sale. It will be called a barter.
⦿To sum-up: the Act applies only when
the buyer pays by cash (or by cheque,
credit card, etc)

11. Essential elements of a valid
contract
⦿All other essentials of a valid contract
as per the Indian Contract Act, 1872
must be present:
⦿ The parties to the contract must be
competent to contract, the consent of
the parties must be free, the object of
the contract must be lawful and so on.

12. SALE AND AGREEMENT TO SELL
Sale
⦿Where under a contract of sale, the
property (ownership) in the goods is
transferred from the seller to the buyer, it
is called a sale.
⦿A sale is an executed contract

13. SALE AND AGREEMENT TO SELL
Agreement to sell
⦿Agreement to sell means a contract of
sale under which the transfer of property
in goods is to take place at a future date
or subject to some conditions thereafter
to be fulfilled.

14. 15
Contract It is an executed contract. It is an executory contract.
Transfer of property
The property in the goods sold passes to the buyer
at the time of contract. It passes immediately.
It takes place at a future time or subject to
fulfilment of conditions.
Conveyance of property
It creates a right in rem –right against things ,it gives
right to the buyer to enjoy the goods against the
whole world
It creates a right in personam – right against a
person. Right to enforce a particular person’s to fulfill
his obligation.
Transfer of risk
The transfer of risk takes place immediately. If there
is loss of goods, it will fall on the buyer.
There is no transfer of risk of loss of goods as
ownership is not transferred. The loss will be
faced by the seller.
Right of seller in case of
breach
Since the property has passed to the buyer, the
seller can sue the buyer for price of the goods.
The seller can only sue for damages, unless the
price was payable at a particular date.
Right of buyer in case of
breach
He can sue the seller for damages. He can sue the seller for damages
Insolvency of seller in
possession of goods
He can claim the goods from the Official assignee
(officer of the court)
He cannot claim the goods but only a rateable
dividend for the money paid.
Insolvency of buyer before
paying the price
The seller has to deliver the goods to the Official
assignee
The seller can refuse to deliver the goods to the
Official Assignee or Receiver.

15. Classification of goods
• Goods may be classified as:
1. Existing
2. Future
3. Contingent
Existing goods are those which are owned or
possessed by the seller at the time of the
contract

16. Classification of goods
• Existing goods may be either:
a) Specific or ascertained
b) Generic and unascertained
Specific goods means goods identified and
agreed upon at the time a contract of sale is
made
Ascertained goods, though normally used as
synonym for specific goods.

17. Classification of goods
• Generic or unascertained goods are goods
indicated by description and not specifically
identified
• Example: Anthony, who owns a TV
showroom, has 20 TV sets and agrees to sell
any one of them to Bharti. The contract is for
unascertained goods, since which particular
TV set shall become the subject matter of
sale is not individualised at the time of the
contract of sale.

18. Classification of goods
⦿Future goods means goods to be
manufactured or produced or acquired
by the seller after making the contract of
sale
Example: Kulkarni agrees to sell future
crop of a particular agricultural field in
the next season. This is an agreement
to sell future goods

19. Classification of goods
• Contingent goods are the goods the
acquisition of which by the seller depends
upon a contingency which may or may not
happen. Contingent goods is a part of
future goods
Example: Alka agrees to sell to Vivek a
certain painting only if Chetan, its present
owner sells it to her. This painting is
classified as contingent goods

20. Conditions & Warranties (Sec. 11-17)
⦿Sec. 12(2) defines a ‘condition’ as, ‘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’
(cancel),
⦿Sec 12(3) defines a ‘warranty’ as, ‘stipulation
collateral to the main purpose of the contract,
the breach of which gives rise to claim for
damages but not to a right to reject the
goods and treat the contract as repudiated’ .

21. Condition example
X wants to purchase a car from Y which must have a
mileage of 20 km/lt.Y pointed to a car and said this will
suit you. X buys that car only but later found that that
this car has a mileage of 15 km/lt. This is a breach of
condition.
Warranty example:
A car which is warranted to be comfortable to drive
and does not make noise has been bought by a man
who gets irritated by the unpleasant noise made by it.
Sitting is also not comfortable. This is breach of
warranty.

22. Conditions & Warranties (Sec. 11-17)
⦿ The effect of a breach of a ‘condition’ is to give
the aggrieved party a right to treat the contract
repudiated, i.e., if price has been paid, the
buyer can claim the refund of price plus
damages for breach
⦿ In case of breach of ‘warranty’, only damages
can be claimed, i.e., the buyer must accept the
goods and claim damages for the breach of
warranty

23. When condition can be treated as a
warranty:
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a) Voluntary waiver of condition by the buyer
a) Voluntary treatment by the buyer that the breach of
condition would be treated as warranty. He cannot
change mind again
a) the buyer has accepted the goods wholly or in part , the
breach of condition could only be treated as breach of
warranty.

24. Conditions and Warranties
24
Express and Implied Conditions and Warranties:
⦿ Express conditions and warranties are those which are
expressly declared or specified in the contract ( Eg
Price, Time and place of delivery, etc)
⦿ Implied conditions and warranties are those which are
implied by the Law

25. Conditions and Warranties
25
Implied conditions
⦿ Conditions as to title: The seller is supposed to have
good title unless contrary is proved
⦿ Sale by description: Sale by description and
specification—the goods would conform to the
description and specification
⦿ Sale by description as well as by sample—The entire
goods shall match with the sample – no justification to
say the bulk of the goods match with the sample
⦿ Condition as to quality or fitness: Fitness for a particular
purpose:
⦿ Condition as to merchantability: Goods are
commercially saleable with the description commonly
known.

26. Conditions and Warranties
26
Implied conditions (contd..)
⦿ Sale by Sample: Bulk of the goods must match with the
sample and the buyer has reasonable opportunity of
comparing the bulk with the sample
⦿ Condition as to wholesomeness: Food grains and
eatable items. A piece of bread containing a stone
damaging the teeth is not wholesome

27. Conditions and Warranties
27
Implied warranties
⦿ Warranty of quiet and peaceful possession
⦿ Warranty of freedom from encumbrances
⦿ Warranty as to quality or fitness by usage of trade
⦿ Warranty to disclose dangerous nature of goods (
Crackers,Acids, Phenyl, Pesticides, Fungicides)etc

28. Rule of Caveat Emptor(page 240)
28
“ Caveat Emptor” means LET THE BUYER BEWARE.
⦿ In a contract of sale, the seller is not duty bound to
disclose all the truth about the goods. Buyers should
thoroughly examine before them. They may ask the
seller all the clarifications required. If the seller shows
the sample and the goods corresponds to the sample,
the buyer cannot blame the seller anytime thereafter. In
sale of goods on “as is where is” basis, buyer will not
have any subsequent claims

29. An unpaid seller is one
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a) who has not been paid
b) A bill of exchange or other negotiable instrument
received but dishonored or otherwise irregular.

30. Rights of an unpaid seller
30
Unpaid seller has two kinds of rights:
a) Against the goods
b) Against the buyer personally
Right against the goods
–a) when the property in goods has passed: Lien,
Stoppage in Transit and Re-sale
--b) when the property in goods has not passed:
Withholding delivery and Stoppage in Transit

31. Rights of an unpaid seller
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Right against the buyer personally
a) Suit for the price
b) Suit for damages
c) Repudiation of the contract
d) Suit for interest

32. Rights of an unpaid seller
32
Right of Lien:
⦿ A lien is a right to retain the possession of the goods until the
price is paid.
⦿ This right is immediate in case of sales.
⦿ In case of credit sales it is after the expiry of the credit
period.
⦿ The right is also available when the buyer becomes insolvent
at any time.
⦿ Seller having made part delivery of the goods may exercise
lien on the remainder

33. Rights of an unpaid seller
33
Right of stoppage in transit:
⦿ This right is available: a) when the buyer becomes
insolvent and b) when the goods are in transit.
⦿ Stoppage can be effected by taking possession or by
giving notice of stopping.

34. Rights of an unpaid seller
34
Right of Resale
⦿ When the goods are perishable
⦿ When the notice of resale is given to the buyer but
buyer does not respond by payment within a reasonable
time
⦿ In case of loss in a resale, seller can claim it from the
buyer as damages for breach of contract

35. Rights of an unpaid seller
35
Right of withholding delivery:
⦿ Where the property in goods has not passed to the
buyer, the unpaid seller has a right of withholding
delivery

36. ⦿Rights and
Duties of buyer
36

37. ⦿ Rights of the buyer
37
⚫ To have delivery of the goods as per contract
⚫ To reject the goods when they are not of the
description, quality or quantity as specified in the
contract.
⚫ To repudiate the contract when goods are delivered
in installments without any agreement to that effects.
⚫ To be informed by the seller, when the goods are to
be sent by sea route, so that he may arrange for
their insurance.
⚫ To have a reasonable opportunity to examine the
goods for ascertaining whether they are in
conformity with the contract.

38. ⚫To sue the seller for recovery of the price,
if already paid, when the seller fails to
deliver the goods.
⚫To sue the seller for damages if the seller
refuses to deliver the goods.
⚫To sue the seller for specific performance
⚫To sue the seller for damages for breach
of a warranty.
⚫To sue the seller for damages for
anticipatory breach of contract
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39. Duties of buyer
39
⦿ To accept the delivery of goods, when the
seller is willing to make the delivery as per
the contract.
⦿ To pay the price in exchange for
possession of the goods
⦿ To apply for delivery of the goods
⦿ To demand delivery of the goods at a
reasonable hour
⦿ To bear the risk of deterioration in the
course of transit

40. ⦿ To inform the seller in case the buyer
refuses to accept or reject the goods
⦿ To take the delivery of the goods within a
reasonable time
⦿ To pay damages for non-acceptance of
goods
⦿ To pay the price, where the property in the
goods are passed to the buyer.
⦿ To accept delivery of the goods in
installments and pay for them, in
accordance with the contract.
40

41. Chhunna Mal Ram Nath vs. Mool Chand Ram Bhagat
Plaintiffs entered into contract for taking deliveries of the
goods packed in wooden boxes from the defendants, which
latter was to secure from London. Since British government
prohibited the supply of such goods in wooden boxes, hence,
defendants offered to supply the goods in bales to which
plaintiffs refused and “cancel[ed] the goods” without claiming
any compensation thereof in any of the correspondences.
Plaintiffs later claimed damages for non-delivery.

42. Digambar Pershad, D got the contract of felling
trees and collecting timber through an
agreement to sell. D commenced the work of
felling trees. All the trees were felled, sawn
and timber was collected at a central point for
transportations. D claimed that all precautions
had been taken to avoid inflammatory material
around the storage area, and watchmen were
also appointed to keep vigil. Fire broke out and
destroyed the timber. The state (S), however,
demanded the amount due under the sale. D
filed a writ petition against the State of UP.

43. Title to the goods had not passed to D as the stage of removing
timber had not reached.
There was no completed sale but only an agreement to sell as the
payment was yet to be made.
Before the sale was completed, the subject-matter of the contract
was destroyed by fire and, therefore, the contract stood frustrated
and hence D was not liable to pay.
Respondents (S)
The condition (21) clearly provided that after 30 days from the
date of acceptance of the contract or from the date of
commencement of work, (whichever is earlier) the buyer will be
fully responsible for the damage caused to the goods. Since this
time had passed the risk was with the buyer.