The sales of goods act, 1930

History of the Act
• Sale Act was originally a part of the  Contract act 
Ss. 76 – 123 of the Indian contract act, 1872.
• Sales of Goods Act, 1930  based on the  English
Sale of Goods Act, 1893
• Sale of Goods Act, 1930  still part of the Indian
contract Act, 1872  repealing Ss. 76 – 123 of the
Indian contract Act, 1872  retaining principles of
contract  Offer, Acceptance. Consideration, Capacity
of contract, free consent, legality of consideration &
object.

Definitions
1. Buyer  S. 2 (1) – “ A person who buys or agree to buy.”
2. Seller  S. 2 (13) – “ A person who sells or agree to sell.”
• Buyer & Seller  complementary to each other  parties to
contract.
• Buyer is person  who buys or agrees to buy.
• Seller is person  who sell or agrees to sell.
3. Delivery S. 2 (2) – “ voluntary transfer of possession from one
person to another.”
• Delivery  transfer of possession & not ownership.

Definitions
4. Documents of Titles of Goods S. 2(4) – “ A Document of
title to goods’ includes a bill of lading, dock warrant,
warehouse-keeper’s certificate, Wharfingers certificate,
railway receipts, warrant or order for the delivery of
goods and any other document which is used in the
ordinary course of business as proof of the possession
or control of goods, or authorising or purporting (i.e.,
having its meaning) to authorise, either by endorsement
or by delivery, the possessor of the document to
transfer or receive goods thereby represented.”

Definitions
5. Goods S. 2 (7) – “Every kind of movable property other than
actionable claims and money; and includes stocks and shares,
growing crops, grass and things attached to or forming part of the
land which are agreed to be served before sale or under the
contract of sale.”
 Goods Include  movable property, stock & shares, growing
crops, grass, trees, goodwill, patent, trademarks, ship, water,
electricity etc & any thing attached to land or part of land
(served form earth) removed within reasonable period of time.
 Goods exclude  actionable claims (claims enforceable in
court), Money (legal tender & not old coins or foreign currency).

Definitions
Classification of goods  Existing, future, Contingent.
1. Existing Goods  existing at the time of the contract.
a) Specific Goods  goods identified & agreed by the parties.
b) Ascertained Goods (similar to Specific goods) goods
identified after the formation of the contract.
c) Unascertained Goods  goods not specifically identified by
parties.
2. Future goods  not existing at the time of the contract 
manufactured or produced  after entering into the contract
 its only an agreement to sell.
3. Contingent goods  acquisition by the seller depends on
contingency  type of future goods.

Definitions
6. Price S. 2(10) – “Price means the money consideration
for a sale of goods.”
7. Property S. 2 (11) – “the general property in the goods,
and not merely a special property.”
 Property  ownership of goods & not interest in goods.

Formation of a contract of sale
• Contract of sale S. 4 (1) Sale – “A contract of sale of goods is a
contract whereby, the seller transfers or agrees to transfer the
property or goods to the buyer for a price.
There may be a contract of sale between one part owner and
another.”
Essential of a contract of sale
1. Number of parties  minimum two parties (buyer & seller) 
transfer of ownership.
 law recognises some exceptions  partner may buy from a firm &
sell it to his partnership firm (firm can do the same), agent can
purchase his own goods from principal, one part owner purchasing
from other part owner.

Formation of a contract of sale
2. Goods  subject matter of the contract.
3. Transfer of property  buyer to seller  transfer of ownership
(transfer of possession not requisite).
4. Price  price may be paid or promise to pay  exchange of money
(partly or fully)  any thing other then money (no sales).
5. Absolute (without condition) or Conditional  for transfer of
property.
6. Form  no particular form for sale  can be expressed or implied
 S. 5 (2) states – “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.”
7. Essential of a contract  fulfil all the conditions of a contract.

Sale
1. Transfer of ownership  takes place immediately
2. Executed contract or Executory contract  executed
contract
3. Conveyance of property  buyer gets the right to enjoy
goods against the whole world.
4. Transfer of risk  takes place immediately and buyer
have to bear the loss even goods are in possession of
seller
5. Rights of seller against the buyer’s breach  seller can
sue the buyer even goods are in his possession

Sale
6. Rights of buyer against the seller’s breach  buyer can
sue the seller for damages & third party who brought
those goods.
7. Effect of insolvency of seller having possession of
goods  buyer can claim the goods from the official
receiver or assignee due to ownership transfer.
8. Effect of insolvency of the buyer before paying the price
 seller must deliver the goods due to ownership
transfer & can claim for rateable divided for unpaid price
9. Right in Rem / Personam  it is a right in rem

Agreement to sell
1. Definition  S. 4 (3) states – “where under a contract of
sale the property in the goods is to take place at a
future time or subject to some conditions thereafter to
be fulfilled, the contract is called an agreement to sell.”
S. 4 (4) “An agreement to sell becomes sale when the
time lapses or the conditions are fulfilled subject to
which the property in the goods is to be transferred.

Agreement to sell
1. Transfer of ownership  takes place at future time or subject to fulfillment of
some condition.
2. Executed contract or Executory contract  executory contract  something
remains to be done
3. Conveyance of property  buyer does not get the rights
4. Transfer of risk  transfer of ownership & risk does not takes place  risk of
loss is born by the seller even if the goods are in the possession of buyer
5. Rights of seller against the buyer’s breach  seller can sue the buyer for
damages even though goods are in the possession of the buyer.
6. Rights of buyer against the seller’s breach  buyer can sue the seller for
damages only
7. Effect of insolvency of seller having possession of goods  buyer cannot the
goods even paid for it & can claim rateable dividend for the paid price
8. Effect of insolvency of the buyer before paying the price  seller can refuse
the delivery of goods unless full price is paid
9. Right in Rem / Personam  it creates a right in personam.

Hire Purchase Agreement
• Hire purchase S. 2 (c) of the Hire Purchase Act, 1972 states – “Hire
purchase agreement means an agreement under which goods are
let on hire and the hirer has an option to purchase them in
accordance with terms of agreement, and includes an agreement
under which:
i. Possession of goods is delivered by the owner thereof to another
person on condition that such person pays the greed amount in
periodical installments, and
ii. The ‘property’ (i.e. ownership) in the goods is to pass to such
another person on the payment of the last of such installments, and
iii. Such another person has a right to terminate the agreement at any
time before the property so passes.”

Hire Purchase Agreement
1. How made  must be writing
2. Transfer of ownership  ownership transferred from
seller to hirer when all the agreed number of
installments are paid.
3. Option to return  hirer can terminate the agreement
any time  cannot be compelled by the seller to buy
the goods or pay the remaining installments.
4. Appointment of installment  when hired (hired
charges) & when purchase ( part payment).
5. Governing Act  Hire Purchase Act, 1972.
6. Sales tax  not applicable until it becomes sale.

Contract for Work and Labour’
• ‘Contract for work & labour’ or ‘contract for work and
materials’ or ‘contract for work and skill’
• Contract for work & labour  exercise of skills is primary
& delivery of goods is secondary.
• Generally party who wants the work to be done 
provides material & pay price for labour
• Sometimes the party who  exercise skill and labour 
provides the goods or material.

Effects of Destruction of Goods
1. Goods perishing before making the contract
under S. 7 of Sale of Goods Act  contract of sales
becomes void  if goods gets damaged or perises &
are nowhere near the description of goods as per the
contract  seller not having knowledge about it.
sales contract is void if –
i. It must be contract for sale of  specific goods.
ii. The goods have perished  before making the contract
iii. Seller not aware of  perishing or damage.

Effects of Destruction of Goods
2. Goods perishing before sale but after agreement to sell –
S. 8 of Sale of Goods Act,  contract to sales becomes void for 
goods perishing before sale but after agreement to sell  under
following conditions –
i. Contract of sale  must be an agreement of sale & not actual
sale’
ii. Agreement to sell must be for  some specific goods.
iii. Goods must perish or damaged before  ‘agreement of sell’
becomes ‘sale’  i.e. before transfer of ownership to the buyer.
iv. Goods perished or damaged  without wrongful act or default
on the part of the  seller or buyer  both are not responsible.

Modes of Ascertainment of Price
• Price  consideration for a contract of sale of goods
• Prices be fixed by –
1. By the terms  of contract
2. Fixed by  manner agreed.
3. Determined by the parties  during the course of the dealing
4. Reasonable price
5. By valuation of a third party 
i. If third party does not fix price  contract becomes void.
ii. If before fixing price part delivery done  reasonable price
will have to be paid.
iii. If one party prevents third party from fixing prices then 
innocent party file a suit for damages.

Conditions & Warranties
Introduction :-
• Buyer & seller make  representations or statements
(may or may not form part of contract)  if part of
contract then is called  ‘stipulations’
• Stipulations  all are not equally important.
• Stipulations  very crucial for the contract (primary) 
‘condition’
• Stipulations  which are secondary or lesser important
 ‘Warranty’.

Conditions
• S. 12 (2) Condition – “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.
• If the above stipulation not true (condition)  buyer can terminate
the contract & claim for refund or damages.
• Stipulation is  essential or important
• Treatment  breach of condition may be treated as breach of
warranty.
Types of conditions
• Conditions may be  Expressed or Implied.
• Expressed condition  specifically spelt by contracting parties.
• Implied condition  presumed to be implied by law in the contract of
sale  unless specifically excluded.
• In case of conflict  expressed conditions shall prevail.

Types of conditions
Types of implied conditions
1. Condition as to Title  transfer of ownership  in sale & agreement
to sell (time property should be passed)  buyer can reject if failed
to do so.
2. Condition as to description  goods should correspond to
descriptions  if not  buyer can reject.
 Buyer has not seen the goods  buyers buy the description by seller.
 Buyer has seen the goods  buyers buy the description by seller.
1. Condition as to sample 
 Goods supplied  similar to the sample
 Buyer is given reasonable opportunity  to compare the sample & the
goods supplied
 Goods delivered shall be free from  defects (seen & unseen) 
which can render goods un-merchantable

Types of conditions
4. Condition as to sample & description  must correspond as per
sample or description  failing  buyer can reject the goods.
5. Condition as to quality or fitness for buyer’s purpose  no implied
condition under the contract of sale  applies “Caveat Emptor”
(buyer beware)
Exceptions –
 Goods order for specific purpose & purpose known to the seller
 Buyer relies on  sellers skills & judgment
 Goods are purchase under  trade name
 Goods purchased on description (from the dealer dealing in it )
 assuming merchantable quality

Types of conditions
6. Condition as to merchantable quality  not defined by the act
 Goods buyed for consumption then  goods reasonable fit for
the purpose or use
 Goods bought for resale  commercial salable as per the
description in the market for full value.
6. Condition as to wholesomeness  part of merchantable  fir for
human consumption.
7. Condition as to trade usage  in quality or fitness for particular
purpose plus usage of trade  printing manufacturing & expiry
date for medicines.

Warranties
• Warranties  secondary stipulation to the contract
• S. 12 (3) warranties – “A stipulation collateral to the purpose of the
contract, the breach of which gives rise to a claim for damages but
not a right to reject the goods and treat the contract as repudiated.”
• Breach of warranty  buyer can claim only damages but cannot
reject the goods.
Types of Warranty
 Warranties can be  expressed or implied.
 Expressed warranties  stipulation specifically laid down by the
contracting parties.
 Implied warranties  implied or presumed to implied by law 
unless expressly excluded by the contracting parties.

Warranties
Implied warranties
1. Quite and undisturbed possession  right of the buyer  if buyers
enjoyment is disturbed on account of seller’s defective title  buyer
can sue the seller.
2. Freedom from encumbrance or charge  by the third party on the
goods purchased  if buyers possession is disturbed on account of
any charge  buyer can sue the seller.
3. To disclose dangerous nature of goods  selling knowing that the
goods are inherently dangerous or likely to be then  seller should
warn the buyer  failing to do so he will be liable.
4. Warranty annexed by trade usage  similar to implied condition.

How to determine weather a stipulation is a condition or
warranty ?
• S. 12 (4) states – “A stipulation in a contract of sale is a
condition or warranty depends on the construction of the
contract. A stipulation may be a condition thought called
a warranty in the contract.”
• Sometimes warranty is treated as  condition (primary).
• Stipulation is  collateral (not that essential or
important)
• Treatment  breach of warranty cannot be treated as
breach of condition.

Circumstances under which a condition may be treated as
a warranty
• Sometimes conditions can be changed to  warranty  breach of
which can be treated as  breach of warranty  buyer can claim
the damages but cannot terminate the contract.
• Breach of such warranty may be  “Voluntary” or “Involuntary
circumstances”
A. Voluntary circumstances  buyer has the right to treat  breach of
condition as breach of warranty  if done so  buyer cannot
change his mind or repudiate the contract.
1. Waiver of a condition  Voluntary relinquish the condition & not
reject the goods  can claim damages.
2. Option to treat the breach of a condition as breach of warranty
 can claim damages.

Circumstances under which a condition may be treated as
a warranty
B. Involuntary Circumstances  buyer has to treat
compulsorily breach of condition as breach of warranty.
1. In case of specific goods  property if passed on to
the buyer (ownership).
2. Contract not severable and acceptance of goods 
whole or part  partly consumed (goods not as per
specification).

Stipulations as to time
• S. 11 states – time is a material factor of the contract or
not dependent on the nature of the contract.
• Stipulation of time  generally not deemed to be 
essence of the contract  unless specifically stated (if
so failure leads to end of the contract)  stipulated time
of delivery.

Caveat Emptor
• Caveat emptor  “buyer beware”  “the person buying
goods, must keep his eyes open, his mind active and
conscious while buying the goods.”
• S. 16 states  “subject to the provisions of this act and
of the other law for the time being in force, there is no
implied warranty or condition as to the quality or fitness
for any particular purpose of goods supplied under a
contract of sale.”
• This doctrine lost its importance by creating exceptions.

Definition of an unpaid seller
• S. 45 Unpaid seller – “One who has paid or tendered the
whole of the price or one who receives a bill of exchange
or other negotiable instrument 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.”
• For unpaid full or part payment for goods then  seller
can said to be unpaid.
• Expenses other then the price unpaid then  seller
cannot be said unpaid.

Rights of an unpaid seller
.
Right of an unpaid Seller
Against goods Against the buyer
Where the property in goods has
passed to the buyer
Where the property in goods has
not passed to the buyer
Right of
lien
Right of
Stoppage in
transit
Right of
Resale
With holding
delivery of goods
Other
remedies
Suit for price Suit for Damages Suit for Interest

I. Against goods
A. Where property in goods has passed to the buyer
 Seller has transferred the  ownership to the buyer.
1. Right to lien (right to retain)  possession of goods  until full
price is paid or tendered.
When can rights to lien be exercised ?
i. Goods sold  without stipulation of credit.
ii. Good sold on credit  credit term of payment has expired.
iii. Buyer becomes insolvent
iv. Seller holds the goods as  agent or bailee.
v. Partly delivered goods (unless circumstances show seller has
waived his right).

Termination of lien
i. Seller deliver the goods to the carrier or bailee  without reserving the right
of deposal.
ii. When buyer or his agent  acquire possession of goods lawfully.
iii. Seller waivers the  right of lien.
iv. Buyer dispose off the goods by sale or other manner  with the consent of
the seller.
2. Right of stoppage of goods in transit  to regain the possession of the
goods & retain until  price is paid.
 Goods should bee in the possession of  someone intervening  between
the seller & buyer.

When can the right to stoppage of goods in transit be exercised ?
i. Seller has parted with  the possession of goods.
ii. Buyer has taken  possession of the goods.
iii. Buyer has become  insolvent.
Buyer is considered insolvent (declaration of court not necessary) when
he cease to pay debts in normal course of business or when he cannot pay
even if the payment is due.
How is stoppage of transit exercised ?
 By taking actual  possession of goods.
 By giving notice of claim to  carrier or bailee  having possession of the
goods.

When is right of stoppage in transit lost?
 Buyer or his agent  obtains possession.
 Carrier or bailee acknowledges (after reaching the appointed
destination)  to the buyer that  he holds goods on the his
(buyers) behalf.
 Carrier or bailee  wrongly refuses to deliver the goods  to buyer
or his agent.
 In case of part delivered goods  remaining goods can be stopped.
 Transit comes to an end  during part delivery  circumstances
indicates sellers agreement  to give up whole possession of the
goods.

Right to resale
• Unpaid seller exercise  ‘right to lien’ or ‘right to stoppage of in
transit’  he can resale the goods (by resuming possession of
goods).
i. Goods are of  perishable nature  notice not required  buyer
responsible for the losses  profit on resale can be retained by the
seller.
ii. Seller has give notice of intention for resale to the buyer  still the
payment remains unpaid  seller loses his right to losses & profits
on resale cannot be retained.
iii. Seller can resale the goods  in case buyer defaults in payment for
goods  notice not required  buyer responsible for the losses 
profit on resale can be retained by the seller.

B. Where the property in the goods has not passed to the buyer 
unpaid seller can exercise  right to with hold delivery of the
goods.
 Other remedies  Right to claim for the damages suffered, special
damages etc.
II. Right of an unpaid against the buyer personally
1. Suite for price  goods transferred to buyer & price not paid by
him  as per the terms of the contract.
2. Suite for damages  when buyer wrongfully refuses to accept the
goods or repudiates the contract.
3. Suite for interest  buyer breaches the contract  seller can file a
suite for price & can claim for interest from the date of tender of
goods or from the date the price becomes payable.

Delivery of Goods
• Delivery of goods  voluntary transfer  of possession  from one person
to another  simultaneously (unless parties agree otherwise)  seller
cannot demand price in advance (unless stipulated),
• S. 33 defines Delivery as  “Delivery of goods sold may by doing anything
which the parties agree shall be treated as delivery or which has the effect
of putting the goods in the possession of the buyer or of any person
authorized to hold them on his behalf.”
• Delivery may be  actual, symbolic or constructive.
• Effect of part delivery
S. 34 states  “A delivery of part of goods, in progress of the delivery of the
whole, has the same effect, for the purpose of passing the property in such
goods, as a delivery of the whole, but a delivery of part of the goods, with an
intention of serving it form the whole, does no operate as a delivery of the
remainder.”
 Delivery of part can be considered as  delivery of whole (not always).

Rules of Delivery
• S. 36 states  “Whether it is for the buyer to take possession of the goods
or for the seller to send them to the buyer us a question depending in each
case on the contract, express or implied, between the parties. Apart from
any such contract, goods sold are to be delivered at the place at which they
are at the time of the sale, and goods agreed to be sold are to be delivered
at the place at which they are at the time agreement to sell, or, if not then in
existence. At the place at which they are manufactured or produced.”
1. Place of Delivery 
 In absence of specification in contract  place of sale
 Agreement to sell  goods not in existence  the place at which they are at that
time.
 Agreement to sell  goods not in existence  place of manufactured or
produced.
1. Time of delivery  time important (depending up on the nature of the
contract)  not time specified then reasonable time to be considered.

Rules of Delivery
3. Delivery by attornment  acknowledgment by the third party  to the buyer
 about possession of goods on his behalf.
4. Time for tender of delivery  reasonable  for buyer to demand & seller to
tender.
5. Expenses of delivery  unless agreed  expenses incidental to putting the
goods in to a deliverable state  shall be born by the seller.
Rules regarding wrong Quantity
1. Short quality  less then contracted  buyer have option to accept or
reject short quantity.
2. Excess quantity  buyer can ‘accept the contracted quantity & reject the
excess’ or ‘reject the whole’  he is not bound to do accept or reject the
excess.
3. Delivery of mixed goods (not contracted different description)  buyer can
accept goods specified by contract & reject the others’ or ‘reject the whole’

Rules of Delivery
4. Installment Deliveries  unless agreed  buyer not bound to
accept goods in installments.
5. Delivery to Carrier or Wharfinger 
 Delivery to carrier by the seller  it operates as delivery to the
buyer.
 Place of delivery specified  delivery to the carrier  does not
amount to the delivery to the buyer.

Cost, Insurance & Freight (C.I.F) contract
• Such contract are used for  sea born commerce.
• Seller is bound to the following act
1. To make invoice  of the goods sold.
2. Seller bares  shipment charges.
3. Seller requires to take insurance as per the terms of current in trade  for
the benefit of the buyer.
4. To procure a ‘contract of Affreightment’  for delivery of goods at the
destination  as specified in the contract.
5. Dispatching the seller  without reasonable delay  Invoice, Bill of lading,
policy of insurance and other usual documents  I
 If seller fails  it would amount breach of contract on the part of the seller
 Buyer refuses to take possession of goods  without valid reason 
breach of contract on the part of the buyer.
 In CIF  contracts property passes  when buyer receives the document
 paying the price or arrival of goods or examination of the goods is
immaterial.

Free on Board (F.O.B) contract
• Free on Board  seller bars the expenses for  loading the goods
on the ship.
• Buyer’s risk  as soon as the goods are loaded  becomes
responsible for  payment of  freight (shipment charges),
insurance & other expenses presented  even if the goods are lost
by that time.

Auction Sale
• Auction sale  public sale  intending buyer come together  at a
particular place & quote the price at which they are willing to buy.
• Price offered  called bid.
• Person offering the price  called the Bidder.
• Goods are sold to the  highest bidder.
• Auction can be conducted by the  seller (principal) or through
Auctioneer (agent for seller & agent for seller & buyer after sale).
• Advertisement of action sale  invitation to public to make offer.
• Intending buyer  cannot sue the auctioneer  if he cancels or
postpones the auction to sale.

Rule regarding Sale by Auction (Section 64)
1. Goods sold in lot  each lot is prima facie  subject to a separate
contract.
2. Contract of sale is completed  when auctioneer  announces its
completion by fall of hammer or by other customary mode.
3. Bidder can withdraw bid  before announcement of completion of
sale.
4. Seller of any one on behalf of seller  cannot bid  unless
expressly reserved right to bid  agreement not to bid against each
other “Knock-Out agreement  valid agreement
5. Seller have right to  ‘Reserve price’ or ‘upset price’ (price below
which auctioneer will not sell).

Rule regarding Sale by Auction (Section 64)
6. Seller have right to make  auction subject condition  right to sell
not at highest bid or any bid  without giving any reason for his
decision.
7. Fall of hammer or any customary manner  bringing contract of
sale  creates a relationship of  Promisor & Promisee  under
section 20 of the Act.
8. Implied warranties in an auction to sale
 Auctioneer authority to sell.
 Auctioneer warrants that  he is unaware of any defect  in
seller’s title & assure quite & peaceful possession of goods.

The sales of goods act, 1930

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