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Sale of Goods Act
Sale of Goods Act
• (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.
• In sale, the title of goods transfers to the buyer with the transfer of
goods.
• In an agreement to sell, the title of goods remains with the seller as there
is no transfer of goods.
• In contract of sale the seller can sue the buyer for breach of contract; In
agreement to sell, the seller can sue the buyer only for damages but not
for the price.
• 1. A sale is governed by the Sale of Goods Act, 1930; where as, A “hire-
purchase agreement” is governed by the Hire Purchase Act, 1972
• 5. Under contract of sale, risk passes to the buyer as the buyer become
the owner when the sale takes place. Under hire purchase agreement,
the risk is with the seller as he remains the owner.
• 6. Under contract of sale, the buyer cannot terminate the contract and
refuse to pay the price of the goods. Under hire purchase agreement, the
hirer can discharge the contract at any time and he is not required to
pay further.
• 7. Under contract of sale, the buyer becomes the owner and gets all the
rights of an owner; Under hire purchase agreement, The hirer does not
become the owner and his position is that of a bailee only. He becomes
owner only when all the installments are paid.
• 8. Under contract of sale, In case of resale by the buyer, the third party
will get a better title of the goods against the original seller; Under hire
purchase agreement, A third party would not get good title against the
original seller since the hirer had no title to goods.
• 9. Under the sale, In case of default by the buyer, the seller can sue for
price; Under hire purchase agreement, Seller can take repossession of
goods as he is the real owner.
• Express conditions are usually consisted language like “if”, “on condition
that”, “provided that”, “I the even that”, and “subject to”.
• If an agreement does not make an event a condition then the court may
supply a term to that effect.
What is condition?
– In this case, the seller is bound to deliver the garment before the
date of the wedding as the delivery of the garment after the said
date of the wedding is of no use to the buyer and the buyer can
refuse to accept the same since the condition to the contract is not
fulfilled.
What is warranty?
• (2) Where a contract of sale is not severable and the buyer has accepted
the goods or part thereof, 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.
• Section 14-17 of the Sale of Goods Act, 1930 deal with the implied
conditions and warranties attached to the subject matter for the sale of a
good which may or may not be mentioned in the contract.
• 14. Implied undertaking as to title, etc.—
(a) an (1) implied condition on the part of the seller that, (i) in the case of a
sale, he has a right to sell the goods and that, (ii) in the case of an
agreement to sell, he will have a right to sell the goods at the time when
the property is to pass;
• This means that the seller has the right to sell a good only if he is the
true owner and holds the title of the goods or is an agent of the title
holder.
– When a good is sold the implied condition for the good is its title,
i.e. the ownership of the good.
• If the seller does not own the title of the said good himself and sells it to
the buyer, it is a breach of condition.
• In such a situation the buyer can return the goods to the seller and claim
his money back or refuse to accept the good before delivery or whenever
he learns about the false title of the seller.
• b) an (2) implied warranty that the buyer shall have and enjoy quiet
possession of the goods;
• (c) an implied warranty that the goods shall be free from any charge or
encumbrance in favour of any third party not declared or known to the
buyer before or at the time when the contract is made.
Section 15. Sale by description.—
• Section 15 of the Sale of Goods Act, 1930 explains that when a buyer
intends to buy goods by description, the goods must correspond with the
description given by the buyer at the time of formation of the contract,
failure in which the buyer can refuse to accept the goods.
• (a) that the bulk shall correspond with the sample in quality;
• (b) that the buyer shall have a reasonable opportunity of comparing the
bulk with the sample;
• (c) that the goods shall be free from any defect, rendering them
unmerchantable, which would not be apparent on reasonable
examination of the sample.
• The transfer of property in goods from the seller to the buyer is the
essence of a contract of sale. Therefore the moment when the property in
goods passes from the seller to the buyer is significant for following
reasons:
– For example, the buyer may sue the seller for non-delivery of the
goods or when the seller has resold the goods, etc.
• Risk follows ownership -- The general rule is that the risk follows the
ownership, irrespective of whether the delivery has been made or not. If
the goods are damaged or destroyed, the loss shall be borne by the
person who was the owner of the goods at the time of damage or
destruction. Thus the risk of loss prima facie is in the person in whom
the property is.
• Action Against Third parties -- When the goods are in any way
damaged or destroyed by the action of third parties, it is only the owner
of the goods who can take action against them.
• Suit for Price - The seller can sue the buyer for the price, unless
otherwise agreed, only after the goods have become the property of the
buyer.
• Insolvency - In the event of insolvency of either the seller or the buyer,
the question whether the goods can be taken over by the Official Receiver
or Assignee, will depend on whether the property in goods is with the
party who has become insolvent.
• CHAPTER III
• (1) Where there is a contract for the sale of specific or ascertained goods
the property in them is transferred to the buyer at such time as the
parties to the contract intend it to he transferred.
• (2) For the purpose of ascertaining the intention of the parties regard shall
be had to the (i)terms of the contract, (ii) the conduct of the parties and
the (iii) circumstances of the case.
• The above two sections deals with essentials requirements for transfer of
property in the goods are:
• it is immaterial (i) whether the time of payment of the price or (ii) the time
of delivery of the goods, or (iii) both, is postponed.
• Illustration
• while the contract is being made on 20th January the property in the
specific lot of hemp shall be transferred from A to B on 20th January
itself.
• Where there is a contract for the sale of specific goods and the seller is
bound to do something to the goods for the purpose of putting them into
a deliverable state, the property does not pass until such thing is done
and the buyer has notice thereof.
• Illustration: There was a contract for the wood of Oak trees in a certain
forest.
• The buyer purchased the wood from the seller selecting certain portion of
trees and rejecting others.
• According to the custom of trade, the seller was to separate the selected
portions from the rejected portions.
• But the buyer threw upon himself the duty of separating the two
portions.
• The court decided that no transfer of ownership has taken places so far
as wood is concerned.
• According to Section 22, where there is a contract for the sale of specific
goods in a deliverable state but the seller is bound to measure, weight or
count the goods in order to determine the price, there would be no
change of ownership from the seller to the buyer till such act is done and
the buyer has notice thereof.
• Illustration: There was a contract for the sale of 289 bales of goat skin.
Every bale was to contain 5 dozens smaller bales and according to the
contract, the price was to be determined according to the price of smaller
bales so that the seller was to count the number of smaller bales in every
bigger bale.
• It was decided that no transfer of property has taken place when the
bales were destroyed by the fire during the process of counting by the
seller.
According to Section 23
– “Where there is a contract for the sale of unascertained or future
goods by description and goods of that description as well as in
deliverable state are unconditionally appropriated to the contract,
either by the seller with the consent of the buyer or by the buyer
with the consent of the seller, the property in the goods shall be
transferred from the seller to the buyer, as soon as such
appropriation is made, the consent of the buyer or the seller as the
case may be obtained either before or after appropriation.
– For example: where an order was placed for tea sets, jars and
glasses made of china clay and where the seller while supplying
the goods also placed some other things in the parcel it was held
that there was no appropriation because the goods did not exactly
answer the description given in the contract.
– By the buyer with the consent of the seller: Where the buyer is
holding the goods on behalf of the seller as an agent, the buyer can
appropriate the goods for the purpose of the contract, inform the
seller regarding the same, obtain his consent only then, the
property shall be transferred to the buyer.
• Illustration No.1
– As soon as B will fill the petrol in the steel tins sent to him by the
buyer, the property shall be transferred from B to A because the
consent of the buyer to the appropriation made by the seller shall be
taken to have been given by the buyer himself supplying the steel
tins (consent of buyer before appropriation).
• Illustration No. 2
– A of Madras orders certain goods from B a manufacturer of
Calcutta.
– After the goods are ready, B appropriates the goods to the contract
informing A that the goods are ready for delivery upon which A
requests B to send them by Rail to Madras after affecting the
Insurance thereon.
• Illustration No. 3
– the words “wait orders of the buyer” are pasted on the gunny bags
with the address of the buyer,
– it was decided that the property has not changed hands although
the goods are in a deliverable state
– because the buyer’s consent to the appropriation has not yet been
obtained.
• 5. Method of Appropriation
• (c) By the delivery of the goods to a common carrier or bailee for the
purpose of transmission to the buyer without reserving the right of
disposal .
• Meaning of reserving the right of disposal – Section 25
(1) Where there is a contract for the sale of specific goods or where goods are
subsequently appropriated to the contract, the seller may, by the terms of
the contract or appropriation, reserve the right of disposal of the goods
until certain conditions are fulfilled.
• (3) Where the seller of goods draws on the buyer for the price and
• transmits to the buyer the bill of exchange together with the bill of lading
or, as the case may be, the railway receipt,
• the buyer is bound to return the bill of lading or the railway receipt if he
does not honour the bill of exchange; and,
• when the property passes to the buyer, the risk devolves on the buyer
whether the delivery has been made or not.
• But if there is any deal in the transfer of property due to the fault of any
one of the parties to the contract, the risk shall remain with the party
but for whose fault the property would have been transferred.
• Section 26
• Provided that, where delivery has been delayed through the fault of either
buyer or seller, the goods are at the risk of the party in fault as regards
any loss which might not have occurred but for such fault:
• Provided also that nothing in this section shall affect the duties or
liabilities of either seller or buyer as a bailee of the goods of the other
party.
• (a) when he signifies his approval or acceptance to the seller or does any
other act adopting the transaction;
• (b) if he does not signify his approval or acceptance to the seller but retains
the goods without giving notice of rejection, then, if a time has been fixed
for the return of the goods, on the expiration of such time, and,
• Section 27. Sale by person not the owner.—Where goods are sold by a
person who is not the owner thereof and who does not sell them under
the authority or with the consent of the owner,
• the buyer acquires no better title to the goods than the seller had, unless
the owner of the goods is by his conduct precluded from denying the
seller’s authority to sell:
• Provided that, where a mercantile agent is, with the consent of the
owner, in possession of the goods or of a document of title to the
goods, any sale made by him, when acting in the ordinary course
of business of a mercantile agent, shall be as valid as if he were
expressly authorised by the owner of the goods to make the same;
• provided that the buyer acts in good faith and has not at the
time of the contract of sale notice that the seller has not
authority to sell.
• If one of several joint owners of goods has the sole possession of them
• the property in the goods is transferred to any person who buys them of
such joint owner in good faith and
• has not at the time of the contract of sale notice that the seller has
not authority to sell.
• the contract has not been rescinded at the time of the sale,
• provided he buys them in (1) good faith and (2) without notice of the
seller’s defect of title.
• CHAPTER V
RIGHTS OF UNPAID SELLER AGAINST THE GOODS
• (a) when the whole of the price has not been paid or tendered;
• (2) 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.
• (1) Subject to the provisions of this Act and of any law for the time being in
force, notwithstanding that the property in the goods may have passed to
the buyer, the unpaid seller of goods, as such, has by implication of law—
(a) a lien on the goods for the price while he is in possession of them;
(b) in case of the insolvency of the buyer a right of stopping the goods
in transit after he has parted with the possession of them;
• (2) Where the property in goods has not passed to the buyer, the unpaid
seller has, in addition to his other remedies, a right of withholding
delivery similar to and co-extensive with his rights of lien and stoppage
in transit where the property has passed to the buyer.
• Where any right, duty or liability would arise under a contract of sale by
implication of law, it may be negatived or varied by express agreement or
by the course of dealing between the parties, or by usage, if the usage is
such as to bind both parties to the contract.
• Seller’s lien.—(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 stipulation as to credit;
• (b) where the goods have been sold on credit, but the term of credit has
expired;
• (2) The seller may exercise his right of lien notwithstanding that he is in
possession of the goods as agent or bailee for the buyer.
• 48. 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.
• (a) when he delivers the goods to a carrier or other bailee 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;
• (2) The unpaid seller of goods, having a lien thereon, does not lose his lien
by reason only that he has obtained a decree for the price of the goods.
• Stoppage in transit
Section 50
• 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.
• If 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.
• 1) Goods are deemed to be in course of transit from the time when they
are delivered to a carrier or other bailee for the purpose of transmission to
the buyer, until the buyer or his agent in that behalf takes delivery of
them from such carrier or other bailee.
• (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) If, after the arrival of the goods at the appointed destination, the carrier
or other bailee acknowledges to the buyer or his agent that
• It is immaterial that a further destination for the goods may have been
indicated by 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.
• (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.
• How stoppage in transit is effected – Section 52
(b) by giving notice of his claim to the carrier or other bailee in whose
possession the goods are.
Such notice may be given either (i) to the person in actual possession of the
goods or (ii) to his principal.
In the latter case, the notice to be effectual, shall be given at such time and in
such circumstances that the principal, by the exercise of reasonable diligence,
may communicate it to his servant or agent in time to prevent a delivery to the
buyer.
• (2) When notice of stoppage in transit is given by the seller to the carrier or
other bailee in possession of the goods,
• Re sale – Section 54
• where the unpaid seller who has exercised his right of lien or stoppage in
transit gives notice to the buyer of his intention to re-sell,
• the unpaid seller may, if the buyer does not within a reasonable time
pay or tender the price, re-sell the goods within a reasonable time and
• recover from the original buyer damages for any loss occasioned by his
breach of contract, but
• the buyer shall not be entitled to any profit which may occur on the re-
sale.
• If such notice is not given, the unpaid seller shall not be entitled to
recover such damages and the buyer shall be entitled to the profit, if any,
on the re-sale.
• (3) Where an unpaid seller who has exercised his right of lien or stoppage
in transit re-sells the goods, the buyer acquires a good title thereto as
against the original buyer, notwithstanding that no notice of the re-sale
has been given to the original buyer.
• (4) Where the seller expressly reserves a right of re-sale in case the buyer
should make default, and, on the buyer making default, re-sells the
goods,
– but without prejudice to any claim which the seller may have for
damages.
– Section 55. Suit for price.—(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.
• Section 55 (2) Where under a contract of sale the price is payable on a
day certain irrespective of delivery and
– the seller may sue him for the price although the property in the
goods has not passed and
• 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 buyer may sue the seller for damages for non-delivery.
• the Court may, if it thinks 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 payment of
damages.
• (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.
• (2) In the absence of a contract to the contrary, the Court may award
interest at such rate as it thinks fit on 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.
• Auction Sale
• The price they are offering for the goods is the bid. And the goods will be
sold to the bidder with the highest bid.
• The person carrying out the auction sale is the auctioneer. He is the
agent of the seller.
• The rules regarding an auction sale are found in the Sale of Goods Act.
• In an auction sale, there can be many goods up for sale of many kinds.
• If some particular goods are put up for sale in a lot, then each such lot
will be considered a separate subject of a separate contract of sale. So
each lot will prima facie be the subject of its own contract of sale.
• 2] Completion of Sale
• The sale is complete when the auctioneer says it is complete. This can
be done by actions also – like the falling of the hammer, or any such
customary action. Till the auctioneer does not announce the completion
of the sale the prospective buyers can keep bidding.
• If the seller has not notified of his right to bid he may not do so under
any circumstances. Then neither the seller nor any person on his behalf
can bid at the auction. If done then it will be unlawful.
• The auctioneer also cannot accept such bids from the seller or any other
person on his behalf.
• 5] Reserve Price
– This means the auctioneer will not sell the goods for any price
below the said reserve price.
• 6] Pretend Bidding
– That means the buyer can choose to honor the contract or he can
choose to void it.
• 7] No Credit
– The auctioneer cannot sell the goods on credit as per his wishes.
A sale by auction is a public sale where goods are offered to be taken by the
highest bidder.
• (1) Where goods are put up for sale in lots, each lot is prima facie deemed
to be the subject of a separate contract of sale;
• (2) the sale is complete when the auctioneer announces its completion by
the fall of the hammer or in other customary manner; and, until such
announcement is made, any bidder may retract his bid;
• (4) where the sale is not notified to be subject to a right to bid on behalf of
the seller, it shall not be lawful for the seller to bid himself or to employ
any person to bid at such sale, or for the auctioneer knowingly to take
any bid from the seller or any such person; and any sale contravening
this rule may be treated as fraudulent by the buyer;
• (6) if the seller makes use of pretended bidding to raise the price, the sale
is voidable at the option of the buyer.
• (1) Unless a different intention appears from the terms of the contract, in
the event of any tax of the nature described in sub-section (2) being
imposed, increased, decreased or remitted in respect of any goods after
the making of any contract for the sale or purchase of such goods
without stipulation as to the payment of tax where tax was not
chargeable at the time of the making of the contract, or
• for the sale or purchase of such goods tax-paid where tax was chargeable
at that time,—
• (a) if such imposition or increase so takes effect that the tax or increased
tax, as the case may be, or any part of such tax is paid or is payable, the
seller may add so much to the contract price as will be equivalent to the
amount paid or payable in respect of such tax or increase of tax, and
• he shall be entitled to be paid and to sue for and recover such addition;
and
• (b) if such decrease or remission so takes effect that the decreased tax
only, or no tax, as the case may be, is paid or is payable, the buyer may
deduct so much from the contract price as will be equivalent to the
decrease of tax or remitted tax, and
• (2) The provisions of sub-section (1) apply to the following taxes, namely:—