SALE OF GOODS ACT, 1930

Section 4: 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 is

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.

Difference between contract of sale & Agreement to Sell

A ‘Contract of Sale‘ is a type of contract whereby one party (seller) either

transfers the ownership of goods or agrees to transfer it for money to the other
party (buyer). A contract of sale can be a sale or an agreement to sell. In a
contract of sale, when there is an actual sale of goods, it is known
as Sale whereas if there is an intention to sell the goods at a certain time in
future or some conditions are satisfied, it is called an Agreement to sell.

Difference between contract of sale & Agreement to Sell

When in a contract of sale, the exchange of goods for money

consideration takes place immediately, it is known as Sale.

When in a contract of sale the parties to contract agree to exchange the

goods for a price at a future specified date is known as an Agreement to Sell.
Sale is absolute; agreement to sell is conditional.

• Sale is a executed Contract; whereas the agreement to sell is executory

Contract.

• 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.

• Contracts of sale creates right in rem whereas, agreement to sell creates

rights in personam

• 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.

Difference between sale and hire purchase agreement

• 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

• According to section 2 (c) of the Hire Purchase Act, 1972, “hire-purchase

agreement” means an agreement under which goods are let on hire and
under which the hirer has an option to purchase them in accordance
with the terms of the agreement and includes an agreement under
which—

– (i) possession of goods is delivered by the owner thereof to a person

on condition that such person pays the agreed amount in
periodical instalments, and

– (ii) the property in the goods is to pass to such person on the

payment of the last of such instalments, and
 – (iii) such person has a right to terminate the agreement at any time
before the property so passes;

• According to Section 4 (1) of the Sale of Goods Act, 1930, 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. A contract of sale
may be absolute or conditional.

• 3. contract of sale may be made either in orally or by writing; hire

purchase agreement must be in writing.

• 4. Under contract of sale, the ownership of the goods is transferred from

the seller to the buyer as soon as the contract is made. Under hire
purchase agreement, the ownership of the goods is transferred from the
seller to the hirer only when all installments are paid as agreed.

• 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.

• Conditions and Warranties: Section 12 - 17

• Conditions may be of two types – Express or implied

• Generally conditions which are agreed to by the parties, are commonly

referred to as express conditions.

• Express conditions are usually consisted language like “if”, “on condition
that”, “provided that”, “I the even that”, and “subject to”.

• But usually in a dispute, it is the court which decides the nature of a

particular clause by the process of interpretation.

• If an agreement does not make an event a condition then the court may
supply a term to that effect.

• Such conditions will be referred to as “implied” conditions, since a court

uses the process of implication to determine whether to supply a term
that makes an event a condition or not, and if yes then what term to
supply.

• The distinction between express and implied conditions is of practical

importance because the rule of strict compliance is limited to express
conditions.

What is condition?

• Section 12 (2) A condition is a stipulation (i) essential to the main

purpose of the contract, (ii) the breach of which gives rise to a right to
treat the contract as repudiated.

– A condition is referred to as, an essential element attached to the

subject matter of an agreement which is mentioned by the buyer to
 the seller and is either expressed or implied while entering into the
contract. The buyer can refuse to accept the goods delivered by the
seller, in case of non-compliance with the condition mentioned by
the seller in the contract. The condition may be express or implied.

• If while entering into a contract, the buyer mentions either in words or

writing that the goods are to be delivered to him before a given date, the
date is taken as a condition to the contract since the buyer expressed it.

• Whereas, if a buyer contracts to buy a red-coloured saree for her

‘wedding’ which is to be held on a date mentioned to the seller, then the
time is the implied condition for the contract. Even if the buyer doesn’t
mention the date of delivery (but has mentioned the date of the wedding
or occasion), it is implied on the part of the seller that the garment is to
be delivered before the mentioned date of the wedding.

– 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.

• Section 12 (1) A stipulation in a contract of sale with reference to goods

which are the subject thereof may be a condition or a warranty.

What is warranty?

• (3) A warranty is a stipulation (i) collateral to the main purpose of the

contract, (ii) the breach of which gives rise to a claim for damages but (iii)
not to a right to reject the goods and treat the contract as repudiated.

Effect of breach of warranty:-

• A warranty is referred to as extra information given with respect to the

desired good or its condition.
 • The warranty is of secondary importance to the contract for its fulfilment.

• Non-compliance of the seller to the warranty of the contract does not

render the contract repudiated and hence, the buyer cannot refuse to
buy the good but can only claim compensation from the seller.

• (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.

THE DIFFERENCE BETWEEN CONDITIONS AND WARRANTY

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 (i) may waive the condition or (ii) elect to treat the
breach of the condition as a breach of warranty and (iii) 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, 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.

• Implied Conditions and Warranties under the Sale of Goods Act

• 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.—

In a contract of sale, unless the circumstances of the contract are such as to

show a different intention, there is—

(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.

• CASE LAW: Rowland v Divall, 192210 – The plaintiff had purchased a

car from the defendant and was compelled to return it to the true owner
after having used it for a while. The plaintiff then sued the defendant for
the purchase money, since the plaintiff didn’t receive the consideration
as per the condition of the title of ownership.

• 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.—

• 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.

• 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.

• See: Thyssen Krupp Materials Ag vs The Steel Authority Of India on 20

April, 2017 – Delhi High Court. National Traders vs Hindustan Soap
Works: AIR 1959 Mad 112 (1960) IIMLJ 195

Section 17. 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 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.

• Transfer of Property in Goods

• The property in the goods is said, to be transferred from the seller to the
buyer when the latter acquires the proprietary rights over the goods and
the obligations linked thereto.

• 'Property in Goods' which means the ownership of goods, is different

from 'possession of goods' which means the physical custody or control
of the goods.

• 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:

• Ownership -- The moment the property in goods passes, the seller

ceases to be their owner and the buyer acquires the ownership. The
buyer can exercise the proprietary rights over the goods.

– 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.

Transfer of property: Sections 18 - 26

• The most important consequence of a contract of sale of goods is the

transfer of property in the goods from the seller to the buyer

– because risk always follows such a transfer of ownership and the

time of payment as well as the time of delivery of the goods is not
an essential consequence of such a contract.

• The most important point regarding the transfer of ownership is that it

can take place only in case of ascertained and specific goods.

– According to Sec. 18 “No transfer of property in the goods can take

place from the seller to the buyer unless and until they are
ascertained”.

• Transfer of property: Sections 18 - 26

• CHAPTER III

• EFFECTS OF THE CONTRACT

• Transfer of property as between seller and buyer

Section 18. Goods must be ascertained.— Where there is a contract for

the sale of unascertained goods, no property in the goods is transferred to the
buyer unless and until the goods are ascertained.
 Section 19. Property passes when intended to pass.—

• (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.

• (3) Unless a different intention appears, the rules contained in sections 20

to 24 are rules for ascertaining the intention of the parties as to the time
at which the property in the goods is to pass to the buyer.

Essentials for Transfer of Property

• The above two sections deals with essentials requirements for transfer of
property in the goods are:

– 1. Goods must be ascertained: (Section 18) Unless the goods are

ascertained, they (or the property therein) cannot pass from the
seller to the buyer. Thus, where there is a contract for the sale of
unascertained goods, no property in the goods is transferred to the
buyer unless and until the goods are ascertained

• 2. Intention to PASS Property in Goods must be there: (Section 19)

In a 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 be regard shall be had to the terms of the contract, the
conduct of the parties and the circumstances of the case.

• 1. When goods are in a deliverable state

• 20. Specific goods in a deliverable state.— Where there is an

unconditional contract for the sale of specific goods in a deliverable state,
 the property in the goods passes to the buyer when the contract is made,
and

• 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

• Where there is a contract between A & B for the purchase of a specific

quantity of hemp stored on the premises of the seller A;

• Price to be paid on 4th February and

• the delivery to be given on 1st of May

• 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.

• 2. When goods are not in a deliverable state:

• 21. Specific goods to be put into a deliverable state.—

• 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.

• 3. When goods are to be measured etc.:

• 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.

• Section 23. Sale of unascertained goods and appropriation.

• Transfer of property in unascertained goods:

• According to section 18 “no transfer of property can take place from

the seller to the buyer in unascertained goods”.

• Therefore some acts have got to be done in order to convert

unascertained goods into ascertained or specific goods.

• Such acts are collectively and technically called ‘appropriation’.

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.

• Thus appropriation of goods is the most important act which permits

the transfer of property from the seller to the buyer.

• Appropriation may be defined as “the application of the goods for the

purposes of a contract of sale”.

• Such an act must have the following essentials.

• 1. Goods which are appropriated must be of the same description

under which they are sold:

– 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.

• 2. The goods appropriated to the contract must be in a deliverable state

because unless they are in such a state no transfer of property can take
place.

• 3. The goods must be unconditionally appropriated to the contract:

– Section 23 (2): Delivery to carrier.— Where, in pursuance of

the contract, the seller delivers the goods to the buyer or to a
carrier or other bailee (whether named by the buyer or not) for the
 purpose of transmission to the buyer, and does not reserve the
right of disposal, he is deemed to have unconditionally
appropriated the goods to the contract.

• The most common form of appropriation is the delivery of goods to

person for the purpose of transporting them to the buyer and as soon as
this is done, generally speaking, the property shall be transferred to the
buyer if the seller has not reserved the right of disposal as defined by
section 25.

• 4. Basis of appropriation: Appropriation of goods is done on the basis of

consent of either the buyer or the seller.

• Such a consent may be obtained either before or after appropriation.

– 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.

• By the seller with the consent of the buyer

• Illustration No.1

– A agrees to purchase 10 tons of petrol from B and already sends

the steel tins to B for packing the petrol.

– 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.

– The property in the goods shall pass from B to A as soon as the

goods after being insured, are handed over to the Railway
Authorities (consent of the buyer after appropriation).

• Illustration No. 3

– A sells 500 maunds of rice out of bigger quantity to B and

– the rice is packed in seller’s gunny bags and

– 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

• Appropriation of goods for the purpose of the contract may be made:

• (a) By packing the goods in suitable containers.

• (b) By separating the goods from a larger quantity.

• (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.

In such case, notwithstanding the delivery of the goods to a buyer or to a carrier

or other bailee for the purpose of transmission to the buyer, the property in the
goods does not pass to the buyer until the conditions imposed by the seller are
fulfilled.

• Section 25 (2) Where goods are shipped or delivered to a railway

administration for carriage by railway and by the bill of lading or railway
receipt, as the case may be, the goods are deliverable to the order of the
seller or his agent, the seller is prima facie deemed to reserve the right of
disposal.

• (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,

• to secure acceptance or payment of the bill of exchange,

• the buyer is bound to return the bill of lading or the railway receipt if he
does not honour the bill of exchange; and,

• if he wrongfully retains the bill of lading or the railway receipt,

• the property in the goods does not pass to him.

• Consequence of the transfer of property

• The most important consequence of the transfer of property under a

contract of sale goods is the risk passes with the property.
• According to section 26, where the property in the goods remains with
the seller, the seller bears the risk 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

• Risk prima facie passes with property.—Unless otherwise agreed, the

goods remain at the seller’s risk until the property therein is transferred
to the buyer, but when the property therein is transferred to the buyer,
the goods are at the buyer’s risk whether delivery has been made or not:

• 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.

• 24. Goods sent on approval or “on sale or return”.—When goods are

delivered to the buyer on approval or “on sale or return” or other similar
terms, the property therein passes to the buyer—

• (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,

• if no time has been fixed, on the expiration of a reasonable time.

• According to section 63 the question what is a reasonable time is a
question of fact.

• Transfer of title Section 27 - 30

• 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.

• Sale by one of joint owners:- Section 28.

• If one of several joint owners of goods has the sole possession of them

• by permission of the co-owners,

• 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.

• Section 29. Sale by person in possession under voidable contract

• When the seller of goods has obtained possession thereof under a
contract voidable under section 19 or section 19A of the Indian Contract
Act, 1872, but

• the contract has not been rescinded at the time of the sale,

• the buyer acquires a good title to the goods,

• 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

• 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 dishonour of the
instrument or otherwise.

• (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.

• 46. Unpaid seller’s Rights.—

• (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;

(c) a right of re-sale as limited by this Act.

• (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.

• Section 62 Implication of law

• 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.

Unpaid seller’s lien – Section 47

• 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;

• (c) where the buyer becomes insolvent.

• (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.

• Section 49. Termination of lien.

• (1) The unpaid seller of goods loses his lien thereon—

• (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;

• (c) by waiver thereof.

• (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

• 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.

• The above 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.
• 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.

• This is subject to the provisions of the Act.

• Duration of transit – Section 51

• 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.

• When the duration of transit comes to 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) If, after the arrival of the goods at the appointed destination, the carrier
or other bailee acknowledges to the buyer or his agent that

– he holds the goods on his behalf and

– continues in possession of them as bailee for the buyer or his

agent, the transit is at an end and

• 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.

• When does the duration of transit not comes to 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

1) The unpaid seller may exercise his right of stoppage in transit

(a) either by taking actual possession of the goods, or

(b) by giving notice of his claim to the carrier or other bailee in whose
possession the goods are.

To whom the notice may be served?

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,

– 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.

• Re sale – Section 54

• A contract of sale is not rescinded by the mere exercise by an unpaid

seller of his right of lien or stoppage in transit

• (2) Where the goods are of a perishable nature, or

• 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,

– the original contract of sale is thereby rescinded,

– but without prejudice to any claim which the seller may have for
damages.

• SUITS FOR BREACH OF THE CONTRACT

• The seller is having the right to sue in the following 2

circumstances:

– 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 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.

• 56. Damages for non-acceptance.—

• Where the buyer wrongfully neglects or refuses to accept and pay for the
goods, the seller may sue him for damages for non-acceptance.

• 57. Damages for non-delivery.—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.

• Section 58. Specific performance

• Subject to the provisions of Chapter II of the Specific Relief Act,

1877, in any suit for breach of contract to deliver specific or ascertained
goods,

• 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.

• 59. Remedy for breach of warranty.

• 1) Where there is a breach of warranty by file 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 breach 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.

• 60. Repudiation of contract before due date.—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 sue for damages
for the breach.

• 61. Interest by way of damages and special damages.—(1) Nothing in

this Act shall affect the right of the seller or the buyer to recover interest
or special damages in any case where by 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 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

• An auction sale is a public sale.

• The goods are sold to all members of the public at large who are
assembled in one place for the auction.

• Such interested buyers are the bidders.

• 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.

• So all the rules of the Law of Agency apply to him.

• But if an auctioneer wishes to sell his own property as the principal he

can do so. And he need not disclose this fact, it is not a requirement
under the law.

• The rules regarding an auction sale are found in the Sale of Goods Act.

• Section 64 of the Act specifically deals with the rules governing an

auction.

• 1] Goods Sold in Lots

• 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.

• 3] Seller may Reserve Right to Bid

• The seller may reserve his right to bid. To do so he must expressly
reserve such right to bid. In this case, the seller on any person on his
behalf can bid at the auction.

• 4] Sale Not Notified

• 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.

• And any sale that contravenes this rule is to be treated as fraudulent by

the buyer.

• 5] Reserve Price

– An auction sale may be subject to a reserve price or an upset price.

– This means the auctioneer will not sell the goods for any price
below the said reserve price.

• 6] Pretend Bidding

– But if the seller or any other person appointed by him employs

pretend bidding to raise the price of the goods,

– the sale is voidable at the option of the buyer.

– 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.

– He cannot accept a bill of exchange either unless the seller is

expressly fine with it.
 • Section 64. Auction sale.

A sale by auction is a public sale where goods are offered to be taken by the
highest bidder.

In the case of a sale by auction—

• (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;

• (3) a right to bid may be reserved expressely by or on behalf of the seller

and, where such right is expressly so reserved, but not otherwise, the
seller or any one person on his behalf may, subject to the provisions
hereinafter contained, bid at the auction;

• (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;

• (5) the sale may be notified to be subject to a reserved or upset price;

• (6) if the seller makes use of pretended bidding to raise the price, the sale
is voidable at the option of the buyer.

• 64A. In contracts of sale, amount of increased or decreased taxes to

be added or deducted.—

• (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

• he shall not be liable to pay, or be sued for, or in respect of, such

deduction.

• (2) The provisions of sub-section (1) apply to the following taxes, namely:—

• (a) any duty of customs or excise on goods;

• (b) any tax on the sale or purchase of goods.