THE SALE OF GOODS ACT, 1930

THE SALE OF GOODS ACT, 1930

CHAPTER-1 FORMATION OF CONTRACT OF SALE
DEFINITIONS
Buyer [ Sec 2 (1) ] :- Buyer means a person who buys or agrees to buy goods.
Seller [Sec 2 (13)] :- Seller means a person who sells or agrees to sell goods.
Goods [Sec 2 (7)] :- Goods means every kind of movable property other than
actionable claims & money and includes :
 Stock and shares
 Growing crops
 Grass &
 Things attached to or forming part of land,
which are agreed to be severed before sale or under the contract of sale.
[Actionable claims are claims which can be enforced only by an action or suit e.g. Debt.]

Types of Goods

Existing Specific
Specific Ascertained
Ascertained
Existing
Goods Goods
Goods
Unascertained
Unascertained Goods
Goods
Goods
Future
Future
Goods
Goods
Goods
Goods
Existing Goods Goods which are in existence at the time of contract of sale i.e. those
owned & possessed by the seller.

Future goods Means goods to be manufactured or produced or acquired by seller after

making the contract of sale. In case of future goods, there is an
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agreement to sell.

Specific Goods Means goods identified & agreed upon at the time of a contract of sale
has been made.

“Unascertained” or Means goods defined only by description and not identified and agreed
“Generic” goods upon.

Ascertained goods Means goods identified in accordance with the agreement after the
 THE SALE OF GOODS ACT, 1930

contract of sale has been made

Goods in Deliverable State:- Goods are said to be in a deliverable state when they are in
such a condition that the buyer is bound to take delivery of them under the contract.
E.g. – A contracts to sell timber and makes bundles thereof, Goods will be in a
deliverable state, after A has put the goods in such a condition.
Delivery [Sec. 2 (2)]: - Delivery means voluntary transfer of possession by one person
to another.

Kinds of Delivery

Actual Delivery Constructive Delivery Symbolic Delivery

a. Actual Delivery It is actual when the goods are physically delivered to the buyer.

b. Constructive delivery When it is effected without any change in the custody or actual
procession of thing.

E.g. Delivery by attornment (acknowledgement).

E.g. Where a warehouseman holding the goods of A, agrees to

hold them on behalf of B, at A’s request.

c. Symbolic Delivery When there is a delivery of thing in token of a transfer of something

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else
E.g. Delivery of goods in transit by handling over the documents to
title (ownership ) to goods, B/L, Dock warrant, Delivery of key of a
Warehouse.
Document of title to goods :- Includes:
Bill of lading
Dock warrant
Warehouse keeper’s certificate
Wharfingers’ certificate
Railway receipt
 THE SALE OF GOODS ACT, 1930

Multimodel transport document

Warrant or order for delivery of goods or any other document used in the ordinary
cause of business as a proof of possession or control of goods.
Mercantile Agent [Sec 2 (9)]: - It means an agent having in the customary course of
business as such agent an authority either
To sell goods or
To consign goods for the purpose of sale or
To buy goods or
To raise money on the security of the goods..
Property [Sec 2 (ii)]
It means General property (Right of ownership in goods) and not merely special
property.
Insolvent [Sec 2 (8)]
A person is said to be insolvent when he ceased to pay his debts in the ordinary
course of business or cannot pay his debts as they become due whether he has
committed an act of insolvency or not.
Contract of sale [ Sec.4 (1)]
A contract of sale is a contract whereby the seller transfers (sale) or agrees to transfer
(agreement to sell) property (ownership) in goods to the buyer for a price.

 Essentials:
 At least two parties
 Subject matter of contract must be Goods
 Price in money only (not in kind) should be paid or promised.
 Transfer of ownership in goods
 A contract of sale must be absolute or conditional.
 Other essentials of a valid contract.
2. SALE Vs. AGREEMENT TO SELL

S. NO. BASIS SALE AGREEMENT TO SALE

1. Property in goods Transfer Not transfer Page1

2. Risk Transfer Not transfer

3. Type Executed contract Executory contract

4. Sue for Price Yes No, only damages unless price was
payable at stated date.

Seller
 THE SALE OF GOODS ACT, 1930

5. Loss of destruction Buyer Buyer’s right to claim damages only.

Breach by Seller Buyer’s Right

(i) To recover the goods

(ii) Suit for damages.

3. SALE Vs. HIRE PURCHASE

S. NO BASIS SALE HIRE PURCHASE

1. Transfer of Immediate On the payment of last instalment

property

2. Position Buyer  Owner Hirer  Bailee till he pays last

instalment

3. Right of Buyer cannot terminate Hirer may terminate the contract by

termination the contract and is returning the goods to its owner
bound to pay the price. without any liability to pay remaining
instalment.

4. Buyer’s Insolvency Risk of loss Seller Seller has no risk, right to take back
goods

5. Passing of title by Buyer can pass good title Hirer cannot pass any title even to a
buyer to bonafide purchaser bonafide purchaser

6. Tax Tax is levied at the time Tax is not leviable unless it eventually
of contract. ripens into sale

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1. Sale v. Bailment
BAILMENT
A bailment is the delivery of goods for some specific purpose under a contract on the condition
that the same goods to be returned to the bailer or are to be disposed off according to
directions of the bailer.
 THE SALE OF GOODS ACT, 1930

SALE Vs. BAILMENT

S.NO BASIS SALE BAILMENT

1. Transfer of Yes No
ownership
Only transfer of possession

2. Return of goods Return of goods in contract of Bailee must return the goods to the
sale not possible. bailor on accomplishment of the
purpose for

which the bailment was made.

3. Consideration Consideration price money Consideration may be gratuitous or

only non gratuitous.

5. SALE Vs. CONTRACT FOR WORK AND LABOUR

S. NO SALE CONTRACT FOR WORK & LABOUR

1.Transfer of Yes No
ownership
Only doing some work of labour.

 E.g. Gold supplied to goldsmith for preparing

an ornament
 An artist ask to paint a picture.
6. Modes of forming contract of sale –

There may be:-

Immediate delivery of goods or

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Immediate payment of price but delivery at the some future date or
Immediate delivery of goods and immediate payment of price or
Delivery or payment or both are to be made in instalments or
Delivery or payment or both are to be made at some future date.
7. Destruction of subject matter of contract ( Sec. 7 & 8 ) :-
(a) Goods not existing at the time of contract.
Goods destroyed without knowledge of the seller, contract is void-ab-initio.
(b) If there was agreement to sell & Goods perishing after contract is made.
Without any fault of buyer or seller, agreement becomes void.
 THE SALE OF GOODS ACT, 1930

8. Ascertainment of price ( Sec. 9 and 10 )

Price is the monetary consideration for sale of goods [Sec 2 (10)]
Price may be:
 Fixed by the contract or
 Agreed to be fixed in a manner provided by the contract. E.g. by a valuer or
 Determined by the course of dealings between the parties.
 Where price cannot be fixed in any of above ways, buyer is bound to pay a
reasonable price to the seller.
9. Stipulation as to time (Section 11)
As regard time for payment of price, unless a different intention appears from the contract,
stipulation as regard this is not deemed to be essence of the contract of sale.
But delivery of goods must be made without delay. Stipulations as to time of delivery are
usually the essence of contract.

CHAPTER-2 CONDITIONS & WARRANTIES

1. Condition – A condition is a stipulation essential to the main purpose of contract, the

breach of which gives the right to repudiate the contract & to claim damages.
2. Warranty – A warranty is a stipulation collateral to the main purpose of contract the
breach of which gives rise to a claim for damages but not to a right to reject the goods
and treat the contract as repudiated.
3. DISTINCTION BETWEEN CONDITION AND WARRANTY
CONDITION WARRANTY

1. Essential to the main 1. Collateral to the main purpose of contract.

purpose of contract.

2. Aggrieved party can 2. Aggrieved party can claim only damages in

repudiate the contract or claim case of breach of warranty.
damages or both in case of breach of
condition. Page1
3. A breach of condition may 3. A breach of warranty cannot be treated as
be treated as breach of warranty. breach of condition.

4. WHEN A CONDITION MAY BE TREATED AS WARRANTY

(i) When buyer altogether waives the performance of the condition.
(ii) Where buyer elects to treat the breach of condition as one of
 THE SALE OF GOODS ACT, 1930

warranty. He may only claim damages instead of repudiating the contract.

(iii) Contract is non-severable, the buyer has accepted either the whole
goods or any part thereof.
(iv) Where fulfillment of any condition or warranty is excused by law by
reason of impossibility or otherwise.

5. EXPRESS & IMPLIED CONDITIONS & WARRANTIES

Express Conditions – are those which are agreed between the parties at the time of
contract
and are expressly provided in the contract.

Implied Conditions – are those which are presumed by law to be present in the contract.
An
implied condition may be negated or waived by an express agreement.

 Implied Conditions :-
Condition as to title

In case of sale, seller has right to sell the goods &

In case of agreement to sell, he will have right to sell the goods at the time when property
is to pass.
If the sellers title turnout to be defective, buyer must return the goods to the true owner
and recover the price from the seller.
Sale by description In this case, there is implied condition that goods correspond with
the description.

Sale by sample Bulk shall correspond with the sample in quality.

The buyer shall have a reasonable opportunity of comparing the
bulk with the sample and
The goods should b free from any defect rendering them
unmerchantable, which would not be apparent on reasonable
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exanimation of the sample.
Condition by sample as Bulk must correspond with sample & description
well as description

Condition as to quality No implied condition as to quality or fitness of the goods

sold for any particular purpose.
or fitness
Condition as to reasonable fitness of goods for a
particular purpose is implied if the buyer had made known to the
seller the purpose of his purchase and relied upon the skill &
judgment of the seller to select the best goods and seller has
 THE SALE OF GOODS ACT, 1930

ordinarily dealing in those goods.

Condition as to In case of eatables & provisions, in addition to merchantable
wholesomeness quality, goods shall be wholesome.

 IMPLIED WARRANTIES

1. Warra Buyer shall have & enjoy quite possession of goods.

nty as to undisturbed
possession

2. arrant Goods shall be free from any charge in favour of a third party
y as to non-existence of not declared or known to the buyer before or at the time
encumbrances
contract is entered into.

3. Discl Goods are dangerous & buyer is ignorant of danger, seller

osure of dangerous nature must warn the buyer of the probable danger.
of goods
4. Warra An implied warranty as to quality or fitness for a particular
nty as to quality or fitness purpose may be annexed by the usage of trade.
by usage of trade
6. CAVEAT EMPTOR
Means Let the buyer beware

 It is the responsibility of the buyer to make proper selection of goods. If the goods turn out
to be defective he cannot hold the seller liable. The seller is in no way responsible for bad
selection of the buyer. The seller is not bound to disclose the defects in the goods which he
is selling.
EXCEPTIONS
1. Where buyer make known to the seller the particular purpose for which the goods are
required, so as to show that he relies on seller’s skill & judgement.
2. Goods purchased under patent No implied condition that the goods shall fit for any
name or brand name particular purpose.

3. Sale by description Goods shall correspond with the description. Goods shall Page1
be of merchantable quality, if purchased from dealer.
the rule shall not apply. But if buyer has examined the
goods & the defects were such which ought to have
been revealed by ordinary examination, the rule shall
apply.

4. Sale by sample if bulk does not correspond with sample.

 THE SALE OF GOODS ACT, 1930

5. Goods by sample as well as Goods shall correspond with both discription as well as
description sample.

6. When quality or fitness for a particular purpose & seller deviates from that.
assumed by usage of trade
7. Fraud or misrepresentation by
the seller.

CHAPTER-3
TRANSFER OF OWNERSHIP AND DELIVERY OF GOODS

1. PASSING OF PROPERTY (PASSING OF OWNERSHIP)

 Rules:
(i) No transfer of property to the buyer, unless & until goods are ascertained.
(ii) Where there is a contract of sale of specific or ascertained goods, property
passes to the buyer at the time when parties intend to pass it.
(iii) Where there is an unconditional contract for the sale of specific goods in a
deliverable state, property in goods passes to the buyer when the contract is made. (Sec.
20). The property shall not pass when the goods are made in deliverable state but shall
pass only when the buyer has notice of it. (Sec. 21)
(iv) Where the goods are in deliverable state, but the seller is bound to weigh,
measure, test or to do same act or thing for the purpose of ascertaining price, the property
does not pass until such act or thing is done. When the seller has done its part the property
passes even if the buyer has to do something for his own satisfaction. (Sec. 22)
(v) Unascertained goods
Property passes when

There is ascertainment of goods &

There unconditional appropriation to the contract.
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Appropriation of goods It involves selection of goods with the intention of using them in
performance of contract and with the mutual consent of seller &
the buyer.

(vi) Goods sent on approval or ‘sale’ or ‘pattern’

Property passes –

When buyer signifies his approval or acceptances to the seller.

When he does any act adopting the transaction &
 THE SALE OF GOODS ACT, 1930

If he does not signifies his approval or acceptance to the seller but retained the goods beyond
a reasonable time. (Sec. 24)
(vii) Sale for cash only or return Property pass only when the cash is paid for.

(viii) Conditional appropriation When the seller reserves the right of disposal until
certain conditions arefulfilled, the property therein will
not pass to the buyer till the condition imposed, if any, by
the seller has been fulfilled.

2. PASSING OF RISK [Sec. 26]

“Risk follows ownership”. The general rule is “Risk passes with property”.

Exceptions –
If there is delay of delivery due to fault of seller or buyer, the goods shall at the risk of
the party in default,as regards loss which might not have arises but for the default.
The duties and liabilities of the seller and buyer as bailee of goods for the other party
remain unaffected even when the risk has passed generally.
3. TRANSFER OF TITLE [Sec. 27 to 30]
The general rule regarding transfer of title is that the seller cannot transfer to the buyer of
goods a better title than he himself has. If the seller is not the owner of the goods, then
the buyer also will not become the owner i.e., the title of buyer shall be the same as that
of the seller. Latin maxim “Nemo dat quod non habet”. which means no one can give
what he has not got.

Exceptions – Sale by non-owner  valid

Sale by Mercantile Agent

For documents of title to goods

Agent in pocession of goods with consent of owner
Sale made acting in ordinary course of business as mercantile agent &
Buyer acted in good faith & at the time of contract of sale, no notice of fact that
seller has no authority to sell. Page1
Sale by one of the joint promisors

Buyer - Good title (Purchase in good faith + No knowledge of fact that seller has no authority to
sale).
Sale by person in possession under voidable contract provided contract has not been rescinded
until the time of sale.
Sale by one who already sold the goods but continues to be in possession thereof.(Person obtain
delivery in good faith + No notice of previous sale)
Sale by buyer obtaining possession before property in goods has vested in him.
 THE SALE OF GOODS ACT, 1930

Effect of estoppel Where the owner is estopped by the conduct from denying the seller’s
authority to sell, the transferee will get a good title on against the true owner.
Sale by an unpaid seller
Sale by official receiver or liquidator of a company.
Sale by finder of goods under certain circumstances.

4. RULES REGARDING DELIVERY OF GOODS

(i) Buyer to apply The seller is not bound to deliver the goods until the buyer
for delivery has applied for delivery, unless otherwise agreed

(ii) Place of If there is no contract to the contrary, goods must be

Delivery – delivered at the place where they were at the time of sale.
In case of agreement to sell, goods agreed to be sold are
required to be delivered at the spot where they were at the
time when agreement was entered into.
If goods were not in existence when agreement to sell was
entered into, then delivery will be made at the place where
they would be manufactured or produced.
(iii) Time of Delivery If not fixed by the parties, the seller must send them within
reasonable time.

(iv) Goods with third In this case, there will be no delivery unless and until such
party third person acknowledges to the buyer that he hold goods
on his behalf.

In case, there is a transfer of document of title to goods, it will

be treated as symbolic delivery. Even if the goods are in
custody of a third person, no acknowledgement is required.
(iii) Time for tender of Demand or tender of delivery should be made at a reasonable
Delivery hour otherwise such demand is ineffectual. What is reasonable
hour is a question of fact.
(iv) Expenses for Delivery Expenses related to putting the goods into a deliverable state
must be borne by the seller, unless there is a contact to the Page1
contrary.
(v) Delivery of wrong In case of delivery of lessor quantity of goods, the
quantity buyer may either accept the same and pay for it or
reject it.
In case of excess delivery, the buyer may accept or
reject the delivery, if he accepts the whole of goods,
he shall pay for them at the contract rate.
In case goods mixed with goods of a different
description and delivery in made, the buyer may
 THE SALE OF GOODS ACT, 1930

accept the relevant goods and reject the rest or reject

the whole.
Note: Mixing of goods with inferior goods does not
amount to a mixing of goods of different description.
(vi) Part Delivery Part Delivery would have the same effect for the purpose of
passing of property in such goods as delivery of the whole.
But delivery of part of goods will not be treated as delivery of
the whole.

(vii) Installment deliveries Unless otherwise agreed, the buyer is not bound to accept
delivery in installments.

The parties to the contract thereon may determine the

rights and liabilities in case of delivery by installments
and payments.
(x) Delivery of carrier Subject to the terms of contract, the delivery of the goods to
the carrier for transmission to the buyer, is prima facie
deemed to be delivery to the buyer.

(xi) Goods deteriorate Where goods are delivered at a distant place, the liability for
during transit deterioration necessarily incidental to the course of transit
will fall on the buyer, though the seller agrees to deliver at
his own risk.

(xii) Buyer’s right to If goods are not previously examined by the buyer, the seller
examine the good is bound, on request, to afford the buyer a reasonable
opportunity of examining the goods.

5. Acceptance of delivery of Goods

 Acceptance is deemed to take place when the buyer:
Intimates to the seller that he had accepted the goods; or
Does any act to the goods which is inconsistent with ownership of the seller; or
Retain the goods after the lapse of a reasonable time, without intimating to the Page1
seller that he has rejected them.

CHAPTER-4 UNPAID SELLER

1. Unpaid Seller – The seller of goods is deemed to be an unpaid seller when –

The whole of the price has not been paid or tendered and the seller has an immediate right
of action for the price. A bill of exchange or other negotiable instrument was given as
 THE SALE OF GOODS ACT, 1930

payment, but the same has been dishonoured, unless this payment was an absolute, and
not a conditional payment.
2.

(A) RIGHTS OF UNPAID SELLER AGAINST THE GOODS

(i) Right of Lien (Section 47)
Goods are in possession of seller
Lien until the payment or tender of the price of such goods.
Cases where right of lien can be exercised:
(a) Goods sold without any stipulation of credit or
(b) Goods sold on credit but term of credit has expired or
(c) Buyer becomes insolvent
Cases under which seller loses his right of lien
Where 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 goods.
Where the buyer or his agent lawfully obtains possession of the goods.
Where seller the waived the right of lien.
By Estoppel i.e., where the seller so conducts himself that he leads third parties Page1
to believe that the lien does not exist.
(ii) Right of stoppage in transit – This right can be exercised only if all the following conditions
are fulfilled:

Seller must be unpaid.

Seller must have parted with the possession of the goods.
Goods are in transit.
Buyer has become insolvent.
 THE SALE OF GOODS ACT, 1930

(iii) Right of re-sale – The right to re-sell the goods can be exercised by the unpaid seller
under the following conditions:

Goods are of perishable nature, no need to inform to the buyer of intention of

resale.
In case of other goods ,when notice of intention of resale is given by unpaid
seller to the buyer & buyer does not within reasonable time pay or tender the
price.

(B) RIGHT OF UNPAID SELLER AGAINST THE BUYER

(i) Suit for price (Section 55)

(a) Property has passed to the buyer (ownership).
Buyer wrongfully neglects or refuses to pay price of goods.

(b) Property has not passed to the buyer.

Price is payable on a particular date irrespective of delivery.

Buyer wrongfully neglects or refuses to pay price of goods.

(ii) Suit for damages for non-acceptance (Section 56)

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

(iii) Suit for damages for Breach (Section 60) – Where the contract is repudiated by the
buyer before the date of delivery, the seller may treat the contract as rescinded
and sue for damages for the breach.
(iv) Suit for interest – Where there is –
 Specific agreement between seller and buyer as to interest on price of goods from
the date.
 On which payment becomes due, the seller may recover the interest from the buyer.

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3. RIGHT OF LIEN Vs. RIGHT OF STOPPAGE IN TRANSIT

S.No. RIGHT OF LIEN RIGHT OF STOPPAGE IN TRANSIT

1. It is a right to retain possession. It is a right to regain possession

2. Seller should be in possession of Seller should have parted with the

the goods. possession.
Possession should be with a carrier &
Buyer has not acquired the
 THE SALE OF GOODS ACT, 1930

possession.
3. The right of lien can be exercised It can be exercised only if buyer is insolvent.
even when the buyer is not
insolvent.

4. The right of stoppage in transit Its starting point is the end of right of lien.
starts where right of lien ends.

4. EFFECT OF SUB-SALE OR PLEDGE BY THE BUYER ON UNPAID SELLER’S RIGHT

 The unpaid seller’s right of lien or stoppage in transit is not effected by any further sale
or other disposition of goods by the buyer.
Exceptions –
When seller has given his assent to such sale, mortgage or other disposition of goods
made by the buyer.
When a document of title of goods has been transferred to the buyer and the buyer
transfers the documents to a person who has bought the goods in good faith & for value.
5. RIGHT OF BUYER AGAINST THE SELLER IN CASE OF BREACH OF CONTRACT (Section 57 to
59)

(i) Suit Where the seller wrongfully neglects or refuses to deliver the goods to
for non-delivery the buyer, the buyer may sue the seller for damages for non-delivery.
[Section 57] –
(ii) Suit for specific Where property has passed to the buyer, the buyer can also exercise
performance the right to sue for specific performance.
[Section 58]
(iii) Suit for damages Buyer is entitled to claim damages from the seller.
for Breach of
warranty [Section
59]

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(iv) Suit for recovery The buyer has right to recover the money paid to the seller where the
of price [Section consideration for payment of it has failed.
61]
6. AUCTION SALE
It is a mode of selling property by inviting bids publicly and the property is sold to
the highest bidder.
An auctioneer is an agent governed by law of agency.
PROVISIONS RELATED TO AUCTION SALE
 THE SALE OF GOODS ACT, 1930

Where goods are put for sale in lot, each lot is prima facie deemed to be subject matter of a
separate contract of sale.
The sale is complete when auctioneer announces its completion:
By fall of hammer or
Any other customary manner.
Any bidder may retract from his bid until announcement is made.
Right to bid may be reserved expressly by or behalf of the seller and where such a right is
expressly reserved, but not otherwise, the seller or any one person on his behalf may bid at the
auction.
If seller’s right to bid has not been expressly reserved, it shall not be lawful for the seller to bid
himself or to employ any person to bid at such sale
Reserve Price – The sale may be notified to be subject to a reserve or upset price.
Pretended biding – If the seller makes use of pretended bidding to raise the price, the sale is
voidable at the option of the buyer.

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