📘 Project on Sale of Goods Act, 1930

BY: SPARSH GARG

BBA LLB HONS.

A3221524041

SECTION - A

📚 Index
S. No. Topic Page No.
1. Introduction to the Sale of Goods Act, 1930 3
2. 🔸 Contract of Sale: Nature and Definition 3
3. 🔸 Conditions and Warranties 5
4. 🔸 Transfer of Property and Title 7
5. 🔸 Performance of the Contract 9
6. 🔸 Rights of Unpaid Seller 11
7. 🔸 Suit for Breach of Contract 14
8. Conclusion 16
9. Bibliography / References 17

🔹 Introduction

The Sale of Goods Act, 1930 governs contracts relating to the sale and purchase of goods. It
defines the rights and duties of buyers and sellers and aims to protect both parties in
commercial transactions.
🔸 1. Contract of Sale: Nature and Definition

📖 Definition:

As per 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.”

This definition highlights the core elements of a sale:

 Two parties: Seller and Buyer

 Goods: Must be movable property (excluding money and actionable claims)
 Price: Monetary consideration (not barter)
 Transfer of ownership/property

✳️Types of Contract of Sale:

1. Sale:
o Ownership in goods is transferred from seller to buyer immediately.
o It is an executed contract.
o Example: A pays ₹10,000 and takes the bike from B on the spot.
2. Agreement to Sell:
o Ownership will transfer at a future time or on the fulfillment of certain
conditions.
o It is an executory contract.
o Example: A agrees to buy B’s bike for ₹10,000 to be delivered after B clears
the insurance formalities next week.

🧩 Legal Implications:

 In a sale, if the goods are destroyed after the contract, the loss falls on the buyer (as
ownership has already passed).
 In an agreement to sell, the seller bears the risk until ownership is transferred.

🧠 Example:
Suppose:

 A agrees to sell his laptop to B for ₹40,000.

 If B pays and takes the laptop immediately, it is a sale.
 If B pays but A agrees to deliver it next week, it is an agreement to sell.

⚖️Case Law: Gomal Prasad v. State of Madhya Pradesh

Citation: AIR 1965 MP 229

📌 Facts:

 The case involved a transaction where the question arose whether it amounted to a
completed sale or just an agreement to sell.

🧾 Judgment:

 The court held that the transfer of ownership is the defining feature of a sale.
 If the title of goods passes to the buyer, it is a sale, irrespective of delivery.
 The decision emphasized that intention of the parties and contractual terms must
be evaluated to determine whether it is a sale or an agreement to sell.

🏛️Principle Established:

Mere payment or agreement to pay a price is not sufficient—what matters is whether

ownership of goods has actually been transferred.

🔸 2. Conditions and Warranties

📖 Definition:

As per Section 12 of the Sale of Goods Act, 1930:

A condition is a stipulation essential to the main purpose of the contract, the breach of which
gives the buyer the right to treat the contract as repudiated.

A warranty is a stipulation collateral to the main purpose of the contract, the breach of
which gives the buyer the right to claim damages but not to repudiate the contract.
🔍 Key Differences:

Basis Condition Warranty

Importance Essential to the main purpose Collateral or subsidiary

Breach Buyer can reject goods and end the Buyer can only claim
Consequence contract damages

Legal Remedy Repudiation + Damages Only Damages

🧾 Types of Conditions & Warranties:

1. Express: Clearly mentioned in the contract.

2. Implied: Automatically assumed by law unless excluded.

📌 Important Sections:

 Section 13 – When a condition may be treated as a warranty:

o Buyer may waive a condition.
o If the buyer has accepted the goods, breach of condition is treated as a breach
of warranty.
 Section 14 – Implied Conditions as to:
o Title: Seller must have the right to sell.
o Quiet possession: Buyer must not be disturbed.
o Freedom from encumbrance: Goods should not have any hidden charges.
 Section 15 – Sale by description:
o Goods must correspond with the description.
 Section 16 – Implied condition as to quality or fitness:
o No implied warranty unless the buyer makes known the purpose and relies on
seller's expertise.
 Section 17 – Sale by sample:
o Bulk must match sample.
o Buyer must have opportunity to compare.
🧠 Example:

 Condition: A buys a laptop described as having a 1TB SSD. If it only has 256GB
storage, this is a breach of condition — A can reject the laptop.
 Warranty: A bike is sold with a 6-month free service warranty. If the seller fails to
provide service, it is a breach of warranty — buyer can claim service costs but
cannot return the bike.

⚖️Case Law: Baldry v. Marshall (1925)

📌 Facts:

 The plaintiff wanted a car suitable for touring.

 The seller sold a car that was unsuitable for that purpose.
 The buyer later sought to return the car and recover the money.

🧾 Judgment:

 The court held that the buyer had expressly stated the purpose.
 The suitability for touring was a condition, not a mere warranty.
 Therefore, the buyer had the right to reject the car and claim a refund.

🏛️Principle Established:

If a buyer makes the purpose known and relies on the seller's skill or judgment, then the
fitness for that purpose becomes a condition of the contract.

🔸 3. Transfer of Property and Title

📖 Definition:

In the context of the Sale of Goods Act, 1930, "property" in goods refers to ownership or
legal title, not just physical possession.

The moment ownership is transferred, the buyer assumes both rights and risks associated with
the goods.

🧩 Why is Transfer of Property Important?

 1. Risk Transfer: Ownership usually determines who bears the risk of loss.
2. Legal Remedies: Determines who can sue for damage, non-delivery, or breach.
3. Tax and Liability: Impacts duties like insurance, taxation, and liability.

📌 Key Sections:

🔹 Section 18-25: Rules for Transfer of Property

These sections outline when ownership passes from seller to buyer depending on the nature
of goods:

 Section 18 – No property is transferred in unascertained goods until they are

ascertained.
 Section 19 – Property in specific goods passes when intended by the parties.
 Section 20-22 – Specific goods in a deliverable state → property passes at the time of
contract.
 Section 23 – Unascertained goods become ascertained → property passes upon
appropriation.
 Section 24 – Goods delivered on approval → ownership passes when buyer accepts
or acts in a way that implies acceptance.
 Section 25 – Reservation of right of disposal → property does not pass until certain
conditions are fulfilled.

🔹 Section 27: Transfer of Title – “Nemo dat quod non habet”

Latin maxim meaning:

“No one can give what they do not have.”

 A seller cannot transfer a better title than what he possesses.

 If someone sells stolen or unauthorized goods, the buyer gets no legal title, even if
he purchased in good faith.

🧠 Example:

 A thief sells a stolen bike to B, an innocent buyer who pays the full price.
 Later, the true owner finds the bike with B.
  As per Section 27, B gets no ownership, because the thief had no title to transfer.
 The real owner can reclaim the bike, and B can only sue the thief, not keep the bike.

⚖️Case Law: Rowland v. Divall (1923)

📌 Facts:

 Plaintiff bought a second-hand car from a dealer.

 After a few months, it was discovered that the car was stolen before being sold.
 Police seized the car and returned it to the rightful owner.

🧾 Judgment:

 The court held that no valid title had passed to the buyer.
 Therefore, the contract was void, and the buyer was entitled to recover the full price
paid, despite having used the car for some time.

🏛️Principle Established:

A seller must have the right to sell the goods. If not, the buyer can rescind the contract and
reclaim the price, regardless of prior use.

🧩 Exceptions to the Nemo Dat Rule (also found under Sections 27–30):

1. Sale by Mercantile Agent: If acting within authority (Section 27 Exception).

2. Sale by Estoppel: If the owner’s conduct makes it appear that the seller had the
authority.
3. Sale under Voidable Contract: If buyer buys in good faith before the contract is
rescinded (Section 29).
4. Sale by a Seller in Possession after Sale (Section 30(1)).
5. Sale by a Buyer in Possession before Ownership Transfers (Section 30(2)).

🔸 4. Performance of the Contract

📖 Definition:
In a contract of sale, performance refers to the fulfillment of contractual obligations by both
parties:

The seller must deliver the goods as agreed, and the buyer must accept the goods and pay the
price.

As per Section 31 of the Sale of Goods Act, 1930:

“It is the duty of the seller to deliver the goods and of the buyer to accept and pay for them, in
accordance with the terms of the contract of sale.”

📌 Relevant Sections: Section 31 to 44

These sections govern how, when, and where the goods are delivered, accepted, and paid
for.

🔹 Seller’s Duties:

1. Deliver the Goods (Section 31)

o Must deliver as per the contract terms (time, place, condition).
2. Delivery Must Match Description (Section 15)
o Goods must conform to sample or description.
3. Delivery Timing (Sections 36–38)
o Time of delivery is generally not of the essence unless expressly stated.
4. Delivery by Installments (Section 38)
o Permitted only if agreed; otherwise, a buyer can reject partial delivery.
5. Effect of Delivery to Carrier (Section 39)
o Delivery to a carrier is considered delivery to the buyer.
6. Risk Transfer (Section 26)
o Risk generally passes with property unless otherwise agreed.

🔹 Buyer’s Duties:

1. Accept the Goods (Section 42)

o Must examine and accept or reject them promptly.
2. Payment of Price (Section 31, 44)
 o Must pay as per agreed terms; refusal may constitute breach.
3. Refusal to Accept Delivery (Section 43)
o If the buyer wrongfully refuses to accept goods, seller can sue for damages.

🧠 Example:

 A contracts to sell 100 chairs to B and deliver them by April 1st.

o If A fails to deliver on that date, it’s a breach of performance by the seller.
o If A delivers on time but the chairs are not as per agreed quality, B can reject
the goods.

⚖️Case Law: Varley v. Whipp (1900)

📌 Facts:

 A machine was sold based on the description that it was "new" and "barely used."
 When delivered, the machine was found to be old and used.
 The buyer refused to accept it.

🧾 Judgment:

 The court held that the goods did not match the contractual description.
 Since conformity to description was a condition, performance was considered
incomplete.
 The buyer was entitled to reject the goods and treat the contract as rescinded.

🏛️Principle Established:

If goods delivered do not conform to the contract description or sample, the buyer has the
right to reject the goods, and performance is considered not done.

📦 Forms of Delivery (Section 33–35):

1. Actual Delivery: Physical handing over.

2. Constructive Delivery: Goods are already with the buyer or their agent.
3. Symbolic Delivery: Transfer through a token (like keys to a warehouse).
Time of Delivery vs. Time of Payment:

 Section 38: Time of delivery may be a condition if expressly stated.

 Section 11: Time of payment is not of the essence unless otherwise agreed.

🔸 5. Rights of Unpaid Seller

📖 Definition:

According to Section 45 of the Sale of Goods Act, 1930:

A seller is deemed unpaid when:

1. The whole of the price has not been paid, or

2. A bill of exchange or other negotiable instrument has been received but
dishonoured.

Thus, even partial non-payment or dishonour of payment instruments qualifies the seller as
unpaid, giving rise to statutory rights.

📌 Key Sections: 45 to 54

These provisions define the rights and remedies of an unpaid seller against the goods and
the buyer.

🔹 Two Broad Categories of Rights:

I. Rights Against the Goods

1. 🛑 Right of Lien (Section 47–49)

The right to retain possession of the goods until the full price is paid.

o Applies when:
 Goods are in possession of the seller.
 No credit term or credit term has expired.
 Buyer becomes insolvent.
 Ends when:

o Seller delivers goods to a carrier (unless reserves right of disposal).

o Buyer or their agent lawfully obtains possession.

Example: A sells machinery to B, payment due on delivery. B doesn't pay. A can

retain the goods.

2. 🚛 Right of Stoppage in Transit (Section 50–52)

If goods are in transit and buyer becomes insolvent, seller may stop delivery.

o Can be exercised even if property has passed to buyer.

o Transit continues until:
 Buyer receives goods.
 Carrier acknowledges holding on buyer’s behalf.

Example: A sends goods through courier to B. While in transit, B becomes insolvent.

A can instruct the courier to stop delivery.

3. 🔁 Right of Resale (Section 54)

Seller can resell goods in the following cases:

o Goods are perishable.

o Seller gives notice of resale and buyer still defaults.
o Seller reserves right of resale in contract.

No notice? Seller may still resell, but cannot recover loss or retain profit.

II. Rights Against the Buyer Personally

Even if the seller loses control over the goods, they can still:

 Sue for price (Section 55) if property has passed.

 Sue for damages for non-acceptance (Section 56).
 Claim interest and special damages (Section 61).
⚖️Case Law: Great Indian Peninsula Railway Co. v. Hanmandas (1893)

📌 Facts:

 Goods were in transit by railway.

 Buyer became insolvent before receiving them.
 Seller wanted to stop the goods before delivery.

🧾 Judgment:

 Court recognized the seller’s right of stoppage in transit and lien as statutory
protections for unpaid sellers.
 Allowed recovery of goods before actual delivery to insolvent buyer.

🏛️Principle Established:

The unpaid seller has protective remedies to retain, retrieve, or resell goods when the buyer
defaults or becomes insolvent.

🧩 Key Takeaways:

Right When Available Purpose

Lien Goods in seller’s possession Retain goods till payment

Stoppage in Transit Goods with carrier, buyer insolvent Stop delivery to prevent loss

Buyer defaults, especially for Recover value and mitigate

Resale
perishables loss

Suit for Price Property passed, buyer didn’t pay Legal recovery

🔸 6. Suit for Breach of Contract

📖 Understanding Breach of Contract in Sale of Goods

A breach of contract occurs when either the buyer or seller fails to perform their
contractual obligations — such as refusing to accept/deliver goods, failing to pay, or
delivering defective goods.
The Sale of Goods Act, 1930 provides remedies for both parties when such a breach takes
place.

📌 Relevant Sections:

🔹 Remedies Available to the Seller:

1. Damages for Non-Acceptance — Section 56

If the buyer wrongfully refuses to accept and pay for the goods:

The seller may sue for damages for breach of contract.

o Damages are calculated based on the difference between contract price and
market price on the date of breach.
2. Suit for Price — Section 55
o If the property in goods has passed to the buyer and they refuse to pay, the
seller can file a suit to recover the price.

🔹 Remedies Available to the Buyer:

1. Damages for Non-Delivery — Section 57

If the seller fails or refuses to deliver the goods, the buyer can sue for damages.

o Measured by the difference between the contract price and market price
on the date of breach.
2. Specific Performance — Section 58

The buyer may seek specific performance (i.e., court order compelling actual
delivery) when damages are not an adequate remedy, particularly for unique or
specific goods.

3. Damages for Breach of Warranty — Section 59

In case of breach of warranty, the buyer cannot reject goods but may:

o Claim reduction in price, or

o Sue for damages.
🧠 Example:

 A agrees to sell 100 TVs to B at ₹10,000 each.

 B refuses to accept delivery on the due date.
 The current market price has dropped to ₹9,000.
 A can sue B for damages of ₹1,00,000 (₹1,000 x 100 units).

⚖️Case Law: Hadley v. Baxendale (1854)

📌 Facts:

 A miller’s business was halted due to a broken crankshaft.

 He hired Baxendale to deliver the crankshaft for repairs.
 Baxendale delayed the delivery, causing further business losses.

🧾 Judgment:

 Court held that damages can only be claimed for losses that are foreseeable or
naturally arising from the breach.
 Since Baxendale was unaware that delay would cause such loss, he wasn’t liable.

🏛️Principle of Law:

Remoteness of Damages: Only those damages which are:

1. Naturally arising from the breach, or

2. Foreseeable by both parties at the time of contract
are recoverable.

⚖️Indian Application: Murlidhar Chiranjilal v. Harishchandra Dwarkadas (1962)

 Supreme Court of India adopted the Hadley v. Baxendale principle.

 Emphasized that compensation must be just, foreseeable, and not speculative.

📌 Conclusion
The Sale of Goods Act, 1930 plays a crucial role in maintaining fairness and transparency in
commercial transactions. Understanding these provisions enables buyers and sellers to assert
their rights and fulfill their duties effectively.

📚 Bibliography

1. Bare Act – The Sale of Goods Act, 1930, Government of India Publication.
2. Avtar Singh, Law of Sale of Goods and Partnership, Eastern Book Company.
3. Mulla, The Sale of Goods Act and The Indian Partnership Act, LexisNexis.
4. Dr. R.K. Bangia, Law of Contract including Specific Relief Act, Allahabad Law
Agency.
5. Case Law Databases – SCC Online, Indian Kanoon, and Manupatra.
6. Official Government Websites – https://legislative.gov.in
7. Legal Blogs and Articles – iPleaders, Lawctopus, Legal Bites, and LiveLaw.