Business Law & Regulation

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 Syed Salman Ahmed
sirsalmanahmed@gmail.com
0300-3610026
Ph-D in progress
MBA (Marketing & Finance) (Silver Medal) IBA Karachi
MEM (Quality Management) (Silver Medal) NED UET Karachi
MBA (MIS) (Silver Medal) IBA Karachi
MAS (HRM) UoK Karachi
MA (Economics) UoK Karachi
PGD (CIS) (Gold Medal) UoK Karachi
B E (Aerospace) NED UET Karachi
LLB UoK Karachi
Teaching Experience : 32 Years
 Sales of Goods Act 1930

History

• Sale of goods act was enacted in 1930.

• Borrowed from the English act.
 Sales of Goods Act 1930

Topics Covered
• Formation of contract of sales
• Difference between sale and Agreement
to sell
• Difference between sale and hire
purchase
• Difference between sale and bailment
• Bail agreement
• Conditions and warranties
• Rule of Caveat Emptor
• Rights of unpaid seller
 Sales of Goods Act 1930

Formation of Contract of Sales

 Sales of Goods Act 1930

Definition

Sale of Goods Act, 1930 defines the contract of

he sale of goods in the following manner:

“ 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”.
 Sales of Goods Act 1930

The term “Contract of sale of goods‟ is a generic

term and it includes:-
a. Sale and
b. An agreement to sell
where the seller transfers the ownership
rights to the buyer immediately on making the
contract, it is the contract of sale, but where the
ownership rights are to pass on some future
date upon the fulfillment of certain conditions
then it is called an agreement to sell.
 Sales of Goods Act 1930

Essentials of a Contract of Sale

• Two parties- buyer and seller
• Goods
• Price
• Transfer of general property
• Essential elements of a valid contract
• A contract of sale may be absolute or
conditional.
 Sales of Goods Act 1930
Difference Between
Sale Agreement to Sale

• Ownership passes to the • Ownership remains with

buyer. the seller.
• It is a executed contract. • It is a executory contract.
• Risk of loss falls on the • Risk of loss falls on the
buyer. seller.
• Seller cannot resell the • Seller can sell goods to
goods. third party.
• It can be in case of • It can be in case of future
existing and specific and unascertained goods.
goods
 Sales of Goods Act 1930

Sale Agreement to Sale

• In case of breach of a
. • In case of breach of a
contract, seller can sue
contract, seller can sue
only for damages not for
for the price of the goods
the price.
• The seller is only entitled
• The seller may refuse to
to the ratable dividend of
sell the goods to the
the price due if the buyer
buyer w/o payments if
becomes insolvent.
the buyer becomes
• The buyer is entitled to
insolvent.
recover the specific
• Buyer can claim only
property from the
ratable dividend for the
assignee if the seller
money paid.
becomes insolvent.
 Sales of Goods Act 1930
Distinction Between

. Sale Hire Purchase Agreement

• Property in the goods is • The goods passes to the

transferred to the buyer hirer on the payment of
immediately at the time the last instalment.
of the contract. • The position of the buyer
• The position of the buyer is that of a bailee till he
is that of owner of the pays the last instalment.
owner of the goods.
 Sales of Goods Act 1930
Distinction Between

. Sale Hire Purchase Agreement

• The hirer may, terminate

• The buyer cannot the contract, by returning
terminate the contract the goods to its owner
and is bound to pay the without any liability to
price of the goods. pay the remaining
instalment.
 Sales of Goods Act 1930

Bailment
• Bailment is the delivery of the goods for
some specific purpose under a contract on the
condition that the same goods are to be
returned to the bailor or are to be disposed of
according to the directions of the bailor.

For example:-
•A guard hired to protect the paintings at a
museum.
 Sales of Goods Act 1930

Features of Bailment
• Subject is personal property
• Transfer is temporary possession
• Transfer is temporary control
• Both parties intend to return the goods.
• A bailment must be personal property.
• Real property such as land and buildings,
cannot be bailed.
 Sales of Goods Act 1930
Distinction Between

. Sale Bailment

• There is only transfer of

possession of goods from
• The property in goods is
the bailor to the bailee
transferred from the
for any of the reasons like
seller to the buyer.
safe custody, carriage etc.
• The return of goods in
• The bailee must return
contract of sale is not
goods to the bailor on the
possible.
accomplishment of the
purpose for which
bailment was made.
 Sales of Goods Act 1930
Distinction Between

. Sale Bailment

• The consideration is the • The consideration may be

price in terms of money. gratuitous or non
gratuitous.
Sales of Goods Act 1930

Conditions and Warranties

 Sales of Goods Act 1930

Terms
• Representation Statement made by the
seller before entering into a contract.
• Stipulation If such representation forms an
integral part of the contract and other
party relies upon it.
• No Representation “CAVEAT EMPTOR‟
i.e. Let the Buyer Beware – is applied
 Sales of Goods Act 1930

Conditions and Warranties

• “A stipulation in a contract of sale with
reference to goods which are subject
matter there of, may be a condition or a
warranty.”
• These stipulations forms a part of the
contract of sale and breach of it provides
a remedy to the buyer against the seller.
 Sales of Goods Act 1930

Conditions and Warranties

• “A condition is a stipulation essential to
the main purpose of the contract, the
breach of which gives rise to a right to
treat the contract as repudiated.”
• It goes to the root of the contract.
• Its non fulfilment upsets the very basis of
the contract.
 Sales of Goods Act 1930

Example :- [Behn v. Burness,1863]

• By charter party( a contract by which a ship is
hired for the carriage of goods), it was agreed that ship
m of 420 tons “now in port of Amsterdam” should
proceed direct to new port to load a cargo. In fact at the
time of the contract the ship was not in the port of
Amsterdam and when the ship reached Newport, the
charterer refused to load. Held, the words “now in the
port of Amsterdam” amounted to a condition, the
breach of which entitled the charterer to repudiate the
contract.
 Sales of Goods Act 1930

Warranty
• A warranty is a stipulation collateral to the
main purpose of the contract the breach of
which gives rise to a claim for damages but not
right to reject the goods and treat the contract
as repudiated.
 Sales of Goods Act 1930
Distinction Between
Condition Warranty

• It is a stipulation which is • It is a stipulation which is

essential for the main collateral to the main
purpose of the contract. purpose of the contract.
• In case of breach of a • In case of breach of
condition, the aggrieved warranty, the aggrieved
party can repudiate the party can claim damages
contract of sale. only.
• A breach of condition • The breach of warranty
may be treated as breach cannot be treated as a
of warranty. breach of a condition.
 Sales of Goods Act 1930

Types
• Express Conditions Expressly provided in
the contract
• Implied Conditions and Warranties Which
the law implies in a contract of sale
 Sales of Goods Act 1930

Implied Conditions
• Conditions as to title
• Sale by description
• Condition as to quality or fitness.
• Conditions as to Merchantability
• Conditions implied by custom
• Sale by Sample
• Condition as to wholesomeness.
 Sales of Goods Act 1930

Implied Warranties
• Warranty of Quiet possession
• Warranty against encumbrances
• Warranty to disclose dangerous natures of
goods
• Warranty as to quality or fitness by usage
of trade
 Sales of Goods Act 1930

CAVEAT EMPTOR

• Let the „Buyer Beware‟

• The principle that the buyer alone is

responsible for checking the quality and
suitability of goods before a purchase is
made.
 Sales of Goods Act 1930

CAVEAT EMPTOR
• The maxim Caveat Emptor does not apply
& the contract will be subject to the
implied conditions under the following
circumstances :
 Sale under fitness for buyer’s
purpose
 Sale under merchantable quality
 Sale under usage of trade
 Consent by Fraud
 Sales of Goods Act 1930

Exceptions
• Fitness for buyer’s purpose
• Sale under a patent or trade name
• Merchantable quality
• Usage of trade
• Consent by fraud
Sales of Goods Act 1930

Rights of Unpaid Seller

 Sales of Goods Act 1930

Unpaid Seller
• A seller of goods is deemed to be an
unpaid seller when:-
 The whole of the price has not been paid
or tendered;
 A bill of exchange or other
negotiable instrument has been
received as a conditional payment, and
the condition on which it was received
has not been fulfilled by reason of the
dishonour of the instrument or
otherwise.
 Sales of Goods Act 1930

Conditions

• 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.
 Sales of Goods Act 1930

Conditions

• The seller shall be called an unpaid seller

even when only a small portion of the price
remains to be unpaid.

• It is for the non payment of the price and

not for other expenses that a seller is termed as
an unpaid seller.
 Sales of Goods Act 1930

Conditions

• Where the full price has been tendered by

the buyer and the seller refused to accept it, the
seller cannot be called as unpaid seller.
 Sales of Goods Act 1930

Conditions
• Where the goods have been sold on
credit, the seller cannot be called as an unpaid
seller. Unless :
 If during the credit period seller
becomes insolvent, or
 On the expiry of the credit
period, if the price remains unpaid,
Then, only the seller will become an unpaid
seller.
 Sales of Goods Act 1930

Right against goods

• Where the property in the goods has
passed
 Lien on goods
 A right of stoppage-in-transit
 A right of Re-sale
• Where the property in the goods has not
passed
 Withholding delivery
 Stoppage in transit
 Sales of Goods Act 1930

Right against buyers

• Suit for price

• Suit for damages
• Repudiation of contract
• Suit for interest
 Sales of Goods Act 1930

Right of LIEN
• The goods are not sold on credit
• The goods have been sold on credit, but
the period:
 of credit has expired
 the buyer becomes insolvent
Right of Re-sale
• Where the goods are of perishable nature
• When the buyer does not pay the price
 Sales of Goods Act 1930

Right of Stoppage in Transit

• The transit is end in following cases:
 If the buyer obtains the possession of
the goods before its arrival at the
destination
 If after the arrival at their destination,
the carrier acknowledges to the buyer
that he holds on his behalf
 If the carrier wrongfully refuses to
deliver the goods to the buyer
 Sales of Goods Act 1930

Nominal Damages:
Token damages awarded in order to acknowledge
that the injured party has been injured.

Liquidated Damages:
Damage amounts that are negotiated by the
parties beforehand so that, in the event of a
breach, the contract itself states how much
damages the injured party can recover.
 Sales of Goods Act 1930

Types of Goods
The goods are the subject matter of any contract.
They can be classified as follows:
1 Existing Goods
These may be of three types:
A Specific Goods
B Ascertained Goods
C Unascertained Goods
2 Future Goods
3 Contingent Goods
 Sales of Goods Act 1930

Existing Goods

When the goods are in possession of the seller at

the time the contract is entered into, they are
called existing goods. This means that the goods
to be sold are in the control of the seller. As
already stated, the existing goods may be Specific,
Ascertained or Unascertained.
 Sales of Goods Act 1930

Specific Goods
These are goods identified and agreed upon at the
time the contract of sale is made.

Illustration: A contract to sell a Nokia cell phone

of a particular model is a contract to sell a specific
good. In this case, the sale is for a specific good,
as the phone has been identified.
 Sales of Goods Act 1930

Ascertained Goods
These are goods that are available in bulk are
specially meant for sale.

Illustration: Shehla owns 20 Suzuki Cars. Umar

enters into a contract with Shehla to buy one car
out of those 20 cars. After the contract one car is
given to Umar and this car will then be an
ascertained good.
 Sales of Goods Act 1930

Unascertained Goods
These are goods that are not specifically agreed
upon at the time of entering into the contract.

Illustration: 100 leather jackets are lying in the

godown out of this lot of 100 jackets, 10 jackets
are to be bought by Kulsoom, this is a contract for
sale of unascertained goods made by the leather
jacket manufacturer.
 Sales of Goods Act 1930

Future Goods

Future Goods means goods to be manufactured

or produced or acquired by the seller after the
making of the contract of the sale” Future goods
therefore are neither in existence nor in
possession of the seller at the time when the
contract of sale is entered into.
 Sales of Goods Act 1930

Illustration: Ramal agrees to sell to Umair the

entire crop of sugarcane to be grown at her farm
in Sindh for an amount of Rs.2,000,000. Such type
of agreement is not a sale but an agreement to
sell future goods.
 Sales of Goods Act 1930

Contingent Goods

Contingent goods are the goods, the acquisition

of which by the seller depends upon a
contingency which may or may not happen. Such
goods are therefore dependent upon an event or
an occurrence which may or may not happen.
 Sales of Goods Act 1930

Illustration: Raees agreed to sell 100 cotton shirts

he was importing from China provided his ship
arrived safely in time. In this example, the cotton
shirts are contingent goods as their sale is
dependent upon the safe and timely arrival of the
ship.