mod-3 sale of goods act 1930 5

8/3/2019 Mod-3 Sale of Goods Act 1930 5

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Module-III

Indian Sale of Goods Act, 1930


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Sale of Goods Act 1930

Sale of Goods Act is an old mercantile law. Saleof Goods is one of the special types of Contract.

Initially, this was part of Indian Contract Act.

Later these sections in Contract Act were

deleted, and separate Sale of Goods Act waspassed in 1930.


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Contract of Sale As per Sec.4 of the Act, a contract of sale is where the seller

transfers or agree to transfer the property in goods to thebuyer for price. It includes

Sale: Where the property in goods is immediately transferred

from the seller to the buyer, the contract is called as a sale.

Agreement to sell: Where the transfer in property is to takeplace at a future time or subject to the fulfillment of certain

conditions, the contract is called an agreement to sell.

Essentials of a contract of Sale:

Two partiesGoods

Price

Transfer of Property


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Distinction between Sale & Agreement to sell

Nature/type of contract Transfer of property/ownership

Types of Goods

Risk of loss Consequences of breach

Right to re-sell

General and particular property Insolvency of buyer

Insolvency of seller


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Sec 5 How Contract of sale is made - A contract of sale is made by an offer to buy or sell goods

for a price and the acceptance of such offer. The contractmay provide for the immediate delivery of the goods orimmediate payment of the price or both, or for the deliveryor payment by installments, or that the delivery orpayment or both shall be postponed.

Subject to the provisions of any law for the time being inforce, a contract of sale may be made in writing or byword of mouth, or partly in writing and partly by word of

mouth or may be implied from the conduct of the parties.

Thus, credit sale is also a sale. - - A verbal contract orcontract by conduct of parties is valid. e.g. putting goods

in basket in super market or taking food in a hotel.


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Sale distinguished from other contracts

Hire purchase agreement- In this the property in goods

will pass on to the buyer only when he pays all hisinstallments. Hirer may return the goods/property anytime and stop paying installments after that.

Pledge- In pledge goods are delivered only for securityfor obtaining debt, which must be returned back onpayment of debt.

Mortgage- In this only special property in goods istransferred. The Mortgager continues to be the owner ofproperty. And moreover it is only for immovable property.

Hypothecation Lease- In case of hypothecation theproperty continues to be in possession of the debtor.


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Subject matter of Contract of SaleS-2(7). Goods means every kind of movable property other

than actionable claims and money; and includes stock

and shares, growing crops, grass and things attached

to or forming part of the land which are agreed to be

separated before sale. Trade marks, copyrights,

patents, water, gas, electricity etc. are all treated as

goods for this Act.Types of Goods:

1) Existing Goods- which are owned/possessed at the

time of contract. They can be of the following types-

Specific or Ascertained

Unascertained


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2) Future Goods: To be manufactured, produced or

acquired after making of the contract.

3) Contingent Goods: They are a kind of future goods theacquisition of which depends on an uncertain

contingency.

Perishable Goods

S-7 In case goods destroyed before contract it is void(mutual mistake)

S-8 In case goods destroyed before sale but after

agreement to sell without any fault of seller or buyer

agreement becomes void (impossibility of performance)


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Price Price - Price means the money consideration for a sale of goods.

[section 2(10)]. Consideration is required for any contract. However, in

case of contract of sale of goods, the consideration should be pricei.e. money consideration.

Sec9. Ascertainment of price.- (1) The price in a contract of sale may befixed by the contract or may be left to be fixed in manner thereby agreed ormay be determined by the course of dealing between the parties.

(2) Where the price is not determined in accordance with the foregoingprovisions, the buyer shall pay the seller a reasonable price. What is areasonable price is a question of fact dependent on the circumstances ofeach particular case.

Sec10. Agreement to sell at valuation.- (1) Where there is an agreementto sell goods on the terms that the price is to be fixed by the valuation of athird party and such third party cannot or does not make such valuation, theagreement is thereby avoided. Provided that, if the goods or any partthereof have been delivered to, and appropriated by the buyer, he shall paya reasonable price therefor.(2) Where such third party is prevented frommaking the valuation by the fault of the seller or buyer, the party not in faultmay maintain a suit for damages against the party in fault.

Sec11. Stipulations as to time.- Unless a different intention appears fromthe terms of the contract, stipulations as to time of payment are not deemedto be of the essence of a contract of sale. Whether any other stipulations asto time is of the essence of the contract or not depends on the terms of thecontract.


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Conditions and Warranties

There are certain stipulations which are essentialfor main purpose of the contract of sale ofgoods. These go to the root of contract and non-fulfillment will mean loss of foundation of

contract. These are termed as conditions. Other stipulations, which are not essential are

termed as warranty. These are collateral tocontract of sale of goods. Contract cannot beavoided for breach of warranty, but aggrievedparty can claim damages. - -A breach ofcondition can be treated as breach of warranty,but vice versa is not permissible.


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contd A stipulation in a contract of sale with reference to goods which are

the subject thereof may be a condition or a warranty. [section 12(1)].

A condition is a stipulation essential to the main purpose of thecontract, the breach of which gives rise to a right to treat thecontract as repudiated. [section 12(2)]( Where a particularstipulation in contract is a condition or warranty depends on theinterpretation of terms of contract. Mere stating Conditions of

Contract in agreement does not mean all stipulations mentioned areconditions within meaning of section 12(2))

A warranty is a stipulation collateral to the main purpose of thecontract, the breach of which gives rise to a claim for damages butnot to a right to reject the goods and treat the contract asrepudiated. [section 12(3)].

Whether a stipulation in a contract of sale is a condition or awarranty depends in each case on the construction of the contract.

A stipulation may be a condition, though called a warranty in thecontract. [section 12(4)].


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When condition to be treated as warranty-VOLUNTARY WAIVER OF CONDITION Where a contract of sale is subject to any condition to be fulfilled by

the seller, the buyer may waive the condition or elect to treat thebreach of the condition as a breach of warranty and not as a groundfor treating the contract as repudiated. [section 13(1)].

ACCEPTANCE OF GOODS BY BUYER Where a contract of sale is not severable and the buyer hasaccepted the goods or part thereof, the breach of any condition tobe fulfilled by the seller can only be treated as a breach of warrantyand not as a ground for rejecting the goods and treating the contractas repudiated, unless there is a term of the contract, express orimplied, to that effect. [section 13(2)].

Nothing in this section shall affect the case of any condition orwarranty fulfillment of which is excused by law by reason ofimpossibility or otherwise. [section 13(3)].


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Implied warranties

Implied warranties of quiet possession

Implied warranty of freedom from encumbrances

Disclosure of Dangerous Nature of Goods Clark v.

Army and Navy Cooperative Society


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Implied conditionsImplied condition as to title

Implied condition under a sale by description-

goods must correspond with description,

Implied condition of wholesomeness,

Implied condition for a fitness for a particular purpose-

Priest v. LastImplied conditions under Sale by Sample-

Correspondence with sample

Buyers opportunity

merchantabilityImplied conditions under Sale by Sample as well as description


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Doctrine of caveat emptor The principle termed as caveat emptormeans buyer be aware.

Generally, buyer is expected to be careful while purchasing the

goods and seller is not liable for any defects in goods sold by him.

This principle in basic form is embodied in section 16 that subject

to provisions of Sale of Goods Act and any other law, there is no

implied condition or warranty as to quality or fitness of goods for

any particular purpose. As per section 2(12), Quality of goodsincludes their state or condition.

Exceptions

1. False representation by seller amounting to fraud.

2. Merchantable Quality.

3. Buyer relying upon the skill of the sellerPriest v. Last.

4. Sale under patent or trade name.


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Transfer of Property

The phrase transfer of property in goods means

transfer of ownership of the goods.

Property in goods is different from possession of

goods which means custody over goods. The

moment of time at which property in goodspasses from seller to buyer is very important due

following points:

i) Risk passes with ownership

ii) Action against third parties

iii) Suit for price

iv) Insolvency of buyer or seller


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Transfer of property or ownership sec18-26

PASSING OF PROPERTY OF SPECIFIC/ASCERTAINED GOODS (19-22 )

Property passes when intended to pass - Where there is a contract forthe sale of specific or ascertained goods the property in them is transferredto the buyer at such time as the parties to the contract intend it to betransferred. For the purpose of ascertaining the intention of the partiesregard shall be had to the terms of the contract, the conduct of the partiesand the circumstances of the case.

Specific goods in a deliverable state - Where there is an unconditional

contract for the sale of specific goods in a deliverable state, the property inthe goods passes to the buyer when the contract is made, and it is immate-rial whether the time of payment of the price or the time of delivery of thegoods, or both, is postponed.

Specific goods to be put into a deliverable state.- Where there is acontract for the sale of specific goods and the seller is bound to dosomething 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 hasnotice thereof.

Specific goods in a deliverable state, when the seller has to doanything thereto in order to ascertain price.- Where there is a contractfor the sale of specific goods in a deliverable state, but the seller is bound toweigh, measure, test or do some other act or thing with reference to thegoods for the purpose of ascertaining the price, the property does not pass

until such act or thing is done and the buyer has notice thereof.


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PASSING OF PROPERTY OF UNASCERTAINED GOODS

(23-25 )

Sale of unascertained goods and appropriation.- (1) Where there is a contract for the sale of unascertained or future goods by

description and goods of that description and in a deliverable state areunconditionally appropriated to the contract, either by the seller with the assent of thebuyer or by the buyer with the assent of the seller, the property in the goodsthereupon passes to the buyer. Such assent may be expressed or implied, and maybe given either before or after the appropriation is made.

(2) Delivery to carrier.- Where, in pursuance of the contract, the seller delivers thegoods.

Goods sent on approval or on sale or return- when goods are delivered to the buyeron approval or on sale or return or other similar terms, the property therein passes tothe buyer-

(a) when he signifies his approval or acceptance to the seller or his disapproval to thesame.

(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 thegoods, on the expiration of such time, and, if not time has been fixed, on theexpiration of a reasonable time.

NOTE : The property in goods will never pass to anybody if the seller reserves theright of disposal


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Reservation of right of disposal.-sec 25

(1) Where there is a contract for the sale of specific goods or wheregoods are subsequently appropriated to the contract, the seller may,by the terms of the contract or appropriation, reserve the right ofdisposal of the goods until certain conditions are fulfilled. In suchcase, notwithstanding the delivery of the goods to a buyer, or to acarrier or other bailee for the purpose of transmission to the buyer,

the property in the goods does not pass to the buyer until theconditions imposed by the seller are fulfilled. (2) Where goods are shipped or delivered to a railway

administration for carriage by railway and by the bill of landing orrailway receipt, as the case may be, the goods are deliverable to theorder of the seller or his agent, the seller is prima facie deemed to

reserve the right of disposal.


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Sale by non-owners (sec 27-30) Subject to the provisions of this Act and of any other law for the

time being in force, 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 conduct precluded from denying the sellers authority to sell.

Exceptions

1. Mercantile agent

2. Sale by co-owners

3. Sale by person under voidable contract

4. Seller or buyer in possession after sale

5. Estoppels6. Sale by unpaid seller

7. Sale by person under other laws


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Rights of unpaid sellerWho is an unpaid seller.

When the whole of the price has not been paid

Where a bill of exchange or other negotiable instrumentreceived as conditional payment is dishonoured.

A seller of goods is deemed as unpaid seller on followingconditions-

He must sell goods on cash terms and must be unpaid. He must be unpaid either wholly or partly.

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

He must not refuse to accept payment when tendered.Rights of unpaid seller can be divided into two categories-

i) Right against the goods

ii) Right against the buyer personally.


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RIGHT AGAINST THE GOODS1) Right of lien (Sec- 47)

Subject to the provisions of this Act, the unpaid seller of goodswho is in possession of them is entitled to retain possession ofthem until payment or tender of the price in the following cases,namely:-

(a) where the goods have been sold without any stipulation as tocredit;

(b) where the goods have been sold on credit, but the term of

credit has expired;(c) where the buyer becomes insolvent.

The seller may exercise his right of lien notwithstanding that heis in possession of the goods as agent or bailee for the buyer.

In case of part delivery- Where an unpaid seller has made part

delivery of the goods, he may exercise his right of lien on theremainder, unless such part delivery has been made undersuch circumstances as to show an agreement to waive the lien.


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Termination of lien (Sec-49)

The unpaid seller of goods loses his lien

(a) when he delivers the goods to a carrier or other bailee forthe purpose of transmission to the buyer without reservingthe right of disposal of the goods;

(b) when the buyer or his agent lawfully obtains possessionof the goods;

(c) by waiver thereof.


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2) RIGHT OF STOPPAGE IN TRANSIT

Right of stoppage in transit (Sec-50)

When the buyer of goods becomes insolvent, the unpaid seller who

has parted with the possession of the goods has the right ofstopping them in transit, that is to say, he may resume possessionof the goods as long as they are in the course of transit, and mayretain them until payment or tender of the price.

Duration of transit (Sec-51)

(1)Goods are deemed to be in course of transit from the time whenthey are delivered to a carrier or other bailee for the purpose oftransmission to the buyer, until the buyer or his agent in that behalftakes delivery of them from such carrier or other bailee.

(2) If, after the arrival of the goods at the appointed destination, thecarrier or other bailee acknowledges to the buyer or his agent thathe holds the goods on his behalf and continues in possession ofthem as bailee for the buyer or his agent, the transit is at an end andit is immaterial that a further destination for the goods may havebeen indicated by the buyer.


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(3) If the buyer or his agent in that behalf obtains delivery of thegoods before their arrival at the appointed destination, the

transit is at an end

(4) If the goods are rejected by the buyer and the carrier or otherbailee continues in possession of them, the transit is notdeemed to be at an end, even if the seller has refused toreceive them back.

(5) Where the carrier or other bailee wrongfully refuses to deliverthe goods to the buyer or his agent in that behalf, the transit isdeemed to be at an end.

(6) Where part delivery of the goods has been made to the buyeror his agent in that behalf, the remainder of the goods may bestopped in transit,


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How stoppage in transit is effected (Sec-52)

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

by taking actual possession of the goods, or by giving notice of hisclaim to the carrier or other bailee in whose possession the goodsare. Such notice may be given either to the person in actualpossession of the goods or to his principal.

The notice to principal be given on time and in such circumstances,

that he, by the exercise of reasonable diligence, may communicateit 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 thecarrier or other bailee in possession of the goods, he shall re-deliverthe goods to, or according to the directions of, the seller. The

expenses of such re-delivery shall be borne by the seller.


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3) Right of Resale (Sec-54)

The unpaid seller has limited right to resell the

goods in case of

i) Perishable goods

ii) Where seller has given notice to the buyer to

resell and buyer does not pay the price inreasonable time.

iii)Where the seller has expressly reserved the

right in contract in case buyer should make a

default.


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RIGHT AGAINST THE BUYER PERSONALLY

1) Suit for price (Sec-55)

(i) Where under a contract of sale the property in the goods has passedto the buyer and the buyer wrongfully neglects or refuses to pay forthe goods according to the terms of the contract, the seller may suehim for the price of the goods.

(ii) Where under a contract of sale the price is payable on a day certainirrespective of delivery and the buyer wrongfully neglects or refuses

to pay such price, the seller may sue him for the price although theproperty in the goods has not passed and the goods have not beenappropriated to the contract.

2) Damages for non-acceptance (Sec-56)Where the buyer wrongfully neglects or refuses to accept and payfor the goods, the seller may sue him for damages for non-

acceptance.

mod-3 sale of goods act 1930 5

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