Sales of Goods Act
Sales of Goods Act
Sales of Goods Act
1
Introduction
• The law relating to sale and purchase of goods, prior to 1930
were dealt by the Indian Contract Act, 1872.
• In 1930, Sections 76 to 123 of the Contract Act was repealed and
a separate Act known as the Sale of Goods Act, 1930 was passed.
• The Act came into force on 1 July, 1930
• It extends to the whole of India, except Jammu & Kashmir.
• This act covers only moveable property only
2
Definition
• 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.
• Contract of sale is made when there is an offer to buy or sell
goods for a price and the acceptance of such offer is also there.
• It can be made in writing or by word of mouth, or partly in
writing and partly by mouth.
• The term contract of sale is a generic term, which includes:
(a) Sale and
(b) Agreement to sell
3
SALE AND AGREEMENT TO SELL
Sale
Where under a contract of sale, the property
(ownership) in the goods is transferred from the
seller to the buyer, it is called a sale.
Thus, sale takes place when there is a transfer of
ownership in goods from the seller to the buyer.
A sale is an executed contract
Agreement to sell
Agreement to sell means a contract of sale under
which the transfer of property in goods is to take
place at a future date or subject to some
conditions thereafter to be fulfilled
Difference
Sale Agreement to Sell
6
1. There must be at least two parties: a sale has to be
bilateral because the property in goods has to pass
from one person to another. The seller and the buyer
must be different persons.
As regards the time fixed for the delivery of goods, time is usually
held to be the essence of the contract’. Thus if time is fixed for
delivery of the goods and the seller makes a delay, the contract is
voidable at the option of the buyer. In case of late delivery,
therefore, the buyer may refuse to accept the delivery and may put
an end to the contract.
As regards the time fixed for the payment of the price, the general
rule is that ‘time is not deemed to be the essence of the contract’,
unless a different intention appears from the terms of the contract
(sec. 11). Thus even if the price is not paid as agreed, the seller
cannot avoid the contract on that account. He has to deliver the
goods if the buyer tenders the price within reasonable time before
resale of the goods. The seller may, however, claim compensation
for the loss occasioned to him by the buyer’s failure to pay on the
appointed day.
• Sec. 12(2) defines a ‘condition’ as, ‘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’ (denied),
• Sec 12(3) defines a ‘warranty’ as, ‘stipulation collateral to the main
purpose of the contract, the breach of which gives rise to claim for
damages but not to a right to reject the goods and treat the
contract as repudiated’ .
• The effect of a breach of a ‘condition’ is to give the aggrieved party
a right to treat the contract repudiated, i.e., if price has been paid,
the buyer can claim the refund of price plus damages for breach
• In case of breach of ‘warranty’, only damages can be claimed, i.e.,
the buyer must accept the goods and claim damages for the breach
of warranty
• 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 a
contract [sec. 12(4)]
Example: 1
Kaushal asks a dealer to supply him a shirt which would not shrink
after use and wash. The dealer supplies a shirt which shrinks after use
and wash. Kaushal can reject the shirt or keep the shirt and claim
damages. Here the stipulation to supply a shirt which would not shrink
after use and wash is a condition.
The illustrations are a clear proof of the fact that an exactly similar
term may be a condition in one contract and a warranty in another
depending upon the construction of the contract as a whole
Condition & Warranty Distinguished
1. As to value:
A condition is a stipulation which is essential to the main
purpose of the contract, whereas a warranty is a stipulation
which is collateral to the main purpose of the contract.
2. As to breach:
The breach of a condition gives the aggrieved party the
right to repudiate the contract and also to claim damages.
3. As to treatment:
A breach of condition may be treated as a breach of
warranty. But a breach of warranty cannot be treated as a
breach of condition.
Caveat Emptor
• Let the “buyer be aware”
• A warning that notifies a buyer that the goods he or
she is buying are "as is," or subject to all defects.
• When a sale is subject to this warning the purchaser
assumes the risk that the product might be either
defective or unsuitable to his or her needs.
This rule is not designed to shield sellers who engage
in Fraud or bad faith dealing by making false or
misleading representations about the quality or
condition of a particular product.
• It merely summarizes the concept that a purchaser m
ust examine, judge, and test the product
considered for purchase himself or herself.
Duties of the buyer
• Duty to accept the goods and pay for them in exchange
of possession.
• Duty to apply for delivery of goods.
• Duty to demand delivery at a reasonable hour.
• Duty to accept installment delivery and pay for it.
• Duty to take risk of deterioration in the course of
transit.
• Duty to intimate the seller where he rejects the goods.
• Duty to take delivery.
• Duty to pay the price.
• 29 Duty to pay damages for non-acceptance.
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; or
• when a bill of exchange or other negotiable
instruments has been received as conditional payment
• the conditions has not been fulfilled by reason of the
dis honour of the instrument or otherwise. [Sec 45(1)]
30
Rights of Unpaid Seller
• Notwithstanding that the property in the goods
may have passed to the buyer, the unpaid seller,
has, by implication of law-
a) a lien on the goods for price while he is in
possession of them;
b) in case of insolvency of the buyer a right of
stopping the goods in transit; and
c) a right of resale. [Sec 45(1)]
31