Sale of Goods Act:

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. It thus includes both an actual 'sale' and an
'agreement to sell',.
'Goods' means every kind of movable property other than actionable claims and money for
contract of sale.
A 'sale' must be distinguished from an 'agreement to sell' since the legal implications of the
two terms are vastly different.
A contract wherein, the property in the goods is transferred from the seller to the buyer, the
contract is called a sale,
but where the transfer of property in the goods is to take place at a future time, or subject to
some conditions, thereafter to be fulfilled, it is called an agreement to sell.
An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled
subject to which the property in the goods is to be transferred.

Electronic procurement or e-procurement, as it's more commonly known – is where an

organisation uses the internet (or sometimes intranet) to procure the goods and services it
needs to operate. Paper-based processes are replaced with a fully electronic workflow that
streamlines all aspects of the purchasing process

Essentials of contract of sale:

1. There must be two parties
2. There must be some movable goods which are transferred from buyer to seller.
3. the consideration for the contract of sale must be only for money
4. All essentials of a valid contract

NO SPECIAL FORMALITIES ARE REQUIRED FOR CONTRACT OF SALE. IT MAY

BE IN WRITING OR ORAL OR IMPLIED

PRICE:
The consideration for the contract of sale must be money. If goods are exchanged against
goods the transaction is barter and not covered by the act. However consideration may be
partly in money and partly in goods.
.
 Price is mentioned in the contract.
  The manner of fixing the price is mentioned in the contract.
 It is determined by the course of dealings of the parties. when price is not fixed by any
of the above modes a ‘reasonable price’ is considered as the price of the contract.

Time:
 When time is stipulated regarding the payment of price :- Time of payment is not
considered the essence of the contract unless a different intention appears from the
terms of the contract. Thus if payment is not made in time the seller can not avoid the
contract but can claim damages.
 When time is stipulated regarding delivery of goods:- time of delivery of goods is
normally considered essence of the contract. Thus non performance at stipulated time
will render the contract voidable at the option of the buyer.

Goods:
Sec.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 severed before sale or under contract of sale.’

Difference between sale and agreement to sell:

When property is transferred from seller to buyer at the time of formation of contract, an
absolute sale occurs.
When property in the goods is to be transferred at some future date and not at the time of
contract, the contract of sale is termed as an agreement to sell

 Nature of contract-executed / executory.

 Transfer of property- immediate / future date.

 Risk of loss- In sale if goods destroyed then the loss falls on the buyer. In agreement
to sell the loss falls on the seller.

 Insolvency of seller- buyer can recover goods / if price already paid proportionate
amount can be recovered.
  Insolvency of buyer- if price is not paid proportionate amount can be recovered.
delivery of goods can be demanded./ seller can refuse delivery unless full price is
paid.

 Right to resell- not available in sale / may resale but liable for damages

Classification of Goods: The goods forming subject matter of contract of sale may be:
a) Existing Goods: Goods owned or possessed by the seller at the time of making the
contacts of sale are called existing goods. Only existing goods can be the subject matter of
sale. Generally the seller is the owner of such goods. But in case of sale by an agent or
Pawnee, the good are possessed but not owned by the seller. Existing goods may be either: 1)
Specific goods 2) Ascertained goods 3) Unascertained goods.

1) Specific goods: Goods identified and agreed upon at the time of the contract of sale is
made are specific goods. For e.g. A agrees to sell his horse or car to B, it is the sale of
specific goods.
2) Ascertained goods: The goods which are ascertained or identified only after the
formation of the contract of sale are known as ascertained goods. The terms
ascertained and specific are commonly used for the same kind of goods.
3) Unascertained Goods: The goods which are not identified and ascertained at the time
of sale are called unascertained goods. They are also called generic goods. They are
not definite and specific. They are goods defined by description only and may form
part of a lot. For example, if a merchant agrees to sell on bag of wheat from his
godown to a buyer, it is a sale of unascertained goods because it is not known which
bag will be delivered.
b) Future Goods: Future Goods are goods which will be manufactured or produced or
acquired by the seller after the making of contract of sale. There cannot be a sale of future
goods. A contract for the sale of future goods is an agreement to sell goods. This is because
ownership cannot be transferred before the goods are manufactured or produced.

Example: Prashant agrees to sell Anand all the mangoes which will be produced in his
garden next year. This is an agreement for the sale of future goods.
c) Contingent Goods: Goods, the acquisition of which by the seller depends upon a certain
contingency, which may or may not happen, are called contingent goods. A contract for sale
of contingent goods is enforceable only when the event of happening of which the
performance of the contract depends has happened. If the event does not happen, the contract
becomes void. Contingent goods come within the class of future goods.

For Example:
i) X agrees to sell to Y a ring provided he is able to purchase it from its present
owner. This is an agreement for the sale of contingent goods.
ii) A agrees to sell to B certain goods which are arrive by a ship from Pakistan. In
case, the availability for the sale of contingency.

Perishable goods:
The possible causes of perishing of goods:-
1. Physical destruction of goods.
2. Damage of goods in such a manner that they loose their commercial value.
3. Loss of goods by theft.
4. Lawful acquisition of goods by government.

Effect of perishing of goods

 Goods perishing before formation of the contract.- in case of specific goods
such contract is void ab initio as the performance of the contract is impossible
due to destruction of subject matter.
 Goods perishing before the sale but after the agreement to sell.:- in case of
specific goods the contract of sale becomes void and both parties are excused
from the performance.
 Effect of perishing of future goods.:- applies in this case also which says
‘where there is an agreement to sell specific goods, and subsequently the
goods without any fault on the part of the seller or buyer perish or become so
damaged as no longer to answer to their description in the agreement before
the risk passes to the buyer, the agreement is thereby avoided.’
Transfer of Property: Transfer of property in the goods is distinct from the delivery of
goods.
Transfer of property means transfer or passing of ownership in the goods.
Property means the general property in the goods and not merely a special property. Property
or ownership in the goods may pass to the buyer without delivery of the goods. On the other
hand, mere delivery of the goods may not constitute transfer of owner in the goods.
Therefore, property in the goods is distinct from delivery or possession of the goods. Transfer
of property thus means, that the ownership of the seller in the goods ceases and buyer’s
ownership in the goods commences. The time of transfer of property in the goods decides
various rights and liabilities of the seller and the buyer.

Transfer of Title: In case of transfer of ownership of goods from seller to the buyer it is
presumed that the seller is full owner of the goods and on transfer the buyer also becomes an
absolute owner of the goods. But where the seller is not an absolute owner of goods, the
buyer will not get a title better than that of seller himself.
A general rule is expressed by the maxim “Nemo Dat Quod Non Habet” which means
that “No can pass a better title than what he himself has”. This rule has certain exceptions.

Exceptions
a) Sale by an unpaid Seller: Where an unpaid seller who has right of lien or stoppage in
transit resells the goods the buyer acquires a title which is good.
b) Sale by Mercantile Agent: When a mercantile agent with the consent of the owner is
in possession of goods and sale is made by him in the ordinary course of business,
such a sale shall be valid and the buyer acquires a good title though the seller had no
authority to sell.
c) Sale under implied authority of owner if title by Estoppels: If the owner by his
conduct or words causes the buyer to believe that the seller was the owner of the
goods or had the owners authority to sell and induced the buyer to buy them, he
cannot afterwards question the seller authority to sell.
d) Sale by one of the several joint Owners: When goods have several joint owners, and
one of the several transfer the property in goods to third person even though he has no
authority to sell and if such a person purchases in good faith he gets a good title.
 e) Sale by person in possession of goods under a voidable contract: In case of sale by
a person who has obtained possession of goods under a voidable contract, the buyer
gets a goods title if he purchases in good faith.
f) Sale by seller in possession after sale: If a person who has sold the goods but still
has their possession sells the goods to a third person then that other person gets a good
title if he had made the purchase in good faith.
g) Sale by buyer in possession after sale: In case where a buyer having bought or
having agreed to buy goods, obtains the consent of the seller possession of goods or
documents of title of goods, and sells them to a benefit then the transferee has good
title.

RIGHTS AND DUTIES OF THE BUYER

RIGHT DUTIES
1. To have delivery of the goods as per 1 To accept the delivery of goods, when
contract. the seller is willing to make the
delivery as per the contract
2. To reject the goods when they are not 2. To pay the price in exchange for
of the description, quality or quantity possession of the goods
as specified in the contract
3. To repudiate the contract when goods 3. To apply for delivery of the goods.
are delivered in installments without
any agreement to that effects
4. To be informed by the seller, when the 4 To demand delivery of the goods at a
goods are to be sent by sea route, so reasonable hour
that he may arrange for their insurance
5 To have a reasonable opportunity to 5 To accept delivery of the goods in
examine the goods for ascertaining installments and pay for them, in
whether they are in conformity with accordance with the contract.
the contract.
6 To sue the seller for recovery of the 6 To bear the risk of deterioration in the
price, if already paid, when the seller course of transit, when the goods are
fails to deliver the goods. to be? delivered at a place other than
where they are sold
7 To sue the seller for damages if the 7 To inform the seller in case the buyer
seller wrongfully neglects or refuses refuses to accept or rejects the goods
to deliver the goods to the buyer
8 To sue the seller for specific 8 To take the delivery of the goods
performance within a reasonable time after the
seller tenders the delivery
9 To sue the seller for damages for 9 To pay the price, where the property in
breach of a warranty or for breach of a the goods are passed to the buyer, in
condition treated as breach of a accordance with the terms of the
warranty contract
 10 To sue the seller the damages for 10 To pay damages for non-acceptance of
anticipatory breach of contract goods
11 To sue the seller for interest where
there is a breach of contract on the
part of the seller and price has to be
refunded to the buyer

Rights of the Seller:

1. To receive the price of the goods.
2. To receive compensation or sure for damages for any loss occasioned by him
by neglect or refusal of the buyer to take delivery of the goods.
3. To receive reasonable charge for care and custody of the goods.
4. If he is unpaid seller then
a) To exercise his right of lien.
b) To exercise his right of stoppage in transit.
c) To exercise his right of resale.
5. To sue the buyer for damages for wrongly neglecting or refusing to accept the
goods.
6. To sue for the price of the goods.
7. To sue for damages on buyer repudiates the contract.

Duties of seller:
i. To deliver the goods when buyer demands the delivery thereof.
ii. To compensate the buyer in case he repudiates the contract or commits
breach of contract.
iii. To refund the amount paid by the buyer in case he fails to deliver the
goods.
iv. To compensate the buyer in case of delivery of wrong quantity.

Unpaid Seller:
A seller of goods is deemed to be an unpaid seller when
 The whole of the price not been paid or tendered
 A bill of exchange or any other negotiable instrument has been
received as conditional payment, and the condition on which it was
 received has not been fulfilled by reason of dishonor of the instrument
or otherwise.

Following conditions must be fulfilled before a seller of goods can be deemed to be an unpaid
seller.
 . He must be unpaid and price must be due
 . He must have an immediate right of action for the price
 . A bill of exchange or other negotiable instrument was received but the same
has been dishonoured.

Seller here means not only the actual seller but also any person who is in position of
a seller (agent of the seller).

Sale of goods act has expressly given two kinds of right to an unpaid seller namely
a. Rights of an unpaid seller against the goods.
b. Rights of an unpaid seller against the buyer personally.

RIGHTS OF AN UNPAID SELLER

Against the Against the

goods buyer

Where the property Where the Property in

in the goods has the goods has not
passed passed

Lien Stoppage in transit Re-Sale Withholding Stoppage

Delivery in transit
 Suit for price Suit for Repudiation of contract Suit for interest
damages

Caveat Emptor: The fundamentals principle of law that guides the sale of goods act
is the maxim “Caveat Emptor” which means “let the buyer beware “. In other words it
is not seller’s duty in a contract of sale to give to buyer an article suitable for
particular purpose unless such purpose is made known to the seller. Thus on sale of
a Knife there is no implied condition that the knife must cut. It is duty of the buyer to
satisfy himself before purchasing the article, that, it is the article which he wants to
buy.

Thus, under the rule of Caveat Emptor in a contract of sale of goods the seller
is under no duty to revealing unflattering truths about the goods sold. Therefore,
when a person buys some goods, he must examine them thoroughly.

Exceptions to Doctrine of Caveat Emptor

1) Sale under a Brand Name: When the article is sold under a brand name, there
is no implied condition that the goods shall be meant for a particular purpose.
2) Buyer’s Response: When the buyer makes known to the seller, the particular
purpose for which the goods are required there is an implied condition that
the goods shall be reasonably fit for the purpose. However there is no implied
condition if the article is sold under a trade name.
3) Usage of Trade: An implied conditions as to quality of fitness for a particular
purpose may be annexed by usage of trade.
4) Merchantable Quality: Where goods are purchased by description from a
seller who deals in such goods then there is an implied condition that the
goods shall be of merchantable quality.
5) Consent by Fraud: Where the seller makes a false representation amounting to
fraud and the buyer relies on it or where the seller conceals the defects in the
goods which cannot be discovered on a reasonable examination, the rule will not
apply. A seller who is quality of fraud, shall not have no protection under the
doctrine of Caveat Emptor.