CONTRACT OF SALE OF GOODS

HISTORY
” SALE OF GOODS ACT” was enacted in
1930.
 Based from the English Sales of Goods
Act,1893.
 Came into force in July 01, 1930.
 The law of sale of goods was contained in
chapter VII of the Indian contract
act,1872,prior to this act
 It extends to whole India except J& K.
 CONTRACT OF SALE
Definition
Sec 4(1) of the Indian Sale of Goods Act,
1930 defines the contract of 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”.
A Contract of sale consists of the following:
1)Sale or Absolute Sale
Where the property (ownership )in the goods is
immediately transferred from the seller to the
buyer & nothing is left on the part of seller.
(Ex:Counter Sale)
2) Agreement to sell or Conditional sale
Where the transfer of the Property (Ownership) in
the goods shall take place in future or fulfillment
of certain conditions
Ex: There was an agreement to sale of a quantity of
nitrate of soda to arrive at a certain ship.
 ESSENTIALS OF A CONTRACT OF SALE
1. There must be at least two parties
2. Transfer or Agreement to transfer the
ownership of goods.
3. The subject matter of the contract must
necessarily be 'goods'.
4. The consideration is Price.
5.A Contract of sale may be an express or
implied
6. All other essentials of a valid contract must
be present
Differences between Sale & Agreement to sell
Basic Sale Agreement to
Difference Sell
Transfer of Immediate Future after
Ownership fulfillment of some
conditions

Nature of Contract Executed Executory

Nature of Rights The buyer gets The buyer gets

RIGHTS in REM RIGHTS in
from the seller PERSONAM from
the seller
Differences between Sale & Agreement to sell
Basic Sale Agreement to
Difference Sell
Breach of Buyer Seller may sue Seller can only sue
buyer for price of the buyer for the
goods damages
Breach of Seller Buyer may sue the Buyer can only sue
seller& obtain the seller for
Possession , damages
Ownership of goods
also damages
Risk of Loss Falls on buyer Falls on Seller
Type of Goods Existing & Specific Future &
goods Contingent goods
Differences between Sale & Agreement to sell
Basic Sale Agreement to
Difference Sell
Insolvency of Seller Contract is Buyer can claim
performed by official damages(if buyer
assignee performs)but not
performance
Insolvency of Buyer Contract is Damages can be
performed by official claimed
assignee

Right to Re-Sell Seller cannot resell as Seller still can find

ownership rights are another buyer but
transferred shall be liable for
breach
 GOODS- Definition
According to Section 2(7) the term
‘goods’ means “every kind of movable
property other than actionable
claims and money and includes stock
and shares , growing crops , and things
attached to or forming part of the land
which are agreed to be severed before
sale or under the contract of sale”
Type of Goods
A)Existing Goods :Goods which exist & which
are owned & possessed by the seller at the time
of making the contract of Sale are called as
existing goods.

Existing goods can be further sub-divided as

1.Specific Goods 2. Ascertained Goods 3.
Unascertained Goods

Specific Goods : “Goods identified and agreed

upon at the time of making the contract of
sale are specific goods. (identified before
entering into the contract)
Ascertained Goods :that have been
identified subsequent to formation of
contract of sale . In such cases the buyer
forms the contract first & later selects the
goods

Unascertained Goods :Goods that are not

specifically identified or ascertained at the
time of entering the contract of sale . They
are identified only by description .
Example: Tom wants to buy 30 apples out of
100 apples.

1)If he Selects 30 apples before formation of

contract –Specific goods
2)If he selects them subsequent to the
formation of contract-ascertained goods
3)All the 1oo apples are unascertained goods
till they are identified
B)Future Goods : Goods to be manufactured
or produced or acquired by the seller
after making the contract of sale .
Ex: Tom agrees to sell to Jerry all the milk that his
cow may yield during the coming year. This is a
contract for the sale of future goods.
C) Contingent Goods: These are the goods the
acquisition of which by the seller depends
upon a contingency, which may or may not
happen .
Ex:A agrees to sell to B a specific rare
painting provided he is able to purchase it
from its present owner. This is a contract
for the sale of contingent goods.
Rights Of Unpaid Seller
Seller:
A person who sells the goods or agrees to
sell the goods is called seller.
Unpaid :-
It means payment is not made or without
payment.
In simple words, "Unpaid seller" means
a person who has sold the goods for a
price but price has not been paid to him.
Sales act defines the "unpaid seller" in the
following words u/s 45
Unpaid Seller is a person :-
i. To whom the whole price has not been paid or
tendered.
ii. And where a bill of exchange or other
negotiable instruments has been accepted by
him as a condition on which it was received has
not been fulfilled by reason of dishonor of the
instrument or otherwise
Ex:Feise v.Wray
A seller draws a bill of exchange for price of goods on the buyer.
The buyer duly accepted it. But on the date of maturity, the buyer
refused to pay. Held the seller is an unpaid seller.
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.
•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.
• Where the full price has been tendered by the buyer and the
seller refused to accept it, the seller cannot be called as unpaid
Rights of an Unpaid Seller
 Right against the goods
A.When the property in the goods
has been transferred
1.Right Of Lien[sec 46(1)(a) And
47 To 49]
The right of lien means lawfully right to retain the goods
possession until the full price is received. An unpaid seller can
exercise his right of lien in following cases.
Where the goods have been sold on the cash basis.
 Where the goods have been sold on credit basis and the term
Right Of
LienforandRs.promises
Ex: X sells the goods to Y
500. Y pays 250
to pay the
remaining 250 after two
month. X has a right of
lien on the goods.
 Rules regarding Right to
Lien
a) If the possession of goods is lost-the right to lien is also lost.
b) Right to lien depends on possession & not on
title/ownership of goods.
c) It can be exercised for the price of the goods and not for
other expenses.
d) It can be exercised on all the goods which are in custody of
the seller.
e) Even when the goods are in the possession of agent of seller.
 Termination of Lien
Seller’s right of lien is terminated in
following cases.
a. When he delivers the goods to the carrier or other
bailey for transmission to the buyer
b. When the buyer or his agent lawfully obtains the
possession of the goods.
c. When seller waives his right of lien on the goods.
d. When the buyer pays the price of goods
2.Right to
Stoppage in
Transit(Sec 50-
52)
Right to Stoppage in Transit: It means stoppage of goods while
they are in transit to take possession until the price is paid (sec.
50-52)
Unpaid seller can stop the goods in transit in
the following cases.
1.While the buyer becomes insolvent.
2. While the goods are out of actual
possession of seller, but have not reached
buyer’s possession i. e. goods are in transit
with career.
3.The unpaid seller can stop the goods in
 Depends
Right to Stoppage in on
Transit The position of carrier

The carrier may hold goods as:

•As Seller’s agent
•As Buyer’s agent
•As Independent Carrier
The unpaid seller can not stop goods in transit in following cases.
1. When the goods reaches the destination.
2. While the buyer or his agent takes possession of delivery even if it is
not reached destination.
3. In case the carrier is agent of the buyer, the transit comes to an end to
the instance carrier receives the goods and seller can not stop the
transition.
4. Carrier’s wrongful refusal to deliver goods to the buyer .
Ex: Litt v.Cowley
Seller gave a notice to the carrier to stop the delivery of goods

Ex: ”Tom” sells refrigerator to “Bunny”. “T” delivers the Fridge to the
carrier to carry it to “B”. Later on gets news that “B” has become
insolvent; “Tom” can stop delivery.
 Difference between Lien &
Stoppage in Transit
Basis Of Distinction Right of Lien Right to Stoppage in Transit
Possession of Goods The goods must be in actual The goods must be in the
possession of the seller possession of a carrier or other
bailee who is acting as an
independent person

Solvency The Right can be exercised The Right can be exercised

even when the buyer is solvent only when the buyer has
but refuses to pay the price become insolvent.
Retaining /Regaining Retain the goods until he Regains them back till price is
receives the price received
Effect of loss of Possession Once the seller loses the Once the seller loses the
possession the right of Lien is possession of goods & then
also lost regains the possession
3.Right of
Resale
Right of Resale: An unpaid seller may re- sell the goods in the following
cases.
•Where the goods are perishable .
•Where the right of re- sale is expressly reserved in the contract .
•Where in exercise of the right f lien or stoppage in transit, the unpaid
seller gives notice to the buyer of his intension to re -sell, and the buyer
does not pay the price within a reasonable time.

Ex: A agrees to deliver a homemade cake to C on credit. C does not pay.

A can re-sell it to any other person.
Loss or Profit on Re-sale
Loss on Re-sale: Measure of Damages=Contract Price-Re-sale Price
Profit on Re-sale : Profit on Re-sale=Re-sale Price-Contract Price

Treatment of Loss or Profit dependent on

fulfillment of Conditions:
1. The seller gave a notice of re-sale to the buyer.
2. Such notice must have been given within reasonable time
3. After giving notice the seller must have re-sold within reasonable
time.
b.When the property in the goods
has not passed
Right of withholding Delivery:
In some cases the ownership of the goods sold is not transferred
to the buyer. In those cases the seller has right to withhold the
delivery of goods ,if the buyer fails to pay the price. It may be
noted that this right is in addition to other remedies available
to the seller.
According to Sec 46(2) this is similar & co-extensive to Right to
 Rights of unpaid seller against the
The unpaid seller can take following actions against the buyer
a.personally:
Sue for Price: buyer personally
The unpaid seller has also a right to claim
the price from the buyer for the goods. It has
been provided under Section 55 . It provides
that where the property in the goods have
already been delivered to buyer and seller
remains unpaid owing to the negligence or
deliberate refusal of the buyer then seller
may sue the buyer for the price of the goods.
Ex: D sold headphone to F for Rs. 1000. F
refused to pay. D can sue F for price of the
head phone
 Rights of unpaid seller against the
buyer personally
The unpaid seller can take following actions against the buyer
personally:
b.Damages for Non- Acceptance:
According to Section 56 : if Buyer refuses to
accept the goods and pay the price of the
goods then seller can sue him for damages for
non-acceptance. The damages are calculated
in accordance with the rules con­tained
in Section 73 of the Indian Contract Act, that
is, the measure of damages is the estimated
loss arising directly and naturally from the
buyer’s breach of contract.
 Rights of unpaid seller against the
buyer personally
The unpaid seller can take following actions against the buyer
C.personally:
Suit for specific performance:
According to Section 58 subject to Specific
Relief Act, seller may also sue buyer for
specific performance of contract in case of a
breach of contract and the decree passed can
be unconditional without giving the
defendant the option of retaining the goods
on payment of damages.
 Rights of unpaid seller against the
buyer personally
The unpaid seller can take following actions against the buyer
personally:
4.Suit for interest:
When under a contract of sale, the seller tenders the
goods to the buyer and the buyer wrongfully refuses
or neglects to accept and pay the price, the seller has a
further right to claim interest on the amount of the
price.
The interest may be calculated from the date of the
tender of the goods or from the date on which the
price was payable. The unpaid seller can claim
interest only when he can recover the price, i.e., if the
seller's remedy is to claim damage, then he cannot
claim interest. The rate of interest to be awarded is at
the discretion of the court.