Sale of Goods Act

Sale (sec. 4(1)) 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
Formation of Contract of sale:
Section I. (Contracts to Sell and Sales.) (1) A contract to sell goods is a
contract whereby the seller agrees to transfer the property in goods to the
buyer for a consideration called the price.

(2) A sale of goods is an agreement whereby the seller transfers the

property in goods to the buyer for a consideration called the price.
(3) A contract to sell or a sale may be absolute or conditional.

(4) There may be a contract to sell or a sale between one part owner and
another.

Section 2. (Capacity - Liabilities for Necessaries.) Capacity to buy and sell is

regulated by the general law concerning capacity to contract, and to
transfer and acquire property.

Where necessaries are sold and delivered to an infant, or to a person who

by reason of mental incapacity or drunkenness is incompetent to contract,
he must pay a reasonable price therefore.

Necessaries in this section means goods suitable to the condition in life of

such infant or other person, and to his actual requirements at the time
of delivery

Classification of Goods:

(Sec 2(7)) defines goods as Goods means every kind of movable property
other than actionable claims and money and includes stock and shares,
growing crops, grass, etc.

(a) Existing goods: These are goods which are owned or possessed by the seller
at the time of sale. They may be:

(i) Specific goods: goods which are identified and agreed upon at the time of
contract of sale (e.g.) in a TV shop, agreement to buy specific BPL.
(ii) Ascertained goods: Goods which are identified & set apart after the
formation of contract of sale (e.g.) in the same T.V.Shop, marking a particular
set.
(iii) Unascertained or Genetic Goods: goods which are not yet identified and
form a part of a lot. (e.g.) in the same T.V.Shop all the other goods which are
not marked
(b) Contingent goodssec 6(2) There may be a contract for sale of goods, the
acquisition of which by the sellers depends upon a contingency which may
or may not happen, (e.g.) A agrees to sell 50 kgs of sugar if the ship that
carries sugar reaches Chennai port.

(c) Future Goods: (sec 2 (6): future goods mean goods to be manufactured or

produced or acquired by the seller after the making of the contract of sale.

Effect of Destruction of Goods:

(i)

(ii)

Sec 7: A contract for sale of specific goods is void if at the time when the
contract was made. The goods have without the knowledge of the seller,
perished. Case: Couturier Vs Hastier.

Sec 8: An agreement to sell specific goods becomes void, if subsequently

the goods, without any fault on the part of the seller, become damaged.
Case: Howell Vs coup land

Ascertainment of Price:

Sec 9(1): The price in a contract of sale may be fixed by the contract or
may be left to be fixed in the manner agreed or course of dealing
between parties.

Sec 9(2): where the price has not been fixed, the buyer shall pay the
seller a reasonable price.
Sec 10: There may be an agreement to sell goods, the price of which
would be valued by a third party.
Conditions and Warranties:
Condition: sec 12(2): A condition is a stipulation essential to the main
purpose of the contract, the breach of which gives rise to treat the contract
as repudiated.
Warranty: Sec 12(3): A warranty is a stipulation collateral to the main
purpose of the contract, the breach of which gives rise to claim for
damages, but not to right to reject the goods and treat the contract as
repudiated e.g. Mr. X buys a particular horse, which is warranted quit to
ride. In case if the horse turns out to be vicious, the buyers remedy is to
claim only damages. Instead Mr. X asks the seller, to supply him a quiet
horse & later it turns out to be a vicious then the stipulation is a condition
and buyer can reject the horse.
Differentiation between condition and warranty:
Points of Difference
Value

Condition

Warranty

A condition is essential to main

A warranty is collateral to main

In case of breach condition. Contract

Contract is not discharged when

gets discharged

there is a breach of condition

Treatment

Breach of condition may be treated

Breach of warranty cannot be

Root of Major contract

it goes to the root of major contract.

It does not go direct to the root of

Breach

purpose of contract.

as breach of warranty

purpose of contract

treated as breach of condition

contract

PASSING OF PROPERTY SEC 18-26

Passing of property means transfer of ownership. The primary rules for
ascertaining transfer of property are as follows:
(a)

Goods must be ascertained: Sec 18 : when there is a contract for

sale of unascertained goods is transferred to the buyer unless and

until the goods are ascertained

(b)

Intention of parties: Sec19 (1): When there is a contract for sale of

specific goods the property in them is transferred to the buyer at
such time as the parties intend it to be transferred.

Sec 19 (2): For the purpose of ascertaining the intention of

parties, regard shall be had to the terms of contract the
conduct of parties and the circumstances of the case.
Sec19 (3) When the intention of parties cannot be

ascertained the rules contained in sec 20 to 24 shall apply

Rules regarding passing of property: Rules regarding

passing of property may be analyzed under three categories:

(i)

Specific goods

(iii)

Goods sent on approval basis

(ii)

General goods

Rights of Unpaid Seller:

An unpaid seller is person who has not received the price for the goods sold: Sec
45 defines unpaid seller as:
The seller of goods is deemed to be an unpaid seller within the meaning of this
act.
a). when a whole of the price has not been paid or tendered

b). when a bill of exchange or other negotiable instrument has been received as
conditional payment and the condition on which it was received has not been
fulfilled by reason of the dishonor of the instrument or otherwise.
c). A seller who has been partly paid also an unpaid seller.
Right of Unpaid of Seller
A. Against Goods

B. Against Buyer.

A. Right of an unpaid seller - against goods:

1. When property in the goods has passed to the buyer: An unpaid seller has
rights the goods these arise by implication of law the unpaid seller can exercise
the following rights where the property in the goods has passed on to the buyer.
These rights are called rights in rem.
i). Rights of lien (Sec 46(1) (a): A lien is a right to retain possession of goods until
payment of price
ii). Right of stoppage of goods in transit: (sec 46(1) (b)) Right of stoppage of goods
means right to stop future transit of goods and to retain the same till the price is
paid. It is an extension of right or lien. It arises when the seller has lost the
opportunity of exercising the right or lien.
B. Rights of unpaid seller against the buyer.
An unpaid seller has the following rights against the buyer personally rights in
person are these are in addition to the rights against the goods.
a) Suit for price: Sec 55: in case where the property in the goods has passed to the
buyer and the buyer refuses to pay the price, the seller can sue the buyer for
price.

b) Suit for damages for non acceptance: sec 56 where the buyer refuses to accept
and pay for the goods, the seller can sue him for damages for non acceptance.
c) Suit for repudiation: Sec 60: in case where the buyer cancelled the contract
before the date of delivery. The seller may wait till the date of delivery or may
treat the contract as cancelled and sue for damages for breach.
d). Suit for recovery of interest together with price: sec61 (2) (a): In case of
specific agreement between buyer and seller with regard to interest then is
payable from the date notified by seller can claim the interest from the date on
which payment becomes due. In case where no specific agreement between buyer
and seller with regard to interest then interest is payable from the date notified by
seller to the buyer.
Sale by Auction:
In a case of a sale by auction
1. Where goods are put up for sale in lots, each lot is prima facie deemed to
be the subject of a separate contract of sale ;
2. the sale is complete when the auctioneer announces its completion by
the fall of the hammer or in other customary manner; and, until such
announcement is made, any bidder may retract his bid;
3. a right to bid may be reserved expressly by or on behalf of the seller
and, where such right is expressly so reserved, but not otherwise, the seller
or any one person on his behalf may, subject to the provisions hereinafter
contained, bid at the auction;
4. where the sale is not notified to be subject to a right to bid on behalf of
the seller, it shall not be lawful for the seller to bid himself or to employ
any person to bid at such sale, or for the auctioneer knowingly to take any

bid from the seller or any such person ; and any sale contravening this rule
may be treated as fraudulent by the buyer ;
5. the sale may be notified to be subject to a reserved or upset price ;
6. if the seller makes use of pretended bidding to raise the price, the sale is
voidable at the option of the buyer.