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CONTRACT OF SALE – D EFINITION –

SEC 4(1) OF THE SALE OF GOODS ACT, 1930
 A Contract

 Whereby the seller transfers or

 Agrees to transfer

 The property in goods

CONTRACT OF SALE OF GOODS
 To the buyer

 For a price.

ESSENTIAL ELEMENTS OF CONTRACT OF

SALE OF GOODS KINDS OF GOODS
 Two parties – buyer and seller  Existing Goods
 Specific & ascertained goods
 Transfer of property (ownership) in the Goods  Unascertained & generic goods
from seller to buyer  Future Goods
 General property  Agreement to sell
 Special interest in the property  Contingent Goods
 Subject matter of the contract necessarily be  Future goods
goods  Depends on contingency which may or may not
 Moveable property other than actionable claims & happen
money  Price to be consideration of contract of sale
 Includes stocks and shares , growing crops, grass and  Money, legal tender
things attached to or forming part of land, which are  Partly for goods and partly for money
agreed to be severed before sale or under contract of
sale  Includes both ‘sale’ and ‘an agreement to sell”

‘SALE’ & ‘AGREEMENT TO SELL’ DOCUMENT OF TITLE OF GOODS

 Transfer of property  Bill of Sale, Certificate of Title, Title deed, bill of
lading, dock receipt or warehouse receipt.
 Jus in ram vs. Jus in personam
 It must be used in the ordinary course of
business.
 Consequences of breach

 The undertaking to deliver goods to the possessor

 Right of resale
must be unconditional

 Insolvency of the buyer before he pays for goods

 The possessor of the document, by virtue of
holding such document, must be entitled to
 Insolvency of seller, if buyer has already paid the receive the goods immediately.
price
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CASE STUDY 1 EFFECT OF THE CONTRACT

 Ravi, the buyer visited the godown of Raman to select the quality
of cotton. Raman showed him some samples of different variety of
cotton available with him. Ravi chose on and put the order to
purchase 10,000 bales of chosen variety of cotton. Cotton bales
were separated and packed in Ravi’s presence. Ravi agreed to
take the delivery in a week time after making payment of the
cotton bales. After the expiry of one week, Ravi did not take the
delivery. Even after a number of reminders sent by Raman, Ravi
did not respond. Raman after giving a notice of resale to Ravi,
sold the cotton bales to Abhay. Ravi dragged Raman to court for
wrong sale and argued that property in goods got transferred to
him at the time of sale and thus Ravi was not the owner of the
goods anymore.
 Questions
 Was the property transferred to Ravi at the time of sale? Justify
your answer.
 Can Ravi recover the goods from Abhay? Why or why not?
 Goods must be ascetained - Sec 18
 In case of contract for sale of unscertained goods, no
property in the goods is transferred to the buyer until and
unless the goods are ascertained.
 Property passes when intended to pass – Sec 19
 In case of contract for sale of specific & ascertained goods
the property in them is transferred to the buyer
 At such time as the parties to the contract intend it to be
transferred
 For the purpose of ascertaining the intention, regard shall
be had to the
 Terms of contract
 Conduct of the parties
 Circumstances of the case

SPECIFIC GOODS IN A DELIVERABLE STATE – SPECIFIC GOODS TO BE PUT INTO A

SEC 20 DELIVERABLE STATE – SEC 21

 Unconditional contract  In case of a contract for sale of specific goods &

 Contract for sale is for specific goods, which are
in deliverable state  Seller is bound to do something to the goods
 Property in the goods passes to the buyer:
 When the contract is made; and  For the purpose of putting them into a
 It is immaterial whether the deliverable state
 Time of payment of the price or
 The time of delivery or
 Both  The property does not pass untill such thing is
 Is postponed done and the buyer has notice thereof

SPECIFIC GOODS IN A DELIVERABLE STATE,

WHEN THE SELLER HAS TO DO ANYTHING TO SALE OF UNASCERTAINED GOODS AND
ASCERTAIN PRICE – SEC 22 APPROPRIATION – SEC 23

 But the seller is bound to weigh, measure, test or
do some other act or thing with reference to goods
for the purpose of acertaining the price
 The property does not pass until such act or thing
is done and the buyer has notice thereof.
 When there is a contract for sale of unascertained
or future goods by description; and
 Goods of that description and in a deliverable
state are unconditionally appropriated to the
contract
 Either by seller with the assent of the buyer or
 By the buyer with the assent of the seller
 The property in the goods thereupon passes to
the buyer.
 Such assent may be express or implied, and may
be given either before or after the appropriation
is made.

SALE OF UNASCERTAINED GOODS AND
APPROPRIATION – SEC 23
 Delivery to Carrier
 Where, in pursuance of contract, the seller
delivers the goods to the buyer or to a carrier or
other bailee (whether named by buyer or not)
 For the purpose of transmission to the buyer, and
 Does not reserve the right of disposal
 He is deemed to have unconditionally appropriated
the goods to the contract.
RESERVATION OF RIGHT OF DISPOSAL –
SEC 25 – BOE WITH BOL OR RR
 Contract for sale of specific goods or where goods are
subsequently appropriated
 The seller may, by the terms of the contract ar
appropriation, reserve the right of disposal of the
goods until certain conditions are fulfilled
 Notwithstanding the delivery of the goods to the
buyer, or to the carrier or other bailee for the purpose
of transmission to the buyer,
 The property in the goods does not pass to the buyer
until the conditions imposed by the seller are fulfilled.
DOCTRINE OF SUPERVENING IMPOSSIBILITY –
SEC 56 OF INDIAN CONTRACT ACT
 Q alleged P to be guilty of breach of contract as did not
deliver the cargo in the agreed time period. Q demanded
damages for his loss of business as a consequence of breach
of contract.
 On the other hand P contended in the court that the
contract got discharged by supervening impossibility and
hence he was not liable to pay any damages for the breach
of contract.
 Questions
 Was the contract discharged on account of supervening
impossibility? Support your answer with relevant
provisions under the Indian Contract Act, 1872.
 Would it make any difference to your answer if P had not
named the ship? Why or Why Not?
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GOODS SENT ON APPROVAL OR “ON SALE
OR RETURN” – SEC 24
 Or other similar terms, the property therein
passes to the buyer:-
 When he signifies his approval or acceptance to the
seller or does any other act adopting the transaction
 If he does not signify his approval or acceptance to
the seller
 But retains the goods without giving the notice of rejection,
then if a time has been fixed for the return of the goods, on
the expiration of such time; and
 If no time has been fixed, on the expiration of reasonable
time.
CASE STUDY 2
 Mr. P and Mr. Q entered into a contract of sale of goods.
Under the contract P was to sell a cargo of cotton seeds to
Q. P and Q belonged to two different countries. It was
agreed between the parties the contract between two of
them will be governed by the Sales of Goods Act, 1930,
enforced in India. The price of cotton seeds was negotiated
between the parties and thereafter was fixed.
 It was agreed between P and Q that P will ship the cargo of
cotton seeds by a specific ship named “Star” in the month of
July that year. Before the cargo could be shipped on “Star”
in month of July, the authorities declared the ship to be not
fit to sail hence incapacitated as to be unable to load by the
agreed time. The cargo could not be shipped on time and Q
being aggrieved by this breach dragged P to the court for
breach of contract.
SALE BY PERSON, NOT THE OWNER – SEC 27
 Buyer can acquire no better title to the goods than the
seller had
 Provided that
 Where a mercantile agent is, with the consent of the
owner, in possession of goods or of documents to the
title to the goods,
 Any sale made by him, when acting in the ordinary
course of business of a mercantile agent shall be valid
 As if he were expressly authorized by the owner of the
goods to make the same
 Provided that the buyer acts in a good faith and
 Has not at the time of the contract of sale notice that the
seller has no authority to sell.
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CONDITIONS & WARRANTIES IMPLIED CONDITIONS

 Condition – Sec 12 (2)  Conditions as to Title
 Stipulation which is essential to the main purpose of
the contract  Condition as to description
 The breach of which gives rise to a right to treat the
contract as repudiated.  Sale by Sample
 The buyer in case of breach of condition has an
option to claim damages instead of repudiating the  Sale by description as well as sample
contract.
 Warranty – Sec 12(3)  Condition as to quality or fitness
 Stipulation collateral to the main purpose of the
contract  Condition as to merchantability
 The breach of which gives rise to a claim for damages
but not a right to reject the goods and treat the
contract as repudiated.  Condition as to wholesomeness

IMPLIED WARRANTIES RIGHTS OF UNPAID SELLER

 Implied warranty as to quite possession Against the buyer
Against the Goods
personally
 Right of lien  Right to sue for price
 Implied warranty against encumbrances
 Right of stoppage of  Right to sue for
 Implied warranty as to quality or fitness by goods in transit damages
usage of trade
 Right of resale
 Right to sue for interest
 Implied warranty to disclose dangerous nature of
goods  Right of withholding the
delivery, when the  Right of repudiation of
property in the goods contract before due date
has not passed

REMEDIES AVAILABLE TO BUYER FOR THE

BREACH OF CONTRACT OF SALE BY SELLER
 For damages for non-delivery (Sec 57)

 For specific performance (Sec 58)

 For breach of warranty (Sec 59)

 For price and interest (sec 61)