1

THE SALES OF
GOODS ACT
(1930)
 INTRODUCTION
2

 Before The Sales of Goods Act,transactions

relating to sales and purchase of goods were
regulated by The Indian Contract Act 1872.

 The Indian Sales Of Goods Act was passed in

1930 and sections 76 to 123 were repealed from
The Indian Contract Act.
Cont.
3

 It came into force on 1st July 1930 and w.e.f 22nd

Sept. 1963 the word Indian was removed and now
the present act is called The Sales Of Goods Act 1930.

 This act extends to whole of INDIA except the state

of Jammu n Kashmir.
 Sales of Goods Act does not Deals with:-
4

MORTAGAGE
(which is dealt with under the Transfer of Property
Act,1882)
PLEDGE
(which is dealt under The Contract Act,1872)
This Act deals with goods but not with:-
a) Movable property e.g actionable claim or money
b) Movable property other than goods
 DEFINATION
5

According to Section 4(1) of The Sales of Goods

Act,1930.
“contract of sales of goods is a contract
whereby the seller transfer or agrees to
transfer the property in goods to the buyer
for a price”
 Contract of Sale is a generic term ,which includes
both sales and an agreement to sell
ESSENTIAL ELEMENTS OF THE ACT
6

BUYER AND
SELLER

ESSENTIAL
ELETMENTS GOODS
OF VALID
CONTRACT

TRANSFER OF
PRICE
PROPERTY
 A.BUYER AND SELLER
7

“BUYER”
means a person who buys or agrees to buy good.
[Section 2(1)]
“SELLER”
means a person who sells or agrees to sell the good.
[Section 2(13)]

 A person cannot be a buyer as well as a seller as a

person cannot buy his own goods
 B. GOODS
8

“GOODS” means every type of movable property

other than actionable claim n money but it can
include stock and shares,crops,lands etc.
Cont.
9

ACTIONABLE CLAIM:- It means which can be

enforced through the courts of Law, e.g. debt due.

MONEY:- means the legal tender i.e. the currency

of the country but not old coins coins.
 C. TRANSFER OF PROPERTY
10

“PROPERTY” means the general property in

goods, and not merely a special property.

 General property in goods means ownership of

the goods

 Special property on the goods means possession

of the goods
 Cont.
11

Thus, there may be either a transfer of ownership of

goods or an agreement to transfer the of the goods.
The ownership may transfer either immediately on
completion of sale or something in future in
agreement to sell.
 d. price
12

For every sale or purchase their must be a price of the

goods.

PRICE means the MONEY CONSIDERATION for the sale

of goods.

i. When there is no consideration,it amounts to gift and

not sale
ii. However , the consideration may be partly in money
and partly in goods because the law does not prohibited
as such.
 E. ESSENTIAL ELEMENTS OF VALID CONTRACT
13

Essential elements of a valid contract as specified

under Section 10 of Indian Contract Act,1872 must
also be present.

a) Offer and Acceptance

b) Delivery and Payment
c) Express or Implied
 CONTRACT OF SALE
14

Under Section 4(3) the Contract of Sale Includes:-

1) SALE:- Sale means where the ownership in goods

is transferred.

2) AGREEMENT TO SELL :-Agreement to sell

includes where the transfer of ownership in goods
is to take place at a future time or subject to the
fulfillment of some condition.
 Distinction between sale and agreement to sell
15

S.No BASIS SALE AGREEMENT TO

SELL
1. Transfer of Transfer of ownership of Transfer of ownership of
ownership goods takes place goods takes place in
immediately. future times.
2. Executed or It is an executed It is an executory contract
Executory contract. because something
remains to happen.
3. Conveyance of Buyer gets the right to Buyer does not get such
Property enjoy the goods against right to enjoy the goods.
whole of the world. It It only creates jus in
creates jus in rem(Right personam (Right against
against property) person)
 Cont.
16

4. Transfer of Transfer of risk* of Transfer of risk

Risk loss of goods takes of loss of goods
place immediately as does not takes
the ownership is place because the
been transferred. As ownership is not
a result in case of transferred. As a
destruction of goods, result, in case of
the loss shall be destruction of
beared by the buyer. goods the loss
shall be borne by
(Risk*-Risk follows the seller.
ownership)
 GOODS
17

U/s 2(7) GOODS MEANS

“GOODS” means every type of movable property other
than actionable claim n money but it can include
stock and shares,crops,lands etc.”
 ACTIONABLE CLAIM:- It means which can be enforced
through the courts of Law, e.g. debt due.
 MONEY:- means the legal tender i.e. the currency of the
country but not old coins
 IMMOVABLE PROPERTY
 TYPES OF GOODS

18

Existing Future Contingent

goods goods goods
 1.Existing goods
19

EXISTING GOODS
means the goods ,which are either owned or possessed
by the seller at the time of contract of sale.
Existing goods are of 3 types:
a) Specific goods
b) Ascertained goods
c) Unascertained goods
 2.Future goods
20

FUTURE GOODS

means goods to be manufactured or produced or

acquired by the seller after the making of the
contract of sale. There is an agreement to sell only.
For Example:-X will sell the goods to Y all the crops to
be grown at Haryana in his farm.
 3.Contingent goods
21

CONTINGENT GOODS
means those goods,acquition of which by the seller
depends upon a contingency, which may or may not
happen.

For example:-X agrees to sell to y all the crops to be

grown at Z’s farm in Haryana during the year 2007
season for sum of 1 lakh rupees,if Z sells the crops.
 22

NEGOTIABLE INSTRUMENTS ACT, 1886

 Negotiable Instruments
23

 According to Section 13(i) “ a negotiable instrument

means a promissory note, bill of exchange or cheque
payable either on order or to bearer”.
 An instrument may be negotiable either by
 Statute : Promissory Notes , bills of exchange and
cheques are negotiable instruments under
Negotiable Instruments Act 1881 .
 By Usage : Bank Notes , Bank Drafts , treasury Bills
etc
 Transfer by Negotiation

24

 Negotiation is a transfer of an instrument from one

person to another in such a manner as to express
title & to represent the transferee the holder thereof.
 Passing of possession
 With intention to pass title
 Must be transferred in such a manner that the
transferee becomes holder thereof.
 Methods of Negotiation

25

1. Negotiation by delivery
2. Negotiation by endorsement & delivery
3. Property is transferred to the endorsee
4. Endorsee get right to negotiate the instrument, sue
on instrument.
 Characteristics
26

 It is freely transferable
 Better title
 Right to sue
 A negotiable instrument can be transferred any
number of times till its maturity
 A negotiable instrument is subject to certain
presumptions
 Presumptions – certain presumptions as to
consideration, reasonable time etc., apply to all
negotiable instruments.
 Presumptions
27

a. Consideration : Every negotiable instrument is

deemed to have been drawn and accepted ,
endorsed, negotiated, or transferred for
consideration
b. Date : Every negotiable instrument must bear the
date on which it is made or drawn
c. Acceptance : Every Bill of exchange was accepted
within a reasonable time after the date mentioned
therein and before the date of its maturity
d. Transfer : Every transfer should be made before the
expiry
 Meaning of Endorsement
28

When a maker or holder writes the person’s name on the

face or back of the instrument & puts his signatures thereto
for the purpose of negotiation, it is called ‘endorsement’.
Person who signs – endorser
To whom it is endorsed – endorsee.
A legal term that refers to the signing of a document which
allows for the legal transfer of a negotiable from one party
to another.
When an employer signs a check, they are endorsing the
transfer of money from the business accounts to the
account of the employee.
 Essentials of valid endorsement
29

On the back or face of the instrument.

Must be made by maker or holder.
Must be properly signed by the endorser.
It must be for the entire negotiation instrument.
No specific form of words are necessary for
endorsement.
 Kinds of endorsement
30

Blank or general endorsement – where endorsee simply puts

his signature on the back of the instrument without writing
name of the person in whose favor the instrument is
endorsed.
Special or full endorsement – An endorsement with the
direction to pay amount mentioned in the instrument to a
specified person or his order & the endorser writes his
signature under it.
Partial endorsement – When an endorser is willing to
transfer to an endorsee only a part of the amount of the
instrument. Such an endorsement does not operate as a
negotiation of the instrument.
 Cont.
31

The instrument is therefore payable to the bearer

Restrictive endorsement – An endorsement is said to
be restrictive if it prohibits or restricts the further
negotiability of the instrument. The holder of such
an instrument can only receive the payment but he
cannot negotiate it further. An instrument can be
made restrictive only by expressed words.
Conditional endorsement – It limit the liability of
the endorser. E.G. – “ Pay A or order on his marrying
B”.
 Effects of Endorsement
32

The property in instrument is transferred from

endorser to endorsee.
The endorsee gets right to negotiate the instrument
further.
The endorsee get the right to sue in his own name to
all other parties.
 Promissory Notes
33

Section 4 defines it as, “ A promissory note is an instrument

in writing containing an unconditional undertaking, signed
by the maker, to pay a certain sum of money only to or to the
order of a certain person or to the bearer of the instrument”.
The person who makes the promissory note is called the
maker. Maker promise to pay a specified sum after the
expiry of a specified duration.
The person to whom payment is to be made is called the
payee. Payee is also called the creditor. Payee is the person
in whose favour the promisory note is made. e.g. – I promise
to pay B or order Rs. 500
 Essentials of Promissory Note
34

It must be in writing

It must contain express promise to pay :- ‘I am liable to pay’
The promise to pay must be unconditional
It must be signed by maker
The maker must be certain- It must describe the name &
designation of the maker, sum of money
There are 2 parties involved i.e. maker and the payee
The payee must be certain- It is essential that it must contain a
promise to pay some person ascertained by name or designation.
The sum payable must be certain
The payment must be in legal money
A currency note is not a promissory note
 Bill of Exchange
35

Section 5, is defined as “A bill of exchange is an instrument in writing

containing an unconditional order, signed by the maker, directing a
certain person to pay a certain sum of money only to or to the order of a
certain person or to the bearer of the instrument”.
Parties to bill of exchange :
Drawer – The person who makes or draws bill of exchange. (maker/
creditor)
Drawee – The person who is directed to pay on bill. On acceptance he
becomes acceptor.
Payee – The person to whom the payment is to be made.
Drawer & Payee can be the same person.
X sells goods worth Rs. 2000 to Y & allow him 3 months time to pay the
price. X then draws a bill on Y “ Three months after date, pay to my order
the sum of Rs. 2000 for value received”. X is drawer . Y is Drawee.
 Essential of Bills of Exchange
36

It must be in writing

It must contain an order to pay and a promise or
request
The order must be unconditional
There must be 3 parties i.e. : drawer, drawee, and
payee
The parties must be certain
It must be signed by the drawer
Number, date and place are not essential
 Cheques
37

Section 6, defines it as “ A cheque is a bill of

exchange drawn on a specified banker & not
expressed to be payable otherwise than on demand”.
It is always drawn on a bank
It is payable to bearer on demand
Parties To Cheque:
Drawer – who makes the cheque
Payee – to whom payment is to be made
Drawee – Bank .
 Meaning of Crossing of Cheque
38

Crossing of a cheque is a unique feature associated with

a cheque affecting to a certain level the responsibility of
the paying Banker and also its negotiable Character.
Crossing of a Cheque is a direction to a particular
Banker by the Drawer that Payment should not be
made across the Counter. The payment on the crossed
Cheque can be collected only through a Banker.
Crossing of the Cheque is affected by drawing two
parallel Transverse lines .
The Cheque that is not crossed is an open Cheque.
 Types of cheque
39

There are two types of cheque:

Open cheque – those which can be en cashed across
the counter of the bank. Liable to great risk if stolen
or lost. Finder can get payment from bank.
Crossed cheque – which bears two transverse lines
with or without the words “ & co.”
 Various kinds of Crossing
40

General Crossing:- which bears across its face the words “

& co.” or the words “not negotiable”. For general crossing
two transverse lines on the face of cheque are essential.
The paying banker shall pay only to a banker. There are
two sloping parallel lines, marked across its face
The cheque bears an short form "& Co. "between the two
parallel lines
The cheque bears the words "A/c. Payee" between the
two parallel lines.
The cheque bears the words "Not Negotiable" between
the two parallel lines.
 Cont.
41

2. Special or Restrictive Crossing :- When a particular bank's name

is written in between the two parallel lines the cheque is said to be
specially crossed. Where a cheque bears across its face an addition
the name of banker either with or without the words “ not
negotiable”. It contains:
The name of the banker across the face of cheque.
With the words “ not negotiable”
In addition to the word bank, the words "A/c. Payee Only", "Not
Negotiable" may also be written. The payment of such cheque is not
made unless the bank named in crossing is presenting the cheque.
The effect of special crossing is that the bank makes payment only
to the banker whose name is written in the crossing. Specially
crossed cheques are more safe than a generally crossed cheques.
 42
Promissory Note
It contains a promise to pay.
It is presented for payment without any
previous acceptance by the maker.
It cannot be made payable to the maker
himself. The maker and the payee
cannot be the same person.
In the case of a promissory note there
are only two parties, the maker and the
payee.
A promissory note can never be
conditional.
In case of dishonour no notice of
dishonour is required to be given by the
Holder
Bill of Exchange
It contains an order to pay.
It is required to be accepted either by the
drawee or by some one else on his behalf,
before it can be presented for payment.
The drawer and payee or the drawee and
the payee may be the same person.
There are three parties, drawer, drawee
and payee.
A bill of exchange cannot be drawn
conditionally, but it can be accepted
conditionally with the consent of the
holder.
A notice of dishonour must be given in
case of dishonour of a Bills of Exchange. 
 43
Cheque
Drawee: Cheque can be drawn only on a
banker.
 Time of payment: A cheque is payable
on demand.
 Grace period: Cheque is payable on
demand and no grace period is allowed.
 Notice of dishonour: Notice of
dishonour is not necessary.
 Acceptance: A cheque is not required to
be presented for acceptance. It needs to
be presented only for payment.
Crossing: A cheque may be crossed.
Validity period: A cheque is usually valid
for a period of six months.
Bill of exchange
The drawee may be any person.
A bill may be drawn payable on
demand or on expiry of certain period
after date or sight.
 While calculating maturity three
day’s grace is allowed.
 A notice of dishonour is required.
 Bills require presentment for
acceptance and it is better to present
them for acceptance even when it is
not essential to do so.
A bill of exchange cannot be crossed.
 A bill may be drawn for any period.
 44

PARTNERSHIP ACT