The Sale of contract of Goods Act,1930

The Sale of contract of Goods Act,1930

1. The Sale of Goods Act, 1930

2. INTRODUCTION Till 1930,transactions relating to sale and purchase of goods were regulated by the Indian Contract Act,1872.

3. In 1930 , a separate Act called ‘The Indian Sale of Goods Act,1930 was passed. It came into force on 1 st July,1930.

4. With effect from 22 nd September,1963,the word ‘ Indian’was also removed. Now,the present Act is called’ The sales of goods act,1930’

5. DEFINITION OF A CONTRACT OF SALE Section 4 defines a contract of sale as “a contract whereby a seller transfers or agrees to transfer the property in goods to the buyer for a price”

6. ESSENTIALS OF A CONTRACT OF SALE Two parties Goods Transfer of property Price Essential elements of a valid contract

7. Two parties There must be a seller as well as a buyer .’ Buyer ’ means a person who buys or agrees to buy goods[Section 2910 ]. ’Seller ’ means a person who sells or agrees to sell goods [Section 29(13)].

8. Goods There must be some goods.’Goods ’ means every kind of movable property the sale of immovable property is not covered under Sale of Goods Act .

9. Transfer of property ( ownership) Here property means ownership . In a contract of sale, it is the ownership that is transferred ( in the case of sale ), or agreed to be transferred ( in the case of agreement to sell ), as against transfer of mere possession.

10. Price the consideration in a contract of sale has necessarily to be ‘money’. When there is no consideration, it amounts to gift and not sale.

11. If for instance, goods are offered as the consideration for goods, it will not amount to sale. It will be called a barter. To sum-up: the Act applies only when the buyer pays by cash (or by cheque , credit card, etc )

12. Essential elements of a valid contract All other essentials of a valid contract as per the Indian Contract Act, 1872 must be present: The parties to the contract must be competent to contract , the consent of the parties must be free , the object of the contract must be lawful and so on.

13. SALE AND AGREEMENT TO SELL Sale Where under a contract of sale, the property (ownership) in the goods is transferred from the seller to the buyer , it is called a sale. A sale is an executed contract

14. SALE AND AGREEMENT TO SELL Agreement to sell Agreement to sell means a contract of sale under which the transfer of property in goods is to take place at a future date or subject to some conditions thereafter to be fulfilled.

15. 15 Basis of Distinction Sale Agreement to Sell Contract It is an executed contract. It is an executory contract. Transfer of property The property in the goods sold passes to the buyer at the time of contract. It passes immediately. It takes place at a future time or subject to fulfilment of conditions. Conveyance of property It creates a right in rem – right against things , it gives right to the buyer to enjoy the goods against the whole world It creates a right in personam – right against a person . Right to enforce a particular person’s to fulfill his obligation. Transfer of risk The transfer of risk takes place immediately . If there is loss of goods, it will fall on the buye r. There is no transfer of risk of loss of goods as ownership is not transferred. The loss will be faced by the seller. Right of seller in case of breach Since the property has passed to the buyer, the seller can sue the buyer for price of the goods. The seller can only sue for damages, unless the price was payable at a particular date. Right of buyer in case of breach He can sue the seller for damages. He can sue the seller for damages Insolvency of seller in possession of goods He can claim the goods from the Official assignee ( officer of the court) He cannot claim the goods but only a rateable dividend for the money paid. Insolvency of buyer before paying the price The seller has to deliver the goods to the Official assignee The seller can refuse to deliver the goods to the Official Assignee or Receiver.

16. Classification of goods Goods may be classified as: Existing Future Contingent Existing goods are those which are owned or possessed by the seller at the time of the contract

17. Classification of goods Existing goods may be either: a) Specific or ascertained b) Generic and unascertained Specific goods means goods identified and agreed upon at the time a contract of sale is made Ascertained goods , though normally used as synonym for specific goods.

18. Classification of goods Generic or unascertained goods are goods indicated by description and not specifically identified Example : Anthony, who owns a TV showroom, has 20 TV sets and agrees to sell any one of them to Bharti . The contract is for unascertained goods, since which particular TV set shall become the subject matter of sale is not individualised at the time of the contract of sale.

19. Classification of goods Future goods means goods to be manufactured or produced or acquired by the seller after making the contract of sale Example : Kulkarni agrees to sell future crop of a particular agricultural field in the next season. This is an agreement to sell future goods

20. Classification of goods Contingent goods are the goods the acquisition of which by the seller depends upon a contingency which may or may not happen. Contingent goods is a part of future goods Example: Alka agrees to sell to Vivek a certain painting only if Chetan , its present owner sells it to her. This painting is classified as contingent goods

21. Conditions & Warranties (Sec. 11-17) Sec. 12(2) defines a ‘ condition ’ as, ‘a stipulation essential to the main purpose of the contract, the breach of which gives rise to a right to treat the contract as repudiated ’ (cancel), Sec 12(3) defines a ‘ warranty ’ as, ‘stipulation collateral to the main purpose of the contract , the breach of which gives rise to claim for damages but not to a right to reject the goods and treat the contract as repudiated’ .

22. Conditions & Warranties (Sec. 11-17) The effect of a breach of a ‘condition ’ is to give the aggrieved party a right to treat the contract repudiated , i.e., if price has been paid, the buyer can claim the refund of price plus damages for breach In case of breach of ‘warranty ’, only damages can be claimed , i.e., the buyer must accept the goods and claim damages for the breach of warranty

23. Conditions and Warranties Express and Implied Conditions and Warranties: These are expressly provided in the contract.For example,a buyer desires to buy a Sony TV Model No.2020,here model no is an express condition . In an advertisement for Khaitan fans,guarantee for 5 years is an express Warranty Implied conditions and warranties are those which are implied by the Law 23

24. Express - Agreed up on at the time of contract Implied – Presumed to be present by law 24

25. Implied Conditions are: Conditions as to title –sole owner of goods Sale by description Sale by sample Sale by description as well as by sample Condition as to quality or fitness of particular purpose Condition as to Merchantable Quality- goods are in good condition and ready to be delivered Condition as to wholesomeness- fit for human consumption 25

26. Implied warranties Warranty of quiet and peaceful possession Warranty of freedom from encumbrances Warranty as to quality or fitness by usage of trade Warranty to disclose dangerous nature of goods ( Crackers, Acids, Phenyl, Pesticides, Fungicides)etc 26

27. Conditions and Warranties When condition can be treated as a warranty: Voluntary waiver of condition by the buyer Buyer treats breach of condition as warranty Contract not separable, buyer accepted whole or part of goods Excused by law for impossibility 27

28. Rule of Caveat Emptor(page 240) “ Caveat Emptor” means LET THE BUYER BEWARE. In a contract of sale, the seller is not duty bound to disclose all the truth about the goods. Buyers should thoroughly examine before them. They may ask the seller all the clarifications required. If the seller shows the sample and the goods corresponds to the sample, the buyer cannot blame the seller anytime thereafter. In sale of goods on “as is where is” basis, buyer will not have any subsequent claims 28

29. Rights of an unpaid seller Rights of unpaid seller: An unpaid seller is one who has not been paid A bill of exchange or other negotiable instrument received but dishonored or otherwise irregular. An unpaid seller has an immediate right of action for the price. 29

30. Rights of an unpaid seller Unpaid seller has two kinds of rights: Against the goods Against the buyer personally Right against the goods –a) when the property in goods has passed : Lien , Stoppage in Transit and Re-sale --b) when the property in goods has not passed : Withholding delivery and Stoppage in Transit 30

31. Rights of an unpaid seller Right against the buyer personally Suit for the price Suit for damages Repudiation of the contract Suit for interest 31

32. Rights of an unpaid seller Right of Lien : A lien is a right to retain the possession of the goods until the price is paid. This right is immediate in case of sales . In case of credit sales it is after the expiry of the credit period. The right is also available when the buyer becomes insolvent at any time. Seller having made part delivery of the goods may exercise lien on the remainder 32

33. Rights of an unpaid seller Right of stoppage in transit : This right is available: a) when the buyer becomes insolvent and b) when the goods are in transit. Stoppage can be effected by taking possession or by giving notice of stopping. 33

34. Rights of an unpaid seller Right of Resale When the goods are perishable When the notice of resale is given to the buyer but buyer does not respond by payment within a reasonable time In case of loss in a resale, seller can claim it from the buyer as damages for breach of contract 34

35. Rights of an unpaid seller Right of withholding delivery : Where the property in goods has not passed to the buyer, the unpaid seller has a right of withholding delivery Rights of the Unpaid seller against the buyer personally : a) Suit for the Price; b) Suit for damages for non-acceptance; c) Repudiation of the contract before due date and d) Suit for interest 35

36. Rights and duties of the buyer Rights of the buyer: To have delivery of the goods as per contract To reject the goods when they are not of the description, quality or quantity as specified in the contract. To repudiate the contract when goods are delivered in installments without any agreement to that effects 36

37. To be informed by the seller ,when the goods are to be sent by sea route,so that he may arrange for their insurance To have a reasonable opportunity to examine the goods for ascertaining whether they are in conformity with the contract 37

38. To sue the seller for recovery of the price,if already paid,when the seller fails to deliver the goods. To sue the seller for damages if the seller refuses to deliver the goods. 38

39. To sue the seller for specific performance To sue the seller for damages for anticipatory breach of contract To sue the seller for damages for breach of a warranty 39

40. Duties of the buyer To accept the delivery of goods, when the seller is willing to make the delivery as per the contract. To pay the price in exchange for possession of the goods 40

41. To apply for delivery of the goods To demand delivery of goods at a reasonable hour. To bear the risk of deterioration in the course of transit 41

42. To inform the seller incase the buyer refuses to accept or reject the goods To take the delivery of the goods within a reasonable time To pay damages for non-acceptance of goods 42

43. To pay the price, where the property in the goods are passed to the buyer. To accept delivery of the goods in installments and pay for them, in accordance with the contract 43