Sale of Goods Act, 1930
It came into force on the 1st of July 1930 as the Indian Sale of Goods Act, 1930. The word “Indian” was omitted by the Indian Sale of Goods (Amendment) Act, 1963 (33 of 1965) and it became “The Sale of Goods Act, 1930”. The act lays down special provisions governing the contract for the sale of goods. Secondly, the Act deals with ‘goods’ (movable property) but not with all movable property, e.g., actionable claims and money.
Contract of Sale of Goods
Section 4 (1) of the Sale of Goods Act, 1930 defines the term ‘Contract of Sale’ as – 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. The following elements must co-exist to constitute a contract of sale of goods under the Sale of Goods Act, 1930.
- There must be at least two parties, the seller, and the buyer.
- There must be goods covering only movable property. It may be either existing goods, owned or possessed by the seller or future goods.
- A price in money (not in kind) should be paid or promised.
- A transfer of property in goods from seller to the buyer must take place.
- A contract of sale must be absolute or conditional.
- All other essential elements of a valid contract must be present in the contract of sale.
Sale and Agreement to Sell
In the Sale of Goods, the property is transferred from the seller to the buyer immediately. The term Sale is defined in the Section 4(3) of the Sale of Goods Act, 1930 as – “where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale.”
In an agreement to sell the ownership of the goods is not transferred immediately. It is intended to transfer at a future date upon the completion of certain conditions thereon. The term is defined in Section 4(3) of the Sale of Goods Act, 1930, which is as follows – "where under a contract of sale the transfer of the property in the goods is to take place at a future time or subject to some condition.
In an agreement to sell the ownership of the goods is not transferred immediately. It is intended to transfer at a future date upon the completion of certain conditions thereon. The term is defined in Section 4(3) of the Sale of Goods Act, 1930, which is as follows – "where under a contract of sale the transfer of the property in the goods is to take place at a future time or subject to some condition.
| Sales | Aggrement to Sell |
|---|---|
| The property in the goods passes to the buyer along with the risk | Since property in the goods does not pass to buyer, the risk also does not pass to him |
| It is executed contract | It is an executory contract |
| The seller can sue the buyer for the price of the goods because of the passage of the property therein to the buyer. | The aggrieved party can sue for damages only and not for the price unless the price was payable at a stated date. |
| A subsequent loss or destruction of the goods is liability of the buyer. | Such loss or destruction is the liability of seller. |
| Breach on part of seller gives buyer double remedy | The seller, being still the owner of the goods, may dispose of them as he likes, and the buyer’s remedy would be to file a suit for damages only. |
Subject matter of contract of sale
The subject matter of the contract of sale is always the goods. The goods may be existing or future goods. Existing goods are such goods as are in existence at the time of the contract of sale, i.e., those owned or possessed by the seller. Future goods means goods to be manufactured or produced or acquired by the seller after making the contract of sale.
Doctrine of Caveat Emptor
In the case of sale of goods, the doctrine ‘Caveat Emptor’ means ‘let the buyer beware’. When sellers display their goods in the open market, it is for the buyers to make a proper selection or choice of the goods. If the goods turn out to be defective, he cannot hold the seller liable. The seller is in no way responsible for the bad selection of the buyer. The rule of Caveat Emptor is laid down in the Section 16 of sale of goods act:
Example: A sold pigs to B. These pigs being infected, caused typhoid to other healthy pigs of the buyer. It was held that the seller was not bound to disclose that the pigs were unhealthy. The rule of the law being “Caveat Emptor”.
Example: A sold pigs to B. These pigs being infected, caused typhoid to other healthy pigs of the buyer. It was held that the seller was not bound to disclose that the pigs were unhealthy. The rule of the law being “Caveat Emptor”.
Exceptions to doctrine of Caveat Emptor
- Fitness as to quality or use: Where the buyer makes known to the seller the particular purpose for which the goods are required, so as to show that he relies on the seller’s skill or judgment and the goods are of a description which is in the course of seller’s business to supply, it is the duty of the seller to supply such goods as are reasonably fit for that purpose. Example: An order was placed for some trucks to be used for heavy trucks in a hilly country. The trucks supplied by the seller were unfit for this purpose and broke down. There is a breach of condition as to fitness.
- Goods purchased under patent or brand name: In case where the goods are purchased under its patent name or brand name, there is no implied condition that the goods shall be fit for any particular purpose.
- Goods sold by description: Where the goods are sold by description there is an implied condition that the goods shall correspond with the description. If it is not so then seller is responsible.
- Goods of Merchantable Quality: Where the goods are bought by description from a seller who deals in goods of that description there is an implied condition that the goods shall be of merchantable quality.
- Sale by Sample: Where the goods are bought by sample, this rule of Caveat Emptor does not apply if the bulk does not correspond with the sample.
- Goods by sample as well as description: Where the goods are bought by sample as well as description, the rule of Caveat Emptor is not applicable in case the goods do not correspond with the sample and description or either of the condition.
- Trade Usage: An implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of trade and if the seller deviates from that, this rule of Caveat Emptor is not applicable. Example: In readymade garment business, there is an implied condition by usage of trade that the garments shall be reasonably fit on the buyer.
- Seller actively conceals a defect or is guilty of fraud: Where the seller sells the goods by making some misrepresentation or fraud and the buyer relies on it or when the seller actively conceals some defect in the goods so that the same could not be discovered by the buyer on a reasonable examination, then the rule of Caveat Emptor will not apply. In such a case the buyer has a right to avoid the contract and claim damages.
Unpaid Seller
According to Section 45(a) of the Sale of Goods Act, 1930 the seller of goods is deemed to be an ‘Unpaid Seller’ when(a) The whole of the price has not been paid or tendered and the seller had an immediate right of action for the price. Example - X sold certain goods to Y for Rs. 5,000. Y paid Rs. 4,000 but fails to pay the balance. X is an unpaid seller.
Rights of unpaid seller
An unpaid seller has been expressly given the rights against the goods as well as the buyer personally.
- Rights against goods: He has a right of lien on the goods for the price while he is in possession, until the payment or tender of the price of such goods. When the unpaid seller has parted with the goods to a carrier and the buyer has become insolvent, he can exercise this right of asking the carrier to return the goods back, or not to deliver the goods to the buyer. The unpaid seller can exercise the right to re-sell the goods where the goods are of a perishable nature and where he gives notice to the buyer of his intention to re-sell.
- Rights against buyer: The rights of the seller against the buyer personally are called rights in personam and are in addition to his rights against the goods.
- Suit for Price: Where property has passed to the buyer and he wrongfully neglects or refuses to pay for the goods, the seller may sue him for the price of the goods.
- Suit for Damages for Non-acceptance: Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may sue him for damages for non- acceptance.
- Repudiation of Contract before due Date: If the buyer repudiates the contract before the delivery date of the goods the seller can still sue for damages.
- Suit for Interest: Where there is a specific agreement between the seller and the buyer as to interest on the price of the goods from the date on which payment becomes due, the seller may recover interest from the buyer.
Rights of buyer against seller
If the seller commits a breach of contract, the buyer gets the following rights against the seller:
- Damage of non-delivery: Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may sue the seller for damages for non-delivery.
- Suit for specific performance: Where the seller commits breach of the contract of sale, the buyer can appeal to the court for specific performance.
- Repudiation of contract: If the seller repudiates the contract, the buyer does not have to wait until the date of the contract. He can trat the contract as rescinded and sue for damages immediately. This will be an anticipatory breach of contract.
- Sue for interest: The buyer is entitled to recover interest or special damages to recover the money paid where in consideration the payment of it has failed.