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All About Sale of Goods Act,1930

Introduction: Scope & Objectives:

Commercial laws are meant to ease the smooth functioning of trade and commerce. The Sale of Goods Act, 1930, a mercantile law of the British period, was enacted on 1st July 1930. Before the existence of this Act, the sales of goods were governed by the Indian Contract Act, 1872. However, being an English law, most of its provisions are based on the English Sales of Goods Act, 1893. The 1930 Act remained operational even during the post-independence[1]. In 1963, several new features got added to the Act. The Act is operable all over India except the State of Jammu & Kashmir. The Act contains 7 Chapters and 66 Sections, out of which several sections have been repealed.

Chapter I of the Act titled as preliminary contains important definitions pertaining to the Act, Chapter II contains provisions relating to the formation of a contract, Chapter III highlights the effects of the contract, Chapter IV deals with the performance of the contract, Chapter V describes the unpaid seller’s right against the goods, Chapter VI discusses the provisions relating to the suits for breach of contract and Chapter VII describes the miscellaneous provisions. This article shall briefly focus into the essential features of the Act relating to the contract of sale and agreement to sell, provisions relating to the transfer of property between buyer and seller, conditions and warranties implied under a contract for the sale of goods, transfer of title through the transfer of goods, rights of unpaid sellers and the remedies for breach of contract.

Principal Provisions:

Section 2 of the Act explains several important definitions in compliance with the provisions of this Act mostly describing the meanings of the terms such as buyer, seller, delivery, the document of title to goods, future goods, goods, mercantile agents and other keywords that play a pivotal role in conducting any transactions under this Act. Section 4 of the Act explains the contract of sale of goods in detail. Section 4 (1) states that a contract of sale of goods is a contract where the seller initiates the transfer or agrees to transfer the property in goods to the buyer for a price. Section 4 (2) describes a transfer as either absolute or conditional. Section 4 (3) explains the difference between a sale contract and an agreement to sell. A contract is called a sale when the goods’ property is transferred from the seller to the buyer. However, an agreement to sell is different. It is when the transfer is subject to certain conditions that will take place in the future. Section 4(4) states that an agreement to sell becomes a sale when the contingent conditions get fulfilled, depending upon which the property in the goods was fixed to be transferred.[2]

Essentials of a Contract of Sale:

Contract of sale could be initiated between two parties, i.e., a buyer and a seller who are competent to make a contract. Section 2(1) defines the buyer as a person who buys or agrees to buy goods. As defined by Section 2 (13), a seller sells or agrees to sell goods. The goods must be a property that is to be transferred from the seller to the buyer. The goods must be movable as the Sale of Goods Act does not regulate the transfer of any immovable property. Section 6 states that the subject matter of the contract of sale, the goods, must be either existing or future goods.

Section 7 mentions the provisions relating to the goods perished even before making a contract. It clearly states that a contract for the sale of specific goods is void if, while initiating the contract, the goods have perished without the seller’s knowledge. The extent of the damage must affect the contract’s description since the goods are the contract’s focal point.

Section 8 enumerates the provisions relating to the goods perished after the agreement to sell was fixed, but before the sale was effective. An agreement to sell specific goods attains the status of being void; if and when the “to be transferred goods” without any fault on the part of the seller or the buyer perishes or becomes so damaged to not fit in the agreement’s description before the risk passes to the buyer. The term fault here shall be read according to the definition provided under Section 2 (5) of the Act.

For transferring property through a sale contract, price plays an essential role. Section 9 of the Sale of Goods Act, 1930 states that the transfer must be effected in exchange for a price. Price could either be paid partly or wholly or promised to be paid partly or wholly in the future. An agreement between the parties could fix the price before the property transfer. The sale contract may lead to the immediate delivery of the goods or immediate payment of the price or delivery of goods and instalment payment.

Section 10 of the Act lays down a condition that states that when an agreement to sell goods depends on the terms that require the price fixation by any third party through valuation and such a third party fails to do such valuation; the agreement shall be treated as void. However, if any part of the goods has been appropriated by the buyer or delivered to him, the buyer must pay a reasonable price.

Section 10 (2) explains that where a third party is prevented from doing a valuation by the seller or buyer’s fault, the innocent party could institute a suit for damages against the defaulted party.

The mode of transferring property is again of two types. They are the transfer of general and transfer of special property. When an owner owns a particular property, he has general property in the goods. Similarly, when he pledges the goods with the other party, the other party attains a special property in the goods. Needless to say that the essential features of a valid contract must be present in order to make a valid contract of sale.

Section 5 (2) states that a contract of sale could be initiated either in writing or orally or partly in writing and partly by word of mouth and deciphered from the parties’ implied conduct.

Conditions & Warranties:

Conditions must always come with several stipulations, the breach of which could lead to the contract’s repudiation. Section 11 of the Act states that a warranty deals with the stipulations, the breach of which could give rise to the claim for damages but that does not repudiate the contract or results in the rejection of the transferred goods. Section 12 states that a stipulation in a contract of sale for any goods may be a condition or a warranty. The Act also states that there is an implied condition that the goods shall correspond with the description where there is a contract for the sale of goods by description. If the sale is by sample and also by description, it is not sufficient that the bulk must correspond with the sample if they do not correspond with the description.[3]

Conditions and warranties could either be expressed or implied. The warranties and conditions expressly provided in the contract between the parties are the expressed form of conditions and warranties. The implied forms already exist in the form of law within the contract unless any contrary conditions appear from the contract terms. Section 14 (a) explains an implied condition as to the title. There could be an implied condition on the part of the seller, which provides him with the right to sell his goods when there is a sale of goods. Also, when there is an agreement to sell, the seller has the right to sell the goods when the property requires to be transferred.

Section 16(2) highlights the provisions relating to the merchantable quality of the goods to be transferred. When the buyer purchases goods on a description from a seller who deals in a particular good of such description, there lies an implied condition that the goods must be of a marketable quality which means that the goods must fit in accordance to the description as determined by a man of ordinary prudence. The goods must be devoid of any latent or hidden defect. However, the caveat emptor principle must be applicable, which demands that the buyer be aware of the quality of the goods he is buying from the seller. He must be prudent to determine the good’s quality and ensure the same fits with a specific description.[4]

In the contemporary commercial filed, caveat venditor has also been given equal importance that states that seller must be aware and must take utmost care to ensure the quality of goods that are to be transferred which includes appropriate disclosure relating to any defects in the goods. Section 14 (b) states an implied warranty concerning the quiet possession. The quiet possession denotes that the buyer shall have and enjoyed the goods’ quiet possession. This provision provides the buyer with a right to claim damages from the seller. Section 16 (3) mentions the provisions relating to the warranty as to the goods’ quality or fitness for a particular purpose. The seller must inform the buyer relating to the dangerous goods, and in case of failure, the buyer secures the right to hold the seller liable for breach of implied warranty. There lies an implied condition that the goods must be fit for a particular purpose if three conditions are fulfilled. Firstly, the purpose of the goods must be disclosed by the seller to the buyer. Secondly, the buyer must have relied on the seller’s skill and judgment. Thirdly, the seller deals in such goods.[5]

Rights of Unpaid Seller Against the Goods:

The Sale of Goods Act provides several rights to the unpaid seller concerning the goods to be transferred and goods-in-transit. Section 50 states that an unpaid seller retains the right to stop the delivery of goods and resume the possession of the goods as long as they are in the course of transit and shall continue to retain the possession until the good’s payment is cleared by the buyer. An unpaid seller possesses a right of lien on the goods for the price while he is in possession of them.

However, as per Section 54 of the Sale of Goods Act, a contract of sale could never get revoked by the mere exercise of the right of lien or stoppage in transit by an unpaid seller. When the buyer is an insolvent one, the seller can stop the goods-in-transit even after it is no longer under his possession. Section 46 grants an unpaid seller a right to resale as limited by the Act. Section 53 states that the unpaid seller’s right to transit does not get affected by any sale or disposition of the goods made by the buyer, where it lacks the seller’s consent.

Suit for Breach of Contract:

Suits for breach of contract lies where the buyer wrongfully neglects or refuses to pay for the goods respecting the terms of the contract. Section 56 states that a seller has a ground to sue the buyer for the damages of non-acceptance where the buyer wrongfully neglects or refuses to accept. The buyer also has the right to sue the seller for damages of non-delivery where the seller willfully neglects or refuses to deliver the goods on time, as stated under Section 57.  An anticipatory breach occurs when either party to the contract of sale repudiates the contract before the date of delivery. However, the other party against whom the contract has been repudiated may sue for damages concerning such breach as stated under Section 60 of the Act.

Conclusion:

The Sale of Goods Act, 1930 is meant to regulate the mercantile sector in selling and buying goods. The Act mainly concludes that there must be a contract, and in such contract, the seller must transfer or agrees to transfer the property in goods to the buyer; there must be a price fixed for such transfer, a sale must be made between two parties; the contract of sale could either be absolute or conditional; if at the time of the agreement the goods are in existence the contract shall be treated as the contract of sale; for goods that are to be transferred in future, it shall be an agreement to sell. The Act’s essence lies in demarcating the buyer and seller’s rights and liabilities and other obligations and safeguarding any breach that could arise in the course of a commercial agreement. The Act marked the pragmatic importance of caveat emptor and caveat venditor that regulates and safeguards both the buyer and seller’s interest in a commercial arena.

[1] Alazemi, E., 2013. Passing of Risk in International Contracts of Sale of Goods; A Comparative Study Between the United Nations Convention on Contracts for Sale of Goods 1980 and the English Sale of Goods Act 1979. Pace Law School Institute of International Commercial Law.

[2] Sales of Goods Act, 1930.

[3] Section 15 – Sales of Goods Act, 1930.

[4] Dyason, J., 1993. The Appropriation of Unascertained Goods in CIF Sales. Juta’s Business Law, 1(4), p.170.

[5] Atiyah, P., Adams, J., Twigg-Flesner, C., Canavan, R. and MacQueen, H., 2016. Atiyah’s and Adams’ sale of goods. 13th ed.

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Amrapali Mukherjee

I have completed my Masters in Commercial and Corporate Law from the Queen Mary University of London with upper merit and a distinction in the dissertation, currently, I am working as a Legal Advisor for a partnership firm at Kolkata.