Overview of Sale of Goods Act

Sale of Goods Act is an act which regulates contract or agreement related to the sale of goods. It came into force in 1930 and is divided into 7 chapters and 65 sections.

Contract of Sale

A contract of sale of goods is a contract between the buyer and the seller to transfer the property in goods in exchange for money. The contract can be absolute or conditional. Where under the contract the seller transfers the goods to the buyer, it is called a sale.

Where the transfer of goods is to take place in the future, or subject to a condition, it is called an agreement to sell. As soon as the time is elapsed or the condition is fulfilled related to the goods which need to be transferred, it becomes a sale.

The following article will cover the areas of the formation of the contract, the performance of the contract, and suit for breach of the contract.

Essential elements for a Contract of Sale

1. Two parties: Buyer and Seller- There have to be two parties for a contract of sale, a seller willing to sell goods and a buyer to buy the goods.

Buyer as defined in Section 2(1), is someone who buys or agrees to buy goods.

Seller as defined in Section 2(13), is someone who sells or agrees to sell goods.

2. Goods- There have to be goods on which the contract of sale is formed. Goods are defined under Section 2(7), “goods” means every kind of moveable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale.

Goods can be classified under the following heads:

1. Existing Goods
2. Specific Goods
3. Ascertained Goods
4. Unascertained Goods
5. Future Goods
6. Contingent Goods

3. Existing Goods- Goods which the seller owns or possesses at the time of the sale are called as existing goods. They are of three kinds:

• Specific Goods- As defined in Section 2(14) of the Act, specific goods are goods identified and agreed upon at the time the contract is made.
• Unascertained Goods- Goods that are described but not identified and agreed upon at the time the contract of sale is made are unascertained goods.
• Ascertained Goods- When ascertained goods are identified after the formation of a contract of sale and are agreed upon are called ascertained goods.
• Future Goods- Goods that are to be sold in the future and form the subject matter for an agreement to sell.
• Contingent Goods- Goods that are contingent upon the happening or non-happening of an event are called Contingent goods.

4. Price- There has to be a price that acts as the monetary consideration for the transfer of the goods. It has to be there for a transfer to be called a contract of sale. It can be done immediately and fully in cash or part payment in installments in the future.

Modes for determination of Price (Section 9)

The price can be determined in the following ways:

1. Price is specified under the contract and is fixed.
2. Price is left to be fixed in an agreed manner
3. Price may be determined by the parties in the course of dealing

Where the price is not fixed by these methods, the buyer has to pay a reasonable price for the seller. The reasonable price depends on the facts and circumstances of the case.

Section 10 mentions the price fixation by a third party. If the goods are not delivered in an agreement where the price has not been evaluated by the third party, the agreement is thereby avoided. Where the goods are delivered, the buyer has to pay a reasonable price. And where the third party was not able to fix the price due to the fault of the buyer or seller, a suit can be filed against the party at fault by the party, not at fault.

5. Transfer of property- It forms the essence of a contract of sale. Property, as defined in Section 2(11), includes general property and not merely special property. General property in goods means ownership of the goods whereas special property in goods means possession in goods. The contract of sale means the transfer of ownership of the goods from the seller to the buyer or an agreement to transfer the ownership in the future. Property cannot be transferred in a bailment or a pledge.

Transfer of property in goods is said to be done when the buyer acquires the proprietary rights over the goods from the seller. After this, the seller ceases to be the owner of the goods. For the transfer to happen, the goods must be ascertained and there should be an intention to pass the property in goods.

6. Essentials of a valid contract- A contract of sale to be valid it should fulfill all the essential conditions of a valid contract: an offer, an acceptance, consideration and an intention to create a legal relationship.

Conditions and Warranties (Section 11 & 12)

When a buyer and seller enter into a contract, representations are made by both the parties, some of them are mere opinions while some of them are facts. Stipulations are representations that become a part of the contract of sale.

Stipulations that are essential to the main purpose of a contract become conditions, on breach of this condition the aggrieved party has the right to terminate a contract.

Stipulations that are collateral to the main purpose of the contract is a warranty, on breach of a warranty, the aggrieved party has the right to claim damages, but not the right to terminate a contract.

Conditions and warranties can be express or implied.

Performance of contract

The seller and the buyer have the duty to perform the terms of the contract. The seller has the duty to deliver the goods and the buyer has to accept it and pay for the same.

Delivery of goods sold may be made by doing anything which the parties agree shall be treated as delivery or which has the effect of putting the goods in the possession of the buyer or of any person authorized to hold them on his behalf.[1] Delivery simply means giving possession of goods to another. The seller has to be willing for the delivery. Section 36 of the Act states the rules for the delivery.

Rights of Unpaid Seller

According to Section 45 of the Act, an unpaid seller is one who has not been paid whole or part of the price. An unpaid seller has the right against the buyer and the goods.

Right of an unpaid seller against goods:

1. Right of lien- Unpaid Seller can retain the possession of the goods until full payment of the price, subject to the provisions of the Act.
2. Right to stoppage in transit- Unpaid seller has the right to regain possession while the goods are in transit and the buyer has become insolvent in the meantime.
3. Right to resale- In the case of perishable goods, the seller has the right to resale if the buyer has not paid the price within reasonable time. Whereas in the case of non-perishable goods, the seller has the right to resale the goods, if he has exercised the right to lien and right to stoppage, and the buyer has not paid the price even after giving the notice to pay in a reasonable time.
4. Where the property in goods has not been passed to the buyer, a right to withhold delivery of goods.

Rights of an unpaid seller against the buyer:

1. Suit for price- When the buyer refuses to pay for the property in goods that have been passed by the seller, a suit can be filed for price. And when the property has not been passed and the price is payable on a certain date regardless of delivery, the seller can sue the buyer.
2. Suit for damages for non-acceptance- When the buyer wrongfully refuses to accept the goods and pay for them, he can be sued.
3. Suit for damages of breach- Where the buyer rescinds the contract before the date of delivery, the seller can sue for damages.

Rights of buyer against the seller:

1. Suit for damage of non-delivery- When seller refuses to deliver the goods to the buyer, buyer may sue for damages.
2. Suit for Specific Performance- In the suit for delivery of specific goods, Court may direct specific performance of the contract.
3. Suit for breach of warranty- Buyer may claim damages for breach of warranty.
4. Right to repudiate the contract- Buyer may repudiate the contract if the seller is not willing to deliver the goods.

Conclusion

The Act covers all aspects of a contract of sale between a buyer and seller and also gives remedies for breach of contract and thus protects both the parties from any kind of infringemenent of their right.

[1] Section 33

This article is authored by Mrunal Pol, Third year B.A.LL.B. student of ILS Law College, Pune.

Also Read – Who is the finder of goods? State the rights and obligations of Finder of Goods