PART B : BUSINESS LAWS Sale of Goods Act, 1930

SALE OF GOODS ACT, 1930

LESSEN OUTLINE
 Introduction  Conditions and Warranties
 Contract of Sale of Goods  Doctrine of Caveat Emptor
 Distinction between  Passing of Property or Transfer of
 Sale and Agreement to Sell Ownership
 Sale and Bailment  Transfer of Title by Person not the
 Sale and Contract for Work and Labour Owner
 Sale and Hire Purchase Agreement  Performance of the Contract of Sale
 Subject matter of Contract of Sale of  Unpaid Seller
Goods

 INTRODUCTION :
The law relating to sale of goods is contained in the Sale of Goods Act, 1930. It has to be read as part
of the Indian Contract Act, 1972 [Section 2(5) and (3)].
Contract of Sale of Goods :
As per Section 4(1) of the Indian Sale of Goods Act, 1930, the contract of sale of goods is defined 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."
Thus the contract of sale is an agreement whereby one of the parties (called the seller or vendor)
obligates himself to deliver something to the other (called the buyer or purchaser or vendee) who, on
his part, binds himself to pay therefore a sum of money or its equivalent (known as the price). The
transfer of title to property or the agreement to transfer title for a price paid or promised, not mere
physical transfer of the property, is the essence of sale.
The above section states that '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 above explanation pertains with it
certain features of a sale:
1. Two parties : The first essential is that there must be two distinct parties to a contract of sale, viz. a
buyer and a seller, as a person cannot buy his own goods. An 'undivided joint owner' must be
distinguished from a 'part owner' who is a joint owner with divisible share. According to section 4(1),
there may be a contract of sale between one part owner and another, e.g., if A and B jointly own a
typewriter, A may sell his ownership in the typewriter to B, thereby making B the sole owner of the
goods.
2. Transfer of property : 'Property' here means ownership. Transfer of property in the goods is
another essential of a contract of sale of goods. A mere transfer of possession of the goods cannot
be termed as sale. To constitute a contract of sale the seller must either transfer or agree to transfer
the property in the goods to the buyer.

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3. Goods : The subject-matter of the contract of sale must be 'goods'. According to Section 2(7),
"goods means very kind of movable property other than actionable claim 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." Thus every kind of movable
property except actionable claim and money is regarded as 'goods'. Goodwill, trademarks,
copyrights, patents right, water, gas, electricity, decree of a court of law, are all regarded as goods.
4. Consideration : The consideration for a contract of sale must be money consideration called the
price. If goods are sold or exchanged for other goods, the transaction is barter, governed by the
Transfer of Property Act and not a sale of goods under this Act. But if goods are sold partly for
goods and partly for money, the contract is one of sale (Aldridge vs. Johnson).
5. Includes both a 'sale' and 'an agreement to sell' : The term contract of sale is a generic term and
includes both a sale and an agreement to sell [as is clear from the definition of the term as per
Section 4(1) given earlier.
Sale : Where under a contract of sale, the property in the goods is immediately transferred at the time
of making the contract from the seller to the buyer; the contract is called as 'sale' [Sec. 4(3)].
An agreement to sell : Where under a contract of sale, the transfer of property in the goods is to take
place at a future time or subject to some condition thereafter to be fulfilled, the contract is called' an
agreement to sell' [Sec. 4(3)]. It is an executory contract and refers to a conditional sale.
No formalities to be observed (Sec. 5) : The Sale of Goods Act does not prescribe any particular
form to constitute a valid contract of sale. A contract of sale of goods can be made by mere offer and
acceptance. The offer may be made either by the seller or the buyer and the same must be accepted
by the other.
 Difference between Sale and Agreement to Sell :
The following points will bring out the distinction between sale and an agreement to sell:
(a) In a sale, the property in the goods sold passes to the buyer at the time of contract so that he
becomes the owner of the goods. In an agreement to sell, the ownership does not pass to the
buyer at the time of contract, but it passes only when it becomes sale on the expiry of certain
time or the fulfillment of some conditions subject to which the property in the goods is to be
transferred.
(b) An agreement to sell is an executory contract; a sale is an executed contract.
(c) An agreement to sell is a contract pure and simple, but a sale is contract plus conveyance.
(d) If there is an agreement to sell and th goods are destroyed by accident, the loss falls on the
seller. In a sale, the loss falls on he buyer, even though the goods are with the seller.
(e) If there is an agreement to sell and the seller commits a breach, the buyer has only a personal
remedy against the seller, namely, a claim for damages. But if there has been a sale, and the
seller commits a breach by refusing to deliver the goods, the buyer has not only a personal
remedy against him but also the other remedies which an owner has in respect of goods
themselves such as a suit for conversion or detinue, etc.
Distinction between Sale and Contract for Work and Labour :
The distinction between a "sale" and a "contract for work and labour" becomes important when question
of passing of property arises for consideration. However, these two are difficult two are difficult to

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distinguish. The test generally applied is that if as a result of the contract, Property in an article is
transferred to one who had no property therein previously for a money consideration, it is a sale, where
it is otherwise it is a contract for work and labour.
Distinction between Sale and Hire Purchase Agreement :
''Sale'', is a contract by which property in goods passes the seller to the buyer for a price. A "hire
purchase agreement" is basically a contract of hire, but in addition, it gives the hirer an option to
purchase the goods at the end of the hiring period. Consequently, until the final payment, the hirer is
merely a bailee of goods delivers the goods to person who agrees to pay certain stipulated periodical
payments as hire charges. Though the possession is with the hirer, the ownership of the goods remains
with the original owner.
The essence of hire purchase agreement is that there is no agreement to buy, but only an option is
given to the hirer to buy by paying all the installments or put an end to the hiring and return the goods to
the owner, at any time before the exercise of the option.
Since the hirer does not become owner of the goods until he has exercised his option to buy, he cannot
pass any title even to an innocent and bona fide purchaser. The transaction of hire-purchase protects
the owner of the goods against the insolvency of the buyer, for if the buyer becomes insolvent or fails to
pay the installments, he can take back the goods as owner. And if the hirer declines to take delivery of
the goods, the remedy of the owner will be damages for non-hiring and not for rent for the period
agreed.
It is important to note the difference between a hire purchase agreement and mere payment of the price
by installments because, the latter is a sale, only the payment of price is to be made by installments.
The distinction between the two is very important because, in a hire-purchase agreement the risk of
loss or deterioration of the goods hired lies with the owner and the hirer will be absolved of any
responsibility therefor, if he has taken reasonable care to protect the same as a bailee. But it is
otherwise in the case of a sale where the price is to be paid in installments.
Distinction between Sale and Bailment :
Sale Bailment
Possession Possession of goods is transferred to the Possession of goods is transferred to the
buyer. bailee.
Ownership Ownership is transferred to the buyer. Ownership resides with the bailor.
Usage The buyer may use the goods in any way A bailee can use the goods only
he likes. according to the directions of the bailor.
Return There is no return of goods from the The goods are returned after the
buyer to the seller, unless there is specified time or accomplishment of the
breach. purpose.
Charges The question of any charges to be paid The bailor has to repay the charges
by the seller to buyer or vice versa does which the bailee has incurred in keeping
not arise. the goods safe.
Duration Final. Once the sale is transacted, the Temporary. The bailee has to return the
seller keeps the goods until he decides goods to the bailor once the specified
to sell them to another. time is passed.

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Distinction between Sale and Contract for Work and Labour :

The distinction between a "sale" and a " contract for work and labour" becomes important when
question of passing of property arises for consideration. However, these two are difficult to distinguish.
The test generally applied is that if as a result of the contract, property in an article is transferred to one
who had no property therein previously for a money consideration, it is a sale, where it is otherwise it is
a contract for work and labout.
Subject matter of Contract of Sale of Goods :
(1) Goods : The subject matter of the contract of sale is essentially goods. According to Section 2(7) of
the Sale of Goods Act, "goods" means every kind of movable 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
may be (a) existing, (b) future, or (c) contingent. The existing goods may be (i) specific or generic,
(ii) ascertained or unascertained.
(2) Existing Goods : Existing goods are goods which are either owned or are in possession of the
seller at the time of the contract. Sale of goods possessed but not owned by the seller would be by
an agent or pledge. Existing goods are such specific goods which are identified and agreed upon at
the time of the sale.
(3) Future Goods : Future goods are goods which a seller manufactures or acquires after the contract
of sale is made. A agrees to sell all the wheat which will be produced in his farm next season. This
is an agreement for the sale of future goods. [Section 2(6)].
(4) Contingent Goods : Where there is a contrazct for the sale of goods, the acquisition of which by
the seller depends upon a contingency which may or may not happen-such goods are known as
contingent goods. Contingent goods fall in the class of future goods.
Effect of Pershing of Goods :
In a contract of sale of goods, the goods may perish before sale is complete. Such a stage may arise in
the following cases :
(1) Goods perishing before making a contract : Where in a contract of sale of specific goods, the
goods without the knowledge of the sell have, at the time of making the contract perished or
become so damaged as no longer to answer to their description in the contract, the contract is void.
This is based on the rule that mutual mistake of fact essential to the contract renders the contract
void (Section 7).
Example : (i) Without the knowledge of the seller the car which he had contracted to sell was
already stolen from his property or (2) Where the seller was contracting to sell sugar without the
knowledge that his warehouse where the sugar was stored was flooded during the night. If the seller
was aware of the destruction and still entered into the contract, he is estopped from disputing the
contract. The perishing of goods not only includes loss by theft but also where the goods have lost
their commercial value.
(2) Goods perishing after agreement to sell : Where there is an agreement to sell specific goods,
and subsequently the goods without any fault of any party perish or are so damaged as no longer to
answer to their description, in the agreement before the risk passes to the buyer, the agreement is
thereby avoided. The provision applies only to sale of specific goods. If the sale is of unascertained

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goods, the perishing of the whole quantity of such goods in the possession of the seller will not
relieve him of his obligation to deliver. (Section 8).
Conditions and Warranties (Sections 10-17)
A stipulation in a contract of sale with reference to goods may be a condition or a warranty [Sec. 12(1)].
Condition : A condition is a stipulation which is essential to the main purpose of the contract, the
breach of which gives rise to a right to treat the contract as repudiated [Sec. 12(2)]. Thus, a condition is
regarded as the very basis of contract. If there is a breach of a condition, the contract will fail and it will
entitle the aggrieved party to put an end to the contract.
Example : B asked a car dealer to suggest him a suitable car for touring purposes. The dealer
suggested buying a "Buik" car. B accordingly purchased the car but found it unfit for the purpose. Held,
the suitability of the car for touring purposes was so important that its non-fulfillment defeated the very
purpose. Hence B could return the car and get back the price [Baldry v. Marshal].
Warranty :
A warranty is a stipulation collateral to the main purpose of the contract. The breach of which gives rise
to a claim for damages but not a right to reject the goods the treat the contract as repudiated [Sec.
12(3)]. A warranty is not regarded as the very basis of a contract. Hence a breach of warranty does not
give the aggrieved party, a right to reject the goods and repudiate the contract. They party will have to
accept the goods but can claim damages for breach of warranty.
It should be noted that whether a stipulation in contract of sale is a condition or a warranty depends in
each case on the format of the contract. A stipulation may be a condition, though called a warranty in
the contract and vice versa [Sec. 12(4)].
When Condition Sinks to the Level of Warranty :
In some cases a condition sometimes descends to the level of a warranty. The first two cases depend
upon the will of the buyer, but the third is compulsory and acts as estoppel against him. A condition will
become a warranty:
(a) Where the buyer waives the condition; or
(b) Where the buyer treats the breach of condition as a breach of warranty; or
(c) Where the contract is indivisible and the buyer has accepted the goods or party thereof, the breach
of condition can only be treated as breach of warranty.
Implied Warranties/Conditions :
Implied conditions and warranties are those which are implied by the law in the absence of any
agreement or the contrary.
Implied Warranties :
In a contract of sale, there are the following implied warranties:
1. Implied warranty as to quiet possession [Sec. 14(b)] : In a contract of sale, unless the
circumstances of the contract show a contrary intention, there is an implied warranty that the buyer
shall have and enjoy quiet possession of the goods. On being disturbed in the enjoyment of goods,
he can claim damages from the seller.
2. Implied warranty against encumbrances [Sec. 14(c)] : The buyer is not to suffer due to any right
in favour of a third party. Unless the circumstances of the case are such as to show a contrary

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intention, there is an implied warranty that the goods shall be free from any charge or encumbrance
in favour of any party not declared or known to the buyer before or at the time contract is made.
Implied Conditions :
1. Condition as to title [Sec. 14(a)] : In a contract of sale, unless the circumstances of the contract
are such as to show a "different intention", there is an implied condition on the part of the seller that:
(i) In the case of sale, the seller has a right to sell the goods, and
(ii) In the case of an agreement to sell, he will have a right to sell the goods at the time when the
property is to pass.
2. Condition as to description (Sec. 15) : There is an implied condition that the goods must
correspond to description when they have been sold by description.
Nature and Scope of Description :
1. It should be noted that the description must be of a fact and not of mere option.
2. A manufacturer of goods is bound to supply the goods of his own manufacturing and not that of
other manufactures, even if the goods are of the same quality.
3. Where the seller has agreed to supply goods of a particular brand, the goods must bear that
brand. The buyer is not bound to accept goods which do not bear the label.
4. Packing of the goods must be according to the description given. If it is not so, the buyer is
entitled to reject the goods.
5. The expression "contract for the sale of goods by description" applies to all cases where the
buyer has not seen the goods, but solely relies on the description given by the seller.
6. It also applies to cases where the buyer has agreed that he will not reject the goods and the
dispute shall be referred to arbitration.
3. Sale by sample (Sec. 17) :
In a sale by sample, there must be a term in the contract, express or implied to that effect. Unless it
is so, the seller is not bound to sell the goods according to sample. However, the term may be
express or implied.
Express : When parties expressly mention in the contract that the sale is by sample.
Implied : When there is a custom of the trade recognized by law. For example, sale of tea is always
by sample. This custom is recognized all over the world.
In a sale by sample, there are three implied conditions, which are follows :
1. The bulk shall correspond to smple.
2. The buyer shall be given a reasonable opportunity to compare the goods with the sample.
3. There is an added implied condition of merchantability in respect of those defects which cannot
be discovered by ordinary inspection, i.e., latent defects. Such defects, in fact, are discovered
when the goods are put to use or by examination in laboratories. However, seller is not liable for
apparent or visible defects which can be discovered by examination.
4. Sale by description as well as sample :
If the sale is by sample as well as description, there is twin condition that the goods shall
correspond not only to smple but also to description (Sec. 15). A agreed to sell to C some oil

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described as "foreign refined rape oil, warranted only equal to sample." The goods supplied were
equal to sample but contained an admixture of hemp oil. Held, C could reject the goods [Nichl v.
Godts].
5. Condition as to quality or fitness [Sec. 16(1)] :
Ordinarily, there is no implied condition as to quality or fitness. In the absence of anything to the
contrary, the doctrine of 'let the buyer beware' applies.
However, Sec. 16(1) provides that where the buyer expressly or by implication, makes known to the
seller the particular purpose for which the goods are required, so as that the buyer relies on the
seller's skill or judgment, and the goods are of a description which it is in the course of the seller's
business to supply (whether he is the manufacturer or producer or not), there is an implied condition
that the goods shall be reasonably fit for such purpose.
Example : B ordered six buses to be used for heavy traffic in a hilly area. The supplier supplied Fiat
Lorries. The Lorries proved useless and broke down. Held, there was a breach of condition of
fitness [Bristol Tramway Co. V. Fiat Motors Ltd.].
6. Condition as to merchantability [Sec. 16(2)] : Where 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. Merchantability means that there is no defect in the goods which render tham
unfit for sale.
7. Condition as to wholesomeness : In the case of eatables and other provisions, there is an added
implied condition that the goods shall be wholesome, i.e., free from any defect which renders them
unfit for human consumption.
Example : A purchase milk from B, a milk dealer. The milk contained tyhoid germs. A's wife on
consuming the milk got infected and died. A was entitled to get damages [Frost v Aylesbury Diary
Co. Ltd.].
 Doctrine of Caveat Emptor :
In business laws, the phrase 'Caveat Emptor' stands for let the buyer beware. It means that buyer
should be very careful in a contract of sale. While purchasing the goods the buyer should check the
goods carefully. If a buyer purchases the goods and after he comes to known that the same are
defective then the seller will not be responsible for this defect. The object of this principle is to make
the buyer more carful in purchasing. It is his duty that he should check the quality and fitness of the
commodity which he needs.
Example : Suppose Ram bought 10 breads from a grocer. Out of those 10,2 were stale. However,
Ram did not know this because he didn't check all 10 breads though he paid for them. The 2 stale
breads rotted within a day of the purchase. Now, as there was no tacit condition that the breads
were fresh at the time of the sale, Ram cannot hold the grocer as responsible for having sold him
stale bread. It was Ram's basic duty to check the bread and not depend on the grocer to tell him the
truth.
In an interesting case, Jones vs. Padgett, the buyer bought cloth for making uniforms. However, the
seller was not aware of the purpose of buying the cloth. Later, the buyer found that the cloth is not fit
making uniforms. It was, however, fit for other normal purposes. The seller was not found guilty as
the principle of 'Caveat Emptor' applied in this case.

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It is the general rule that in a contract of sale the seller does not guarantee the quality of fitness for
any particular purpose of goods supplied under a contract of sale.
 Exception to the doctrine :
The rule of caveat emptor has following exception.
(1) Purchase by description : If a buyer enters into contract of sale of goods under description
with the seller, it is an implied condition. These goods will be supplied according to the same
quality.
(2) Misrepresentation : If seller sells the goods under misrepresentation he will be liable for the
compensation.
(3) Usage of trade : An implied condition or warranty as to quality or fitness for a particular purpose
may be annexed by usage of trade.
(4) Consent by fraud : Where the consent of the buyer in a contract for sale of goods is obtained
by the seller by fraud. The doctrine will not apply.
(5) Concealment by seller : If seller does not disclose the defects of the goods to the buyer and
knowingly conceals it the doctrine will not apply.
Passing of Property or Transfer of Ownership (Sections 18-20)
The sole purpose of a sale is the transfer of ownership of goods from the seller to the buyer It is
important to know the precise moment of time at which the property in the goods passes from the
seller to the buyer for the following reasons :
(a) The general rule is that the risk is always borne by the owner. If the goods are lost or damaged
by accident or otherwise, then, subject to certain exceptions, the loss falls on the owner of the
goods at the time they were lost or damaged.
(b) When there is a danger of the goods being damaged by the action of third parties, it is generally
the owner who can take action against such third party.
(c) The rights of third parties may depend upon the passing of the ownership if the buyer resells the
goods to a third party. The third-party will only obtain a good title if the property in the goods has
passed to the buyer before or at the time of the resale.
(d) In case of insolvency of either the seller or the buyer, it is necessary to know whether the goods
can be taken over by the official assignee or the official receiver, It will depend upon whether the
property in the goods was with the party adjudged insolvent.
Thus in this context, ownership and possession are two different concepts and it is not necessary
the possessor must be the owner of the property.
Passing of property in specific goods :
Section 17(1) states Where there is a contract for the sale of specific or ascertained goods the he
parties to the contract intend it to be transferred. 'As regards the parties' intention.
Sections 17(2) states For the purpose of ascertaining the intention of the parties regard shall be had
to the terms of the contract, the conduct of the parties and the circumstances of the case."
Unless a contrary intention appears, the following rules are applicable for ascertaining the intention
of the parties:

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(a) Where there is an unconditional contract for the sale of specific goods in a deliverable state, the
property in the goods passes to the buyer when the contract is made. Deliverable state means
such a state that the buyer would be bound to take delivery of the goods. The fact that the time
of delivery or the time of payment is postponed does not prevent the property from passing at
once. (Section 20).
(b) Where there is a contract for the sale of specific goods not in a deliverable state, i.e., the seller
has to do something to the goods to put them in a deliverable state, the property does not pass
until that thing is done and the buyer has notice of it (Section 21).
(c) Where there is a sale of specific goods in a deliverable state, but the seller is bound to weigh,
measure, test or do something with reference to the goods for the purpose of ascertaining the
price, the property to the goods for the purpose of ascertaining the price, does not pass until
such act or thing is done and the buyer has notice of it (Section 22).
(d) When good are delivered to the buyer "on approval" or "on sale of return" or other similar terms
the property therein passes to the buyer:
(i) When he signifies his approval or acceptance to the seller, or does any other act adopting
the transaction;
(ii) If he does not signify his approval or acceptance but retains the goods without giving notice
of rejection, in such a case (a) if a time has been fixed for the return of the goods, on the
expiration of such time; and (b) if no time has been fixed, on the expiration of a reasonable
time.
Ownership in Unascertained Goods :
The property in unascertained future goods does not pass until the goods are ascertained.
Unascertained goods are goods defined by description only, for example, 150 quintals of rice; are
not goods identified and agreed upon when the contract is made.
Unless a different intention appears, the following rules are applicable for ascertaining the intention
of the parties in regard to passing of property in respect of such goods:
(a) The property in unascertained or future goods sold by description passes to the buyer when
goods of that description and in a deliverable state are unconditionally appropriated to the
contract, either by the seller with the assent of the buyer or by the buyer with the assent of the
seller. Such assent may be expressed or implied and may be given either before or after the
appropriation is made. (Section 23).
(b) If there is a sale of a quantity of goods out of a large quantity, for example, 50 quintals of rice
out of a heap in B's warehouse, the property will pass on the proportion of the specified quantity
by one party with the assent of the other.
(c) Delivery by the seller of the goods to a carrier or other buyer for the purpose of transmission to
the buyer in pursuance of the contact is an appropriation sufficient to pass the property in the
goods.
(d) The property in goods, whether specific or unascertained, does not pass if the seller reserves
the right of disposal of the goods. Apart from an express reservation of the right of disposal, the
selleris deemed to reserve the right of disposal in the following two cases: (i) Where goods are
shipped or delivered to a railway administration for carriage by railway and by the bill of lading or

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railway receipt, the goods are deliverable to the order of the seller or his agent. (ii) When the
seller sends the bill of exchange.
Passing of Risk (Section 26) :
The general rule is that goods remain at the seller's risk until the ownership is transferred to the
buyer. After the ownership has passed to the buyer, the goods are at the buyer's risk whether the
delivery has been made or not.
For example, 'A' buys goods of 'B' and property has passed from 'B' to 'A'; but the goods remain in
B's warehouse and the price is unpaid. Before delivery, B's warehouse is burnt down for no fault of
B' and the goods are destroyed. A must pay B' the price of the goods, as he was the owner. The
rule is resperitdemino - the loss falls on the owner. But the parties may agree that risk will pass at
the time different from the time when ownership passed. For example, the seller may agree to be
responsible for the goods even after the ownership is passed to the buyer or vice versa.
In Consolidated Coffee Ltd. v. Coffee Board (1980 3 SCC 358),one of the terms adopted by coffee
board for auction of coffee was the property in the coffee knocked down to a bidder would not pass
until the payment of price and in the meantime the goods would remain with the seller but at the risk
of the buyer, In such cases, risk and property passes on at different stages.
In Multanmal Champalal v. Shah & Co AIR (1970) Mysore 106, goods were dispatched by the seller
from Bombay to Bellary through a public carrier. According to the terms of the contract, the goods
were to remain the property of the seller till the price was paid though the risk was to pass to the
buyer when they were delivered to public carrier for dispatch. When the goods were subsequently
lost before the payment of the price (and the consequent to the passing of the property to the
buyer), the Court held that the loss was to be borne by the buyer.
It was further held in the same case that the buyer was at fault in delaying delivery unreasonably
and therefore on that ground also he was liable for the loss, because such loss would not have
arisen but for such delay.
Thus, where delivery has been delayed through the fault of either the buyer or the seller, in such a
case, the goods are at the risk of the party at fault as regards any loss which might not have
occurred but for such fault.
Transfer of Title by Person not the Owner (Sections 27-30)
The general rule is that only the owner of goods is entitled to sell the goods. Thus the sale of an
article by a person, who is not the owner or his agent, cannot pass the ownership title to the buyer.
The rule is expressed by the maxim; "Nemo Dat Quod Non Habet" i.e. no one can pass a better title
than he himself has. Thus stolen goods bought from a thief will not entitle the buyer to the
ownership title even though the goods were bought in good faith.
Exception to the General Rule :
The Act while recognizing the general rule that no one can give a better title than he himself has,
laid down few exceptions to it. These exceptions are given below:
(a) Sale by a mercantile agent : A transfer of title will occur if the buyer buys in good faith from a
mercantile agent who is in possession either of the goods or documents of title to the goods with
the consent of the owner, and who is entitled to sell the goods in the ordinary course of his
business.

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(b) Sale by a co-owner : A buyer who buys in good faith from one of the several joint owners who
is in sole possession of the goods with the permission of his co-owners will get good title to the
goods.
(c) Sale by a person in possession under a voidable contract : A buyer buys in good faith from
a person in possession of goods under a contract which is voidable, but has not been rescinded
at the time of the sale.
(d) Sale by seller in possession after sale : Where a seller, after having sold the goods,
continues or is in possession of the goods or of the documents of title to the goods and again
sells them by himself or through his mercantile agent to a person who buys in good faith and
without notice of the previous sale, such a buyer gets a good title to the goods.
(e) Sale by buyer in possession : If the original buyer obtains, with the seller's consent,
possession of the goods or of the documents of title to them, any sale by him or by his
mercantile agent to a buyer who buys in good faith without notice of any lien or other claim of
the original seller against the goods. Will give a good title to the buyer.
(f) Estoppel : If the true owner knowingly allows an innocent buyer to buy his goods via third
person, who professes to have the right to sell the same, in such a case the true owner will be
estopped from denying the third party's right to sell.
(g) Sale by an unpaid seller : Where an unpaid seller has exercised his right of lien or stoppage in
transit and is in possession of the goods, he may resell them and the second buyer will get
absolute right to the goods.
(h) Sale by person under other laws : A pawnor, on default of the pawnee to repay, has a right to
sell the goods, paumed and the buyer gets a good title to the goods. The finder of lost goods
can also sell under certain circumstances. The Official Assignee or Official Receiver, Liquidator,
Officers of Court selling under a decree, Executors, and Administrators, all these persons are
not owners, but they can convey better title than they have.
Performance of the Contract of Sale :
The performance of the contract of sale is the duty of both the buyer and the seller. The duty of the
seller is to deliver the goods and that of the buyer to accept the goods and pay for them in
accordance with the contract of sale. Unless otherwise agreed, payment of the price and the
delivery of the goods take place at the same time.
Delivery (Sections 33-39) : Delivery is the voluntary transfer of possession from one person to
another. Delivery may be actual, constructive or symbolic. Actual or physical delivery takes place
where the goods are handed over by the seller to the buyer or his agent authorized to take
possession of the goods. Constructive delivery takes place when the person in possession of the
goods acknowledges that he holds the goods on behalf of and at the disposal of the buyer.
Rules as to Delivery :
The following rules apply regarding delivery of goods :
(a) Delivery takes place when the buyer gets the possession of the goods.
(b) The seller must deliver the goods according to the terms of the contract.
(c) The seller should make arrangements for delivery so that the buyer can take the goods. It is not
mandatory for the seller to hand over goods to the buyer personally until and unless specifically
provided in the contract.

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But the goods must be in a deliverable state at the time of delivery or tender of delivery.
(d) Where the goods at the time of the sale are in the possession of a third person, there will be
delivery only when that person acknowledges to the buyer that he holds the goods on his behalf.
(e) The seller must deliver goods upon demand from the buyer. The buyer must accept delivery
when delivered by the seller.
(f) The place of delivery is usually stated in the contract. Where t is so stated, the goods must be
delivered at the specified place during working hours on a working day. Where no place is
mentioned, the goods are to be delivered at a place at which they happen to be at the time of
the contract of sale and if not then in existence they are to be delivered at the place at which
they are manufactured or produced.
(g) The seller will bear the cost of delivery unless the contract otherwise provides. While the cost of
obtaining delivery is said to be of the buyer, the cost of the putting the goods into deliverable
state must be borne by the seller. In other words, in the absence of an agreement to the
contrary, the expenses of making delivery of the goods must be borne by the seller; the
expenses of receiving delivery must be borne by the buyer.
(h) If the goods are to be delivered at a place other than where they are, the risk of deterioration in
transit will, unless otherwise agreed, be borne by the buyer.
(i) Unless otherwise agreed, the buyer is not bound to accept delivery in installments.
Acceptance of Goods by the Buyer :
The breach is a repudiation Acceptance of the goods by the buyer takes place when the buyer :
 Where the buyer intimates or lets the seller know that he has accepted the goods; or
 Where the buyer retains the goods without an intimation of rejection of the same to the seller for
a reasonable.
 Where the buyer docs any act in concern with the goods that is inconsistent with the ownership
of the seller, e.g., pledges or resells the goods.
If the seller sends the buyer any other quantity of goods than ordered, the buyer may:
 reject the whole; or
 accept the whole; or
 accept the quantity originally ordered and reject the rest or demand the deficit quantity while
accepting the delivery.
 If the seller delivers with the goods ordered, any other goods, the buyer may accept the goods
ordered and reject the rest, or reject the whole.
 Where the buyer rightly rejects the goods, he is under no obligation to return the rejected goods
to the seller, Intimation of rejection to the seller is sufficient.
 Unpaid seller (Sections 45-54)
Unpaid seller means a person who has sold the goods for a price but price has not been paid to
him. According to Section 45, the seller of goods is deemed to be an unpaid seller.
(i) When the whole of the price has not been paid or tendered.
(ii) When a bill of exchange or other negotiable instrument has been received as a condition to
payment and the condition on which it has been received remains unfulfilled by reason of
dishonour of the instrument or otherwise.

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PART B : BUSINESS LAWS Sale of Goods Act, 1930

 Features of unpaid seller :

Following are the features of unpaid seller.
(i) A sale of goods must take place but the seller was left unpaid.
(ii) Seller must be unpaid either wholly or partly.
(iii) If the price is paid through a bill of exchange or other negotiable instruments, the same must be
have been dishonoured
(iii) He must not refuse to accept the payment when tendered.
 Rights of unpaid seller :
The rights of an unpaid seller can be broadly classified into two categories. They are :
(1) Rights of unpaid seller against goods.
(2) Rights of unpaid seller against the buyer.
 The unpaid seller has following rights against goods :
(a) Right of lien: Lien is the right to retain possession of the goods and refuse to deliver them to the
buyer until the price due in exchange of them is paid.
Following are the cases where the right of lien can be exercised :
(i) Where the goods have been sold without any condition.
(ii) Where the goods have been sold on credit, but the term of the credit has expired.
(iii) Where the buyer becomes insolvent, even though the period of credit may not have yet
expired.
Termination of right of lien:
Following are the circumstances under which an unpaid seller loses his right of lien -
(a) When he delivers the goods to a carrier or other bailee for the purpose of transmission to the
buyer without reserving the right of disposal of goods.
(b) When the possession of goods is obtained lawfully by the buyer or his agent.
(c) When the seller waives his right of lien on goods.
(d) When buyer further sells the goods.
(b) Right of stoppage of goods in transit :
Unpaid seller also has a right to stop the goods in transit.
Following are the conditions where such measures can be taken :
 The seller must be unpaid
 Goods must be in transit.
 Property has passed to the buyer
 Buyer is insolvent.
Modes of stoppage :
Following are the modes in which stoppage can be brought in effect :
 By taking possession of the goods

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 By giving notice of his claim to the carrier or other bailee in whose possession the goods
are.
(c) Right of resale : Unpaid seller has a right to resell the goods where :
 Goods are of perishable nature
 Right of resale is expressed in the sale contract
 Buyer has not paid the seller
 Buyer has duly received notice of non-payinent of the seller from seller
(d) Rights to withhold Deliver: If the property in the goods has passed, the unpaid seller has right
as described above. If, however, the property has not passed, the unpaid seller has a right of
withholding delivery similar to and co-extensive with his rights of lien and stoppage in transit.
Under Section 56, the seller may sue the buyer for damages or breach of contract where the buyer
wrongfully neglects or refuses to accept and pay for the goods. Thus an unpaid seller's rights
against the buyer personally are
 Suit for price : Where property has already passed to the buyer, and the buyer refuses or neglects
to pay for the goods, the seller may sue him for the price of the goods.
 Suit for repudiation : In the case where the buyer repudiates the contract before the date of the
delivery the seller may treat the contract as subsisting and wait till the date of delivery or may treat
the contract as rescinded and sue for damages for breach of contract.
 Suit for damages for non acceptance : If buyer refused to accept and pay for the goods the seller
has right to sue for damages for non-acceptance.
 Suit for interest and special damages : Where the buyer has not paid the seller for a reasonable
time the Unpaid seller can claim interest on the unpaid price. He can also sue the buyer for special
damages.
Auction Sales (Section 64)
The law has not defined an auction sale. However, auction sale means a public sale to the highest
bidder. Section 64 sums up the rules applicable to auction sale. These rules are as follows :
1. Where goods are put up for sale in lots, each lot is prima facie deemed to be subject of a separate
contract of sale. The rule can be excluded by an agreement [Sec. 64(1)].
2. The sale is complete when the auctioneer announces its completion by the fall of the hammer or in
some other customary manner. For example, saying 'one', 'two' and 'three' or 'going', 'going' and
gone'. When a person bids, it is only an offer and it is deemed to be accepted by the fall of the
hammer or by, say, calling 'one', 'two' and 'three, Before the fall of the hammer, ie, before its
acceptance, it can be withdrawn [Sec. 64(2)].
Any rule which does not permit a bidder to withdraw his bid before it is accepted is invalid. It is against
the provision of law which provides that an offer can be revoked before it is accepted.
Trading Contracts Involving Rail or Sea Transit :
In the case of a contract for the sale of goods which are to be shipped by sea a number of conditions
are attached by the parties or by custom and practice of merchants. Some of the important types of
such contracts are given below :

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(a) Free on Board : Under an FO.B. contract, it is the duty of the seller to deliver the goods on board of
the specified ship at his own expense. The property in goods transfers to the buyer only after the
goods have been put on board the ship, thus making them buyer's risk as soon as they are
delivered on board the ship of buyer's choice. The seller must immediately give notification to the
buyer of the delivery of the goods on board so that the buyer may get them insure them. If he fails to
do so the goods shall be deemed to be at seller's risk during such sea transit.
(b) Free on Rail : Similar position prevails in these contracts as in the case of free on board contracts.
(c) Cost Insurance and Freight : In such types of contracts, the seller's liability does not end with
delivery of goods on board but continues till the buyer does not receive delivery after the journey
has finished. The seller not only bears all the expenses of putting the goods on board the ship as in
an FO.B. contract, but also has to bear the freight and insurance charges. He will arrange for an
insurance of the goods for the benefit of the buyer. On the tender of documents, the buyer is
required to pay and then take delivery. He has a right to reject the goods if they are damaged or are
not according to the contract in any way.
(d) Ex-Ship : Here the seller is bound to arrange the delivery of shipment of the goods not only to the
port of destination, but to such further inland destination as the buyer may stipulate. The buyer is
not bound to pay until the goods are ready for unloading from the ship and all freight charges are
paid. The goods travel at the seller's risk, but he is not bound to insure them.

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