Module 2

Goods: Any movable property, excluding actionable claims and money. Includes
things like stocks, shares, crops, grass, and things attached to land.

Types of Goods:

• Existing goods: Goods that are currently available.

• Future goods: Goods that will be produced or acquired in the future.

Sale of Goods Act, 1930: Defines a contract of sale where the seller agrees
to transfer the ownership of goods to the buyer for a price.

Contract of Sale:

• A contract between two parties: seller and buyer.

. The essentials of a valid contract of sale are as follows:

1. Offer and Acceptance: There must be a clear offer from the seller to
transfer the goods and an acceptance by the buyer to receive those goods for a price.

2. Two Parties: A valid contract of sale involves two parties: the seller (who
transfers the goods) and the buyer (who receives the goods and pays for them).

3. Goods: The contract must involve goods (movable property) that are
clearly identified and agreed upon by both parties.

4. Price: There must be an agreed-upon price for the goods. The price can be
fixed or agreed upon later, but it must be certain.

5. Transfer of Ownership: The primary purpose of the contract is to transfer

the ownership of the goods from the seller to the buyer.

6. Capacity to Contract: Both the seller and buyer must have the legal
capacity to enter into the contract (e.g., they must be of legal age and mentally
competent).

7. Intention to Create Legal Relations: Both parties must intend to be legally

bound by the contract.
 8. Consent: Both parties must freely consent to the terms of the contract
without any force, fraud, or undue influence.

Difference between sale and agreement to sell

Types of Goods:

1. Durable Goods: Goods that have a long lifespan and can be used over an
extended period, such as furniture, vehicles, and appliances.

2. Non-durable Goods: Goods that have a short lifespan and are used up
quickly, like food, clothing, or disposable items.

3. Consumer Goods: Goods purchased by individuals for personal use or

consumption, such as groceries, electronics, and clothing.

4. Capital Goods: Goods used by businesses to produce other goods and

services, like machinery, tools, and factory equipment.

5. Worldly Goods: Goods that provide material or physical comfort, such as

property, money, and other valuable assets.

6. Specific Goods: Goods that are specifically identified and agreed upon by
both parties in the contract, such as a particular car or piece of art.

7. Existing Goods: Goods that are physically available at the time of the
contract, i.e., the goods exist at the moment of the sale.

8. Future Goods: Goods that are not yet in existence but will be produced or
acquired in the future, like crops that haven’t been harvested yet.

9. Contingent Goods: Goods whose existence depends on an uncertain

event, like a rare collectible that will only exist if a certain condition is met.

10. Uncertain Goods: Goods that are not clearly defined or identifiable, and
may be subject to changes in specification.

11. Ascertainable Goods: Goods that can be specifically identified or

determined based on certain criteria or conditions.
Condition vs. Warranty:

1. Condition: A condition is a vital term of the contract that is essential to the

agreement. Breach of a condition may allow the injured party to cancel the contract and
claim damages.

2. Warranty: A warranty is a less significant term of the contract. Breach of a

warranty does not allow the injured party to cancel the contract but may entitle them to
claim damages.

Types of Condition:

1. Express Condition: A condition that is specifically stated in the contract.

Both parties agree to the terms explicitly, such as “The goods must be delivered by a
specific date.”

2. Implied Condition: A condition that is not stated in the contract but is

assumed by law based on the nature of the contract. For example, in a contract for the
sale of goods, there is an implied condition that the goods must be of satisfactory
quality.

Meaning of Guarantee:

A guarantee is a promise or assurance given by a seller or a third party to the buyer

regarding the quality or condition of the goods being sold. It typically ensures that the
goods will be free from defects or that they will meet certain specified standards for a
certain period. If the goods do not meet the guarantee, the seller or guarantor is liable
for repair, replacement, or compensation.

Meaning of Passing of Goods and Property:

The passing of goods refers to the transfer of ownership or title of goods from the seller
to the buyer. The passing of property is when the ownership rights of goods move to the
buyer, as per the terms of the contract. This may happen immediately (in a sale) or in
the future (in an agreement to sell). The passing of goods and property is crucial to
establish when the buyer becomes responsible for the goods and when risks associated
with the goods are transferred.
Meaning of Performance of Contract of Sale:

The performance of a contract of sale refers to the fulfillment of the terms agreed upon
in the sale contract by both parties. The seller must deliver the goods, and the buyer
must pay the agreed price. Both actions must be performed as per the contract for the
sale to be complete.

Unpaid Seller

An unpaid seller is a seller who has not received payment or compensation for goods
sold, typically due to non-payment or delayed payment by the buyer. The seller may
have the right to retain the goods or claim them back under certain conditions until
payment is made.

Rights of an unpaid seller

Against the Goods:

1. Right of Lien: The seller can retain possession of the goods until payment
is made, provided they still have possession of the goods.

2. Right of Stoppage of Goods in Transit: If the goods are in transit and the
seller learns that the buyer is insolvent, they have the right to stop the goods from
reaching the buyer and regain possession.

3. Right to Resell: If the buyer fails to pay, the seller may resell the goods,
provided it is done in a reasonable manner, and any loss from the resale can be claimed
from the buyer.

Against the Buyer:

1. Suit for Price: The seller can sue the buyer for the
price of the goods if the buyer refuses to pay.

2. Suit for Damages for Non-acceptance: If the buyer fails to accept the
goods, the seller can claim damages for non-acceptance, which covers any loss incurred
due to the buyer’s default.

3. Suit for Interest: The seller may claim interest on the unpaid price of the
goods if agreed upon or stipulated by the contract.
CAVEAT EMPTOR

The Doctrine of Caveat Emptor is a Latin term meaning “let the buyer beware.” It
suggests that the buyer is responsible for checking the quality and suitability of goods
before making a purchase. Under this doctrine, once the sale is completed, the buyer
cannot claim compensation or reject the goods based on defects, unless there was fraud
or misrepresentation by the seller. It places the burden of responsibility on the buyer to
be cautious.

These exceptions include:

1. Sale of Branded Products: If the product is branded, the buyer expects a

certain standard of quality. If the product fails to meet that standard, the buyer may
have grounds to return it or claim compensation.

2. Sale Knowing Buyer’s Purpose: If the seller is aware of the specific purpose
for which the buyer is purchasing the goods, and the goods are unsuitable for that
purpose, the buyer can claim compensation or return the goods.

3. Sale by Description: If the goods are sold based on a description and do

not match the description, the buyer has the right to reject the goods or claim damages.

4. Sale by Fraud or Misrepresentation: If the seller intentionally

misrepresents the goods or conceals defects, the buyer can take action against the
seller, even if they accepted the goods.

5. Sale by Sample: If the goods are sold based on a sample and the actual
goods do not conform to the sample, the buyer is entitled to a remedy.

The formation of a contract of sale involves the following key steps:

1. Offer and Acceptance: One party (the seller) makes an offer to sell goods,
and the other party (the buyer) accepts it. The acceptance must be clear and
unambiguous.

2. Intention to Create Legal Relations: Both the buyer and the seller must
intend to enter into a legally binding agreement. In commercial transactions, it is
generally presumed that such an intention exists.
 3. Consideration: There must be an exchange of value, usually in the form of
money from the buyer in exchange for the goods or services from the seller.

4. Capacity to Contract: Both parties must be legally capable of entering into

a contract. This means they must be of legal age and sound mind.

5. Legality of Purpose: The subject matter of the sale (i.e., the goods being
sold) must be lawful. A contract for the sale of illegal goods is void.

6. Consent: Both parties must freely consent to the contract without any
form of coercion, misrepresentation, or undue influence.

7. Delivery of Goods: The contract must include terms related to the delivery
of goods, such as the time and place of delivery, and whether the goods are to be
delivered immediately or at a later date.