Unit 2 - Sales of Goods Act, 1930
Commercial Law Study Material
1. Introduction to the Sales of Goods Act, 1930
The Sales of Goods Act, 1930 is a fundamental law governing the sale of goods in India. It defines and amends the law related to the sale and purchase of goods. This act came into force on 1st July 1930 and originally formed a part of the Indian Contract Act of 1872, but was later separated for clarity.
Key Terms
- Seller: A person who sells or agrees to sell goods.
- Buyer: A person who buys or agrees to buy goods.
- Goods: Every kind of movable property, excluding actionable claims and money.
Objective of the Act: To define the rights and duties of buyers and sellers, as well as to provide remedies in case of breach of contract for the sale of goods.
2. Formation of Contract of Sale (Sections 4-17)
The contract of sale is an agreement where the seller transfers or agrees to transfer the ownership of goods to the buyer for a price.
Types of Contract
- Sale: Immediate transfer of ownership.
- Agreement to Sell: Transfer of ownership happens at a future date or subject to conditions.
Important Provisions
- Section 4: Defines a contract of sale
- Section 5: How contract can be made
- Section 6: Sale of existing/future goods
- Section 7: Goods must be ascertained
Key Concept: Transfer of Ownership
- In a "Sale," ownership passes immediately.
- In an "Agreement to Sell," it passes at a future time.
3. Conditions and Warranties (Sections 12-17)
The act differentiates between conditions and warranties, which are crucial concepts.
Conditions (Section 12)
- Essential terms of a contract
- Breach allows contract termination
- Example: "Car must be new"
Warranties (Section 12)
- Non-essential terms
- Breach allows damages only
- Example: "Car must have spare tire"
Important Provisions
- Section 13: When condition becomes warranty
- Sections 14-16: Implied conditions/warranties
4. Transfer of Property in Goods (Sections 18-26)
The property refers to the ownership of the goods, not just physical possession.
Key Sections
- Section 18-20: Transfer of specific goods
- Section 21-24: Transfer of unascertained goods
- Section 25: Goods sent "on approval"
- Section 26: Risk follows ownership
Important Concept
Ownership and risk pass together unless otherwise agreed. For example, if goods are damaged after ownership is transferred to the buyer, the buyer bears the loss.
5. Performance of the Contract (Sections 31-44)
Performance refers to the seller delivering goods and the buyer accepting them.
Key Sections
- Section 31: Duties of seller and buyer
- Section 32-33: Delivery and its meaning
- Section 34-35: Rules for delivery
- Section 37: Delivery in installments
- Section 39: Buyer's right to inspect
6. Rights of Unpaid Seller (Sections 45-54)
The Act gives certain rights to an unpaid seller, who has sold goods but not received payment.
Key Rights
- Right of Lien: Retain goods until payment
- Right of Stoppage: Stop goods in transit
- Right of Resale: Resell goods after notice
Important Sections
- Section 45: Definition
- Section 46-49: Rights against goods
- Section 50-54: Rights against buyer
Relevant Case Laws
1.1 Formation of Contract of Sale
Azmat Ali v. Musammat Kaniz Fatima (1895)
Concept: Sale vs. Agreement to Sell
This case distinguished between a sale and an agreement to sell, emphasizing that ownership and risk do not pass until the goods are ascertained.
Varley v. Whipp (1900)
Concept: Sale of Specific Goods
Held that if goods don't match description, buyer can reject them.
Summary of Key Concepts
Sale vs. Agreement to Sell
Immediate vs. future transfer
Conditions vs. Warranties
Essential vs. non-essential terms
Unpaid Seller Rights
Lien, stoppage in transit, resale
Performance
Delivery and acceptance rules
Risk and Ownership
Risk follows ownership
