BUSINESS LAWS

UNIT 02: Sales of Goods Act, 1930

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 and distinguishes between a "sale" and "agreement to sell."
Section 5: States how a contract of sale can be made (orally, in writing, or implied).
Section 6: Sale of existing or future goods.
Section 7: Goods must be ascertained (specifically identified) in a sale.

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 the buyer to terminate the contract.
Example: In a sale of a car, the term "car must be new" is a condition.

Warranties (Section 12):

Non-essential terms of a contract. Breach allows the buyer to claim damages but not to cancel the contract.
Example: A "car must have a spare tire" is a warranty.

Important Provisions:

Section 13: When a condition can be treated as a warranty.
Section 14-16: Implied conditions and warranties (like the quality and fitness of goods).

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: Rules regarding the transfer of specific and ascertained goods.
Section 21-24: Transfer of unascertained or future goods.
Section 25: Goods sent "on approval" or "on sale or return."
Section 26: Risk follows ownership — the person who owns the goods bears the risk.

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 — the transfer of possession.
Section 34-35: Rules on how delivery should be made (time, place, mode).
Section 37: Delivery of goods in installments.
Section 39: Buyer's right to inspect the goods before acceptance.

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: Right to retain the goods until payment is made.
Right of Stoppage in Transit: Right to stop the goods in transit if the buyer becomes insolvent.
Right of Resale: Right to resell the goods if payment is not made after due notice.

Important Sections:

Section 45: Definition of an unpaid seller.
Section 46-49: Rights against the goods (lien, stoppage in transit).
Section 50-54: Rights against the buyer personally (for breach).

7. Remedies for Breach of Contract (Sections 55-61)

The Act specifies the remedies available to both buyers and sellers in case of a breach of contract.

For Buyer:

Damages for non-delivery (Section 56).
Right to specific performance (force the seller to deliver goods).

For Seller:

Damages for non-acceptance (Section 55).
Right to claim the price (Section 55).

Key Questions:

What remedies does an unpaid seller have under the Act?
How do "conditions" differ from "warranties"?
What is the significance of "transfer of property"?

8. Miscellaneous Provisions (Sections 62-66)

These sections deal with specific scenarios not covered under the previous sections.

Section 62: Agreement to vary or rescind the contract.
Section 64: Auction sales — rules regarding auctions, including when the auction is complete.
Section 65-66: Various legal principles regarding the sale of goods not covered elsewhere.

9. Key Amendments and Modern Context

Over time, the Sales of Goods Act, 1930, has seen changes primarily through judicial interpretations rather than statutory amendments. However, recent trends emphasize consumer protection, harmonizing with the Consumer Protection Act, 2019, which provides additional safeguards.

Summary of Key Concepts

Sale vs. Agreement to Sell: Immediate vs. future transfer.
Conditions vs. Warranties: Essential vs. non-essential terms.
Unpaid Seller Rights: Protection given to sellers who have not received payment.
Performance: Delivery and acceptance rules.
Risk and Ownership: Risk of loss follows ownership unless agreed otherwise.

Relevant Case Laws for the Sale of Goods Act, 1930

Below are the most significant case laws categorized by key concepts within the Act:

1.1 Formation of Contract of Sale

1. Azmat Ali v. Musammat Kaniz Fatima (1895):

Concept: Sale vs. Agreement to Sell.
Summary: This case distinguished between a sale and an agreement to sell, emphasizing that ownership and risk do not pass until the goods are ascertained.

2. Varley v. Whipp (1900):

Concept: Sale of Specific and Ascertained Goods.
Summary: The seller sold a second-hand reaping machine. The buyer rejected it, claiming it did not match the description. The court held that if the goods do not match the description in the contract, the buyer can reject them.

1.2 Conditions and Warranties

3. Baldry v. Marshall (1925):

Concept: Condition vs. Warranty.
Summary: A car was sold with a specific purpose in mind. When the car did not fulfill that purpose, the court held it was a breach of condition, allowing the buyer to reject the car.

4. Beale v. Taylor (1967):

Concept: Implied Condition as to Description.
Summary: A car sold as a 1961 model was later found to be a 1958 model with a 1961 rear. The buyer was entitled to a refund as the description was misleading.