Sale of Goods Act, 1930

(i) Definition (ii) Applicability(iii) Essentials of a Contract of Sale

Definition

It is a contract by which the ownership of movable goods is transferred from the seller to the buyer. The term ‘contract of sale’ is defined in Section 4(1) of the Sale of Goods Act 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”

The Sale of Goods Act extends to whole of India except the State of Jammu and Kashmir

Essentials of a Contract of Sale(i) All requirements of a valid contract must

be fulfilled (ii) Two Parties – (iii)Goods(iv) Transfer of Property(v) Price(vi) Includes both a ‘sale’ and ‘agreement

to sale’(vii)No formalities are required

Price

, Exchange,sale

Mode of determining of price [ section 9(1)]Fixed by contractBy third parties

(iii) GoodsThe subject matter of a contract of sale of goods is goods. According to Sec 2(7) “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 contract of sale.

ACTIONABLE CLAIM – ‘means a claim which can be enforced through the court of law e.g a debt due from one person to another is an actionable claim

Examples of GoodsGoodwill, Trade Mark, Copyright, Patent right, Water, Gas, Electricity, are all example of good

Classification of Goods(i) Existing Goods (ii) Specific goods (iii)unascertained goods

(iv) Future Goods- This is applicable to goods which are subject matter of the agreement to sale

(v) Contingent Goods- i.e. the goods arriving by ships etc.

Sale & Agreement to sellThe ownership is

transferred immediately

Executed contractA seller can sue for

price. He has all the right of unpaid seller

Sale takes place in the case of existing goods usually.

A buyer bears the risk.

At some future dateExecutory ContractA seller can sue for

damages.An agreement to sell

takes place in the case of future goods.

A seller bears the risk.

Stipulation, Condition & Warranty

A representation which forms part of the contract of sale and affects the contract, is called a stipulation.

A stipulation which is most important for formation of the contract of sale is known as a ‘condition’.

A stipulation which is collateral or of least importance for the formation of the contract of sale, is known as a ‘warranty’.

ConditionsSection 12(2) of the Sale of Goods Act, 1930 defines condition as, “a condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to right to treat the contract as repudiated.”

Example: Buyer wanted a horse which could run at a speed of 45 m.p.h.

Implied Conditions(i) Condition as to Title [Sec 14(a)](ii) Condition as to Description [Sec 15](iii) Condition as to Sample [Sec 17(2)](iv) Condition as to Sample as well as Description

[Sec 15](v) Condition as to Quality or Fitness for Buyer’s

purpose [Section 16(1)](vi) Condition as to Merchantability

[Section 16(2)](vii)Condition as to Wholesomeness

Condition as to Title [Sec 14(a)]It is the most important implied condition in a contract of sale that seller has the right to sell the goods.

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Condition as to Description [Sec 15]

Whenever the goods are sold by description, the implied condition is that the goods shall correspond with the description.

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Condition as to SampleIn a sale by sample there is a implied condition that the goods shall correspond with the sample in quality, and the goods shall be free from the defects which render them unmerchantable.Sale by sample has following three conditions:(i) Correspondence of Goods with sample in quality [sec 17(2)(a)](ii) Reasonable opportunity of comparing goods with the sample [Sec 17(2)(b)](iii) Merchantability of Goods [Sec 17(2)(c)]

Condition as to Sample as well as Description [Sec 15]

Sometimes, the seller shows sample to the buyer and also gives him description. In such case, the implied condition is that the goods shall correspond with both, the sample as well description.

Condition as to Merchantability [Section 16(2)]

The term merchantability means two things:(i) If goods are purchased for resale, they should

be immediately re-saleable; &(ii) If goods are purchased for self use then they

should be reasonably fit for the purpose for which they are generally used.

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Condition & WarrantiesCondition is a

stipulation which is essential to the main purpose of the contract.

It is of vital importance

Warranties are subsidiary or collateral to the main purpose of the contract.

It is not of vital importance. The main contract can be completed even if warranty is not fulfilled.

Condition & WarrantiesIn case of breach of

condition, the buyer may put an end to the contract.

A breach of condition may be treated as a breach of warranty.

In case of breach of warranty, the buyer cannot put an end to the contract. He can only claim damages from the seller.

A breach of warranty cannot be treated as a breach of condition.

Doctrine of Caveat Emptor [Sec 16] The doctrine of caveat emptor is a

fundamental principle of law of sale of goods. It means ‘Caution Buyer’ i.e. ‘let the buyer beware’. In other words, it is no part of the seller’s duty to point out defects in his own goods. The buyer must inspect the goods to find out if they will suit his purpose e.g. certain pigs are sold ‘subject to all faults’. These pigs being infected cause typhoid to the other healthy pigs of the buyer. The rule of caveat emptor would apply.

Exceptions to the Doctrine of Caveat Emptor(i) Condition as to Quality or Fitness for Buyer’s purpose(ii) Where the seller makes a false representation or obtains consent of the buyer by fraud (iii) Condition as to Merchantability(iv) Condition as to Wholesomeness(v) Condition implied by the Custom or Trade Usage