Sale of Goods Act 1930

Q. Describe the scope and definitions of Sale of Goods Act, 1930

Ans : The Sale of Goods Act, 1930 is a significant piece of legislation in India that governs the sale and purchase of goods. It lays down the legal framework for the rights, duties, and liabilities of buyers and sellers in a contract of sale. The Act defines key terms, the formation of contracts, the transfer of ownership, and the remedies available for breach of contract.

Scope of the Sale of Goods Act, 1930

Territorial Applicability: The Act applies to the whole of India except the State of Jammu and Kashmir (prior to the abrogation of Article 370).

Subject Matter: The Act specifically deals with the sale of movable goods, excluding immovable property (real estate) and services. It applies to all contracts where goods are sold or agreed to be sold for a price.

Legal Framework: The Act provides the legal framework for the formation of a contract of sale, including the terms of the contract, the rights and duties of the buyer and seller, the transfer of property in goods, the performance of the contract, and the remedies available in case of a breach.

Exclusions: The Act does not cover services, barter transactions (exchange of goods without money), or gifts (transfer without consideration).

Key Definitions under the Sale of Goods Act, 1930

Goods: Section 2(7) defines "goods" as every kind of movable property, other than actionable claims and money. This includes stock and shares, growing crops, and things attached to or forming part of the land, which are agreed to be severed before the sale or under the contract of sale. 

Seller: A seller is a person who sells or agrees to sell goods.

Buyer: A buyer is a person who buys or agrees to buy goods.

Contract of Sale: According to Section 4(1), 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 contract can be either a sale (where the transfer of goods is immediate) or an agreement to sell (where the transfer is to take place at a future time or subject to some conditions).

Sale: A sale is a contract where the ownership of goods is transferred from the seller to the buyer immediately in exchange for a price.

Agreement to Sell: An agreement to sell is a contract where the transfer of ownership is to take place at a future date or subject to certain conditions.

Delivery: Delivery means the voluntary transfer of possession from one person to another. It can be actual, symbolic, or constructive.

Price: Price is the money consideration for a sale of goods. The price must be fixed or capable of being fixed in a manner agreed upon by the parties.

Conditions and Warranties: Conditions are essential stipulations of a contract, the breach of which may give rise to the right to treat the contract as repudiated. Warranties are lesser stipulations, and their breach only entitles the buyer to claim damages, not to reject the goods and treat the contract as repudiated.

Property: Property refers to the ownership or title of the goods, not the possession.

Specific Goods: Goods that are identified and agreed upon at the time the contract of sale is made.

Unascertained Goods: Goods that are not specifically identified at the time the contract of sale is made.

The Sale of Goods Act, 1930 thus provides a comprehensive legal framework to facilitate the buying and selling of goods, ensuring clarity and fairness in commercial transactions.

Q. Who is an Unpaid Seller?

Ans : An unpaid seller is a seller who has not received the full price of the goods sold, or has received a negotiable instrument (like a bill of exchange or cheque) that has been dishonored. Under Section 45 of the Sale of Goods Act, 1930, a seller is considered "unpaid" in the following situations:

Full Payment Not Made: When the whole of the price has not been paid or tendered.

Conditional Payment Failure: When a bill of exchange, cheque, or other negotiable instrument has been received as conditional payment, and the condition (such as the instrument being honored) is not fulfilled due to the instrument being dishonored.

Rights of an Unpaid Seller

The Sale of Goods Act grants several rights to an unpaid seller, which can be categorized into two main types: rights against the goods and rights against the buyer personally.

Rights Against the Goods

These rights allow the unpaid seller to take certain actions in relation to the goods themselves:

Right of Lien (Section 47-49):

The unpaid seller has the right to retain possession of the goods until payment is made.

This right is available as long as the seller is in possession of the goods.

The lien can be exercised even if the seller is in possession of the goods as an agent or bailee for the buyer.

Right of Stoppage in Transit (Section 50-52):

If the buyer becomes insolvent, the unpaid seller can stop the goods in transit.

This right can be exercised when the seller has parted with the goods but they are still in transit.

The seller can regain possession of the goods from the carrier or other custodian.

Right of Resale (Section 54):

The unpaid seller can resell the goods if the buyer defaults on payment.

This right is typically exercised after the right of lien or stoppage in transit has been exercised.

If the goods are perishable, the seller can resell them immediately.

In other cases, reasonable notice must be given to the buyer before resale.

If the goods are resold, the seller is entitled to recover any loss from the original buyer and is also entitled to retain any profit from the resale.

Rights Against the Buyer Personally

These rights allow the unpaid seller to take action directly against the buyer:

Right to Sue for the Price (Section 55):

The seller can sue the buyer for the price of the goods if ownership has passed to the buyer, and the buyer has wrongfully neglected or refused to pay.

Right to Sue for Damages for Non-Acceptance (Section 56):

If the buyer wrongfully refuses to accept and pay for the goods, the seller can sue for damages for non-acceptance.

The measure of damages is typically the difference between the contract price and the market price at the time and place of delivery.

Right to Repudiate the Contract (Section 60):

If the buyer repudiates the contract before the due date of delivery, the seller can choose to treat the contract as rescinded and sue for damages for anticipatory breach.

Right to Sue for Interest (Section 61):

The seller may also sue for interest on the unpaid price if there is an agreement to that effect, or if such interest is payable by custom or under the terms of the contract.

These rights ensure that the unpaid seller has recourse to recover the price or deal with the goods if the buyer fails to fulfill their obligations under the contract.

Q. Write Short Notes on :

a) Condition

A condition is a fundamental term in a contract of sale under the Sale of Goods Act, 1930. It refers to a stipulation that is essential to the main purpose of the contract. The performance of a condition is crucial to the fulfillment of the contract, and a breach of a condition gives the aggrieved party the right to repudiate the contract entirely. If a seller fails to meet a condition, the buyer is entitled to reject the goods, terminate the contract, and claim damages. Conditions are contrasted with warranties, which are less significant terms within a contract.

A condition is a crucial term in a contract of sale. For example, imagine you purchase a car under a contract that states the car must have a certain type of engine. The engine type is a condition because it's essential to the contract. If the car is delivered with a different engine, you can reject the car, terminate the contract, and demand a refund. This is because the engine type is fundamental to your decision to purchase the car. The breach of this condition gives you the right to cancel the entire contract.

 

b) Goods

Goods, as defined under the Sale of Goods Act, 1930, refer to every kind of movable property other than actionable claims and money. This includes tangible objects such as consumer products, raw materials, and manufactured items. Goods also encompass growing crops, stock, shares, and things attached to or forming part of the land, provided they are agreed to be severed before sale or under the contract of sale. Goods are central to any contract of sale, and they can be categorized into specific goods, which are identified and agreed upon at the time of the contract, and unascertained goods, which are not specifically identified until a later stage.

Goods refer to any type of movable property that can be sold or bought. For example, if you go to a store and buy a laptop, the laptop is considered "goods" under the Sale of Goods Act. Other examples of goods include furniture, clothing, or a stock of raw materials like steel. Goods can also include crops that are still growing or things attached to land, like timber, as long as they are intended to be severed before sale. If you enter into a contract to buy a specific painting, that painting is a specific good because it is uniquely identified at the time of the contract.

 

c) Warranty

A warranty in the context of a sale of goods is a stipulation that is collateral to the main purpose of the contract. Unlike a condition, a warranty is a lesser obligation. A breach of warranty does not entitle the aggrieved party to repudiate the contract; instead, it allows the party to claim damages. Warranties may relate to the quality, condition, or fitness of the goods being sold. For instance, if goods are found to be defective or not in accordance with the description, the buyer can seek compensation for the breach of warranty but must still accept the goods.

A warranty is a less critical term in a contract. Suppose you buy a refrigerator with a warranty that guarantees it will be free from defects for two years. If the refrigerator stops cooling after six months, you can't return it to the seller and cancel the contract entirely, but you can claim damages or ask for repair or replacement under the warranty. The refrigerator's functioning is important, but it's not essential enough to cancel the whole contract—hence, it's covered by a warranty, not a condition.

 

d) Agreement to Sell

An agreement to sell is a contract in which the transfer of ownership of the goods is to take place at a future date or subject to certain conditions being met. This agreement is distinguished from a sale, where the transfer of property is immediate. Under the Sale of Goods Act, 1930, an agreement to sell becomes a sale when the time elapses or the conditions are fulfilled. Until the ownership is transferred, the seller retains the title to the goods, and the buyer only gains ownership once the conditions of the contract are met. If the buyer fails to fulfill the conditions, the seller may retain the goods and has the right to sue for breach of contract.

An agreement to sell is a contract where the transfer of goods is set to occur at a future date or under specific conditions. For example, if you agree to buy a batch of custom-made furniture that will be ready in three months, you’ve entered into an agreement to sell. The ownership of the furniture remains with the seller until the furniture is completed and delivered, and the buyer makes the payment. If, after three months, the furniture is ready but the buyer refuses to pay, the seller can retain the furniture and sue for breach of contract. Conversely, if the seller fails to deliver the furniture, the buyer can sue for damages. Once the conditions are fulfilled, this agreement automatically converts into a sale, transferring ownership to the buyer.