very help full

1. SALE OF GOODS ACT

2. The sale of goods is the most common of all the commercial
contracts. The law relating to it is contained in the sale of
goods Act, 1930. Prior to this Act, the law of sale of goods was
contained in chapter VII of the Indian Contract Act, 1872
Contracts for the sale of goods are subject to the general legal
principles applicable to all contracts, such as offer &
acceptance, the capacity of the parties, free & real consent,
consideration, and legality of the object. The general
provision of the Indian Contract Act Continue to apply to
contracts for the sale of goods in so far as they are not
inconsistent with the express provision of the Sale of Goods
Act (Sec.3)

3. CONTRACT OF SALE OF GOODS
• Sale and Agreement to sell : Where under a contract of
sale, the property in the goods is transferred from the
seller to the buyer, the contract is called ‘sale’, but where
the transfer of the property in the goods is to take place
at a future time or subject to some conditions thereafter
to be fulfilled, the contract is called an ‘agreement to
sale’[Sec.4 (3)]. An agreement to sell becomes a sale
when the time elapses or the conditions, subject to which
the property in the goods is to be transferred are fulfilled
[sec.4 (4)].

4. Essentials of a contract of sale.
Two Parties. There must be two distinct parties. i.e., a buyer and
seller, to effect a contract of sale and they must be competent
to contract. ‘Buyer’ means a person who buys or agrees to buy
goods [Sec.2(1)]
Example:
A partnership firm was dissolved and the surplus assets,
including the stock in trade, were divided among the partner, in
specie (in the same form). Held, it was not a sale as the partners
themselves were the joint owners of the goods and they could
not be both sellers and buyers [State of Gujarat v.Raman Lal&
co., A.I.R. (1965) Guj.60]

5. • Goods. There must be some goods the property in which is or
is to be transferred from the seller to the buyer. The goods
which from the subject-matter of the contract of sale must be
movable. Transfer of immovable property is not regulated by
the Sale of Goods Act.
• Example:
A hotel company provided residence and food making a
consolidated charged for both the services. No rebate was
allowed if food was not taken by the customers. Held, supply
of food was not sale of goods but simply a service as the
transaction was an indivisible contract of multiple services
and did not involve any sale of food [Associated Hotels of
India v. Excise & Taxation Officer, A.I.R.(1996) Punj.449].It
was observed in the case that the “position is akin to that of a
steamship or airline company which
serves food to
passengers”

6. • Price:
the consideration for the contract of sale, called price,
must be money. When goods are exchanged for goods, it is not a
Sale but a ‘Barter’. There is, however, nothing to prevent the
consideration from being partly in money and partly in goods
• Example:
A agreed to exchange with B 100 quarters of barley At Rs. 2 per
quarter for 52 bullocks valued at Rs. 6 per bullock and difference
in cash. Held, the contract was a contract of sale [Aldridge v.
Johnson,(1857) 7E. & B.385].

7. Transfer of general property.
There must be a transfer of general property as
distinguished from special property in goods from the
seller to the buyer. If A own certain goods, he has
general property in the goods. If he pledges them with
B, B has special property in the goods
Essential elements of a valid contract.
All the essential elements of a valid contract must be
present in the contract of sale

8. Contract of sale how made
No particular form is necessary to constitute a contract of sale. It
is, like any other contract, made by the ordinary method of offer
(to buy or sell goods) by one party and its acceptance ( to sell or
buy goods respectively) by the other party. It may also implied
from the conduct of the parties.[Sec.5(2)] or from the course of
dealing between the parties

9. Distinction between Sale and Agreement to
Sell
Point of
Distinction
Sale
Agreement to
sell
Transfer of ownership
Transfer of ownership of
goods
take
place
immediately at the time
of making the contract.
Transfer of ownership
take place at a future
time or subject to
fulfillment of certain
conditions.
Type of contract
Executed contract
Executory contract
Nature of Right
JUS IN REM
JUS IN PERSONAM

10. Point of
Distinction
Sale
Agreement to
sell
Risk of loss
Risk of loss or damage
of goods is transferred
to
the
buyer
immediately
Risk of loss or damage
of
goods
is
not
transferred to the buyer
immediately
as
ownership
has
not
transferred
Right of seller against
buyer’s breach
Seller can sue the buyer
for the price of goods
even though the goods
are in his possession
Buyer can sue the seller
for damages and also
the third party who
bought the goods
Seller can sue the buyer
for the damages only
Right of buyer against
seller breach
Buyer can sue the seller
for the damages only

11. Meaning of hire-purchase Agreement:
Hire purchase agreement means an agreement under which goods
are let on hire and under which the hirer has an option to purchase
them in accordance with the terms of the agreement and includes
the agreement under which:
• Possession of goods is delivered by the owner thereof to a
person on a condition that such person pays the agreed
amount in periodical installments
• The property in the goods is to pass to such person on the
payment of the last installment; and
• such a person has a right to terminate the agreement at
anytime before property so passes
• Until the final payment, the hirer is merely a bailee of the
goods and ownership remains vested in the bailor

12. Distinction between sale and Hire Purchase
agreement
Point of
Distinction
Sale
Hire Purchase
Agreement
Regulating Law
All contracts of sale
are governed by
Sale of Goods Act,
1930
The Hire Purchase
Agreements
are
governed by Hire
Purchase Act, 1972
Nature of
Contract
It is a contract of It is an agreement
Sale
of hiring and hence
an agreement to
sell

13. Point of
Distinction
Possession of
goods
Sale
Hire Purchase
Agreement
Possession of
goods need not
necessarily be
transferred
immediately
Possession of
goods is necessarily
transferred
immediately
Transfer of
ownership of
goods
Ownership of
goods is
transferred
immediately
Ownership of
goods is
transferred on the
payment of the last
instalment when
the option to
purchase is
exercised.

14. Point of
Distinction
Right to
terminate
Right to
repossess the
goods.
Sale
Hire Purchase
Agreement
The buyer has no The hirer has a
right to terminate right to terminate
the contract of sale the agreement at
anytime before the
ownership
is
transferred.
The seller has no The hire- vendor
right to repossess has a right to
the goods. He can repossess
the
sue for the price
goods if the hirer
defaults.

15. Point of
Distinction
Sale
Hire Purchase
Agreement
Transfer of good title to The buyer can transfer a
third party
good title to third party
because ownership of
goods
has
been
transferred
Compulsion as to be in A contract of sale need
writing
not necessarily be in
writing
The
hirer
cannot
transfer a good title to
third party because
ownership of goods has
not been transferred
The
hire
purchase
agreement must be in
writing
Treatment of payment The payment made by
made by installment
the buyer is treated as
payment towards the
price of goods
The payment made by
the hire purchaser s
treated as hire charges
for the use of goods till
the option to purchase
the goods is exercised

16. Goods (Section 2(7))
“Goods” means every kind of movable
property other than actionable claims and
money, and includes the following
•Stocks 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 the
contract of sale.

17. It Includes
It Excludes
Stock and shares
Actionable claims
Growing crops
Money
Grass and things attached Immovable property
to or forming part of the
land, which are agreed to
be severed before sale or
under the contract of sale.

18. •
•
Example of Goods:
Old rare coins, stock, share, debenture, goodwill, patents,
trademarks, copyright, water, gas, electricity, grass,
growing crops, tree to be cut and their log wood delivered
etc.
Things excluded from the term ‘goods’:
The term ‘goods’ does not include the following :
a) Actionable claims means claims, which can be
enforced only by an action or suit. For instance, a
debt due to a man from another s an actionable claim
and hence cannot be sold as goods.
b) Money, which means the legal tender or current
money and not the old rare coins .
c) Immovable property.

19. Types of Goods
Goods
Existing Goods
Future Goods
Contingent Goods
Specific Goods
Ascertained Goods
Unascertained Goods

20. Existing Goods
Existing Goods means the Goods which are either owned or
possessed by the seller at the time of contract of sale. The existing
Goods may be specific or ascertained or unascertained
• Specific Goods: These goods the which are identified and agreed
upon at the time when a contract of sale is made.
Example: A specified T.V., V .C.R., Car and Ring.
• Ascertained Goods: Goods are said to be ascertained when out of a
mass of unascertained goods, the quantity extracted for is
identified and set aside for a given contract. Thus, when part of the
goods lying in bulk are identified and marked for sale, such goods
are termed as ascertained goods.
• Unascertained Goods: These are the goods which are not identified
and agreed upon at the time when a contract of sale is made.
Example: Goods in stocks or lying in lots.

21. Future Goods
Future goods means goods to be manufactured or
produced or acquired by the seller after the making
of the contract of sale. There can be an agreement to
sell only. There can be no sale respect of future
goods because one cannot sell what he does not
possess.
Example:
X agrees to sell to Y all the crops to be grown at his
farm in Haryana during the year 2013 season for a
sum of Rs.1,00,000/-. This is an agreement to sell
future goods and not a sale.

22. Contingent Goods
These are the goods the acquisition of which by the
seller depends upon a contingency which may or
may not happen.
Example:
X agrees to sell to Y all crops to be grown at Z’s farm
in Haryana during the year 2013 to X. This is an
agreement to sell contingent goods because the
availability of crops depends on its sale by Z.

23. Effect of Perishing of Goods
Goods perishing before making a contract:
Where in a contract of sale of specified goods, the goods,
without the knowledge of the seller, have, at the time of
making the contract, perished or destroyed or become so
damaged as no longer to answer to their description in the
contract, the contract is void.
Goods perishing after the contract is made:
Where there is an agreement to sell specific goods and
subsequently the goods, without any fault of either party,
perish or are so damaged as no longer to answer to their
description in the agreement before the risk passes to buyer
the agreement becomes void.

24. Document of title to goods and document
showing Title to Goods
The expression ‘document of title to goods’ has been
explained under Section 2(4) of Sale of Goods Act, 1930.
According to this, a document of title is any written
document that is treated in the regular course of
business as adequate evidence that the person in
possession of document is entitled to receive, hold and
dispose of the document and a right to transfer or
receive goods thereby represented. Bill of lading, railway
receipts, warehouse receipts are type of document of
title of goods.

25. It may be noted that there is difference between a
‘document of title’ and ‘document showing title’ . For
instance, a share certificate is a ‘ document showing
title’ as it merely shows that the person named in
the share certificate is entitled to the share
represented by it, but it does not allow that person
to transfer the share mentioned therein by mere
endorsement on the back of the certificate and the
delivery of the certificate.

26. •
Price:
No sale can take place without a price. Thus, if there is no
valuable consideration to support a voluntary surrender of
goods by the real owner to another person, the transaction
is a gift and hence not governed by the Sale of Goods Act.
Therefore, price, which is money consideration for the sale
of goods, constitutesthe essence for contract of sale.
The price may be:
1.
2.
3.
4.
At the time of contract, fixed by the parties themselves; or
Left to be determined by the course of dealings between
parties; or
Left to be fixed in some way stipulated in the contract; or
Left to be fixed by some third party.

27. Where the contract states that the price is to be fixed
by a third party and he fails to do so, the contract is
void. Where nothing is said by the parties regarding
price, the buyer must pay a reasonable price, and the
market price would be a reasonable price.

28. PASSING
OF
PROPERTY

29. • Meaning of passing of property:
The sole purpose of the contract of sale is the transfer of ownership
of goods from the seller to the buyer. Thus it is important to know
the precise moment of time at which the property in goods passes
from the seller to the buyer.
Passing of property in specific or ascertained goods:
In a sale of specific or ascertained goods, the property passes to the
buyer, as and when the parties intended to pass. The intention of
the parties must be gathered from the terms of the contract; the
conduct of the parties; and the circumstances.
Unless a contrary intention appears, the following rules are
applicable for, ascertaining the intention of the parties or
ascertaining the precise moment of time at which the property in
specific goods passed from seller to the buyer.

30. 1.
Where there is an unconditional contract for the sale of specific goods in a
deliverable state, the property passes to the buyer when the contract is
made (i.e. when the offer is accepted). Deliverable state means goods are in
such a state that the buyer would be bound to take delivery of the goods.
The fact that the time of delivery of the goods or time of payment of price is
postponed does not prevent the property from passing at once.
2.
Where there is a contract for sale of a specific goods not in a deliverable
state, i.e. the seller has to do something to the goods to put them in a
deliverable state, the property dose not pass until that thing is done and the
buyer has notice of it
3.
Where there is a contract for sale of specific goods in a deliverable state,
but the seller is bound to weigh, measure, test or do something with a
reference to the goods for the purpose of ascertaining the price, the
property to the goods, for the purpose of asatcertaining the price, does not
pass until that thing is done and the buyer has notice of it.

31. •
Passing of property in unascertained or future goods
The following rules are applicable for ascertaining the precise
moment of time at which the property in unascertained or
future goods passes from seller to the buyer
1. The property in unascertained or future goods dose not pass
until the goods are ascertained.
2.
The property in unascertained or future goods sold by
description passes to the buyer, when goods of that description
and is deliverable state are unconditionally appropriated to the
contract, either by the seller with the assent of the buyer or by
the buyer with the assent of the seller. Such assent may be
expressed or implied and may be given either before or after
the appropriation is made

32. •
Passing of property in goods sent “on approval or on sale or
return”
When goods are delivered to the buyer “on approval” or on sale
or return” basis, the property therein passes to the buyer:
1.
When the signified his approval or acceptance to the seller, or
does any other act adopting the transaction: or
2.
If he retains the goods, without giving notice of rejection,
beyond time fixed for the returen of goods, or if no time is
fixed, beyond a reasonable time.

33. It may be noted that where the goods have been delivered by
a person “on sale or return” with the terms that the goods
were to remain the property of the seller till they are paid
for, then the property therein does not pass to buyer until
the terms are complied with, i.e., cash is paid for. This is
called “sale for cash only or Return”.

34. Example:
I.
X delivers some goods to Y on “sale or return” for 7 days.
State the legal position in each of the following alternative case:
Case (a) such goods are destroyed by fire on the third day itself
without any fault of Y.
Case (b) Y inform X on telephone on the third day itself that he has
accepted the goods and immediately after the receiver is put
off, the goods are destroyed by fire.
Case (c) such goods are further delivered b Y on the third day itself
to Z and then by Z to A on similar terms. The goods are stolen
while in the custody of A

35. Case (d) Y neither returns nor give notice of rejection even after the
expiry of 7 days. Goods are destroyed by fire on the eighth day
Case (e) Y retains the goods but gives the notice of rejection on the
expiry of 7 days. Goods are destroyed by fire on the eighth day.
Solution :
Case (a): X shall bear the loss because the ownership has not yet
passed to the buyer.
Case (b): Y shall bear the loss because the ownership has passed to
the buyer.
Case (c): X can recover the loss from Y because the ownership passed
to Y as Y has adopted the transaction by delivering the goods to Z.Y
can recover the loss from Z because the ownership has passed to Z
as Z has adopted the transaction by delivering the goods to A.Z
cannot recover the loss from A because the ownership has not yet
passed.

36. Case (d) : Y shall bear the loss because the ownership has passed
to the buyer.
Case (e): X shall bear the loss because the ownership has not yet
passed.
Reservation of Rights of Disposal
The property in goods, whether specific or unascertained,
does not pass to the buyer, if the seller reserves the rights of
disposal of the goods.A seller have expressed as well as
deemed reservation of he right of disposal.

37. CAVEAT EMPTOR

38. • Doctrine Of Caveat Emptor:
The term “caveat Emptor” is a Latin word which means
“let the buyer beware”. This principal states that it is for
the buyer to satisfy himself that the goods, which he is
purchasing, are of the quality, which he requires. If he
buys goods for a particular purpose, he must satisfy
himself that they are fit for that purpose. It is not the
seller’s duty to give to the buyer the goods, which are fit
for a particular purpose of the buyer. If the buyer makes
the wrong selection, he can not blame the seller, if the
goods turn out to be defective or do not serve his
purpose

39. In Ward v. Hobbs, certain goat were sold by auction. The
buyer paid but they were ill and all except one died of
fever. It was held that there was no implied condition or
warranty that the goat were of good health. It was the
buyer’s duty to satisfy himself regarding the health of
goat.
H bought oats from S a sample of which had been shown
to H. H erroneously thought that the oats were old. The
oats were, however, new. Held, H could not avoid the
contract [Smith v. Hughes]

40. Exceptions to the Doctrine of caveat Emptor:
the doctrine of caveat emptor is subject to the following
exceptions:
1. In case of Misrepresentation by the seller: where the seller
makes a misrepresentation and the buyer relies on that
representation.
2.
In case of concealment of latent Defect: where the seller
knowingly conceals a defect which would not be discovered on
a reasonable examination.

41. 3.
In case of sale by Description: where the goods are sold by
description and the goods supplied by the seller do not
correspond to the description.
4.
In case of sale by sample: where the goods are sold by sample
and the supplied by the seller do not correspond with the
sample.
5.
Fitness for a particular purpose:
where the seller or a
manufacturer is a dealer of the type of goods sole by him and
the buyer has disclosed the purpose for which goods are
required and relied upon the seller’s skills or judgment.

42. 6.
Merchantable quality: where the goods are bought by
description from a seller who deals in goods of that description
(whether he is the manufacturer or producer or not), there is an
implied condition that the goods shall be of merchantable
quality.
Relevance Of Caveat Emptor
the rule of caveat emptor appeared to play an important role in
the past when trade was conducted on local scale and the buyer
had every opportunity to examine the goods before buying.
However, in the modern context, the rigours of the rule have
been mitigated because of global dimensions of trade,
government legislation on consumer protection, professional
management, and instance competition and consumer
awareness. In fact, the rule of caveat emptor should be
replaced by the ‘rule of caveat vendor’ (Let the seller beware)

43. UN PAID SELLER

44. Definition of unpaid seller : Section 45 of sale of goods act,
1930 defines the term ‘unpaid seller’. According to this, the
seller of the goods is deemed to be an unpaid seller in the
following cases, namely :a) When the whole of the price has not been paid or tendered;
b) when a conditional payment was made by bill of exchange or
other negotiable instrument, and the instrument has been
dishonored.
Right of an unpaid seller against the goods
An unpaid seller has the following rights against the goods:a) Right of Line
b) Right to stoppage-in-transit
c) Right of re-sale; and
d) Right to withhold delivery.

45. Right of Lien: An un paid seller, in possession of goods sold, may
exercise his lien on the goods, i.e., keep the goods in his
possession and refuse to deliver them to the buyer until payment
of the price.
An unpaid seller is entitled to lien in the following three case,
namely:i. Where goods have been sold without any stipulation as to credit;
ii. Where goods have been sold on credit, but the term of credit has
expired;
iii. Where the buyer become insolvent.

46. The right of lien is lost in the following three cases:
i. When the seller delivers the goods to a carrier or other bailee for
the purpose of transmission to the buyer, without reserving the
right of disposal of the goods;
ii. When the buyer or his agent lawfully obtains possession of the
goods;
iii. When the unpaid seller waives his right of lien.
Where an unpaid seller has made a part delivery of the goods, he
may exercise his lien on the remainder; unless such part delivery
has been made under such circumstances as to show an
agreement to waive the lien

47. Right of stoppage-in-transit:
An unpaid seller has the right of stopping the goods in transit,
after he has parted with their possession to a carrier. Thus, right
to stoppage-in-transmit means right of stopping the goods while
they are in transit, resuming possession of them and retaining
possession until payment of the price
The right is exercisable by unpaid seller, only if the following
condition are fulfilled
1.The seller must have parted with the possession of the goods
2.The goods must be in transit; and
3.The buyer must have become insolvent.

48. Duration of transit:
The goods are in transit form the time they are delivered to
a carrier or other bailee, for the purpose of transmission to
the buyer, and until the buyer takes the delivery of them.
The transit comes to an end in the following cases:1.
2.
3.
If the buyer obtains delivery before arrival of the goods at
their destination.
If after the arrival of the goods at their destination, the
carrier acknowledges to the buyer that he holds the goods
on his behalf:
If the carrier wrongfully refuses to deliver the goods to the
buyer.

49. Right to Re- Sale:
An unpaid seller may re- sell the goods in the following cases:1. Where the goods are perishable
2. Where the right of re- sale is expressly reserved in the
contract
3. Where in exercise of the right f lien or stoppage in transit,
the unpaid seller gives notice to the buyer of his intension
to re -sell, and the buyer does not pay the price within a
reasonable time.

50. If on re-sale, there is a deficiency between the price due and
the amount realised, the seller is entitled to recover it from
the original buyer. If there is a surplus, he can keep it. The
seller will have these rights, only if he has given notice to the
original buyer. Thus, if the notice of re sale has not been given
to the original buyer, then seller can neither ask for the deficit
amount nor is he entitled to keep the surplus.
Right to Withhold delivery:
Where the property in goods has not passed to the buyer, an
unpaid seller has a right of withholding delivery of goods;
similar to and co-extensive with his rights of lien and
stoppage in transit, where the property in goods has passed
to the buyer.

51. Distinction between ‘Right of Lien’ and ‘ Right
of Stoppage in – transit’
Basis of
distinction
Right of Lien
Right of
Stoppage in
transit
Possession of
Goods
The goods must be
in actual
possession of the
seller
The goods must be
in the possession
of a carrier or
other bailee who
is acting as an
independent
person

52. Basis of
distinction
Right of Lien
Right of
Stoppage in
transit
Solvency
The Right can be
exercised even
when the buyer is
solvent but refuses
to pay the price
The Right can be
exercised only when
the buyer has
become insolvent.
End vs
Commencement
delivery to carrier
The Right comes to
an end when the
seller delivers the
goods to the carrier
This Right
commences only
when the seller
delivers goods to a
carrier

53. Basis of
distinction
Right of Lien
Right of
Stoppage in
transit
Purpose
The purpose of the
Right is to retain
possession of the
goods
The purpose of this
right is to regain the
possession of the
goods
Mode of exercising
the Right
This Right can be
exercised by the
seller himself
This Right can be
exercised by the
seller through the
carrier or the other
bailee

54. Right of an unpaid seller against the buyer personally:
a)
b)
An unpaid seller has the following right against the buyer
personally:Suit for the price;
Suit for the damages
Suit for the price : an unpaid seller may sue the buyer for the
1.
price of the goods in the following case:Where the property in goods has passed to the buyer.
2.
Where the price is payable on a certain day, even if the
property in the goods has not passed;
3.
Where the buyer has wrongfully neglected or refused to pay
according to the terms of the contract

55. Suit for the damages: An unpaid seller may sue the buyer for
damages for non-acceptance, if the buyer wrongfully neglects or
refuses to accept and pay for the goods.