Law of Sale of Goods
Law of Sale of Goods
2.1 Definitions
Sale of Goods:
A contract whereby the seller transfers or agrees to transfer the ownership
(property) in goods to the buyer for a price.
➡ Defined under Section 4(1) of the Sale of
Goods Act, 1930.
Goods:
Every kind of movable property other than actionable claims and money. Includes
stock, shares, crops, etc.
➡ Defined in Section 2(7).
Buyer:
A person who buys or agrees to buy goods. (Section 2(1))
Seller:
A person who sells or agrees to sell goods. (Section 2(13))
Price:
The money consideration for a sale of goods. (Section 2(10))
Contract of Sale:
Includes both a sale (ownership transferred immediately) and an agreement
to sell (ownership to be transferred in the future or upon certain
conditions).
2.2 Formation of the Contract
A contract for the sale of goods must fulfill the essentials
of a valid contract under the Contract Act, 1872:
Essentials:
- Offer
and Acceptance
- Lawful
Consideration – Price
- Capacity
of Parties
- Free
Consent
- Lawful
Object
Types of Contracts:
- Sale
– Immediate transfer of property
- Agreement
to Sell – Future transfer of property (Section 4(3))
Modes of Contract:
- Written
- Oral
- Implied
from conduct
Example:
A agrees to sell his laptop to B for Rs. 50,000. This is a
sale.
If A agrees to sell it after a month, it is an agreement to sell.
2.3 Effects of the Contract
Transfer of Ownership (Property):
- The
most important effect.
- Ownership
passes when parties intend it to pass (Section 19).
- Risk
follows ownership. If goods are destroyed after transfer, the buyer bears
the loss.
Passing of Risk:
- When
ownership is transferred, the risk of loss or damage also transfers
(Section 26).
Delivery of Goods:
- Actual,
symbolic, or constructive.
- Time
of delivery may affect ownership transfer.
2.4 Performance of the Contract
Duties of the Seller:
- Deliver
the goods as per contract terms.
- Ensure
goods correspond to description or sample.
- Pass
good title.
Duties of the Buyer:
- Accept
delivery.
- Pay
the agreed price.
- Take
reasonable steps to receive delivery.
Time and Place of Delivery:
- Time
is not “of the essence” unless specified.
- Place
of delivery is seller’s business location unless agreed otherwise.
Example:
If a seller delivers goods late but the buyer accepts, the
buyer cannot later reject unless time was of the essence.
2.5 Rights of Unpaid Seller Against the Goods
An unpaid seller is one who has not received full
payment for the goods sold.
Rights Against the Goods:
- Right
of Lien – Retain goods till payment.
- Right
of Stoppage in Transit – Stop goods in transit if buyer becomes
insolvent.
- Right
of Resale – Resell the goods after notice.
Rights Against the Buyer Personally:
- Suit
for Price
- Suit
for Damages
- Suit
for Interest
Example:
A sold goods worth Rs. 10,000 to B. B failed to pay. A, being unpaid, can
retain goods, stop delivery, or resell.
2.6 Sale by Auction
Sale where goods are sold to the highest bidder in a public
bidding process.
Rules of Auction Sale (Section 64):
- Each
lot is a separate contract.
- Sale
is complete when the auctioneer announces by fall of the hammer.
- The
seller can set a reserve price (minimum).
- Pretended
bidding to raise price is illegal.
Example:
If A is the highest bidder and the auctioneer strikes the hammer, a valid sale
contract is formed.
2.7 Breach of Contract
Breach occurs when either party fails to perform
obligations.
Types of Breach:
- Actual
Breach – Failure to perform on due date.
- Anticipatory
Breach – Declaration of non-performance before the due date.
Remedies Available:
- Damages
for non-delivery or non-acceptance
- Specific
performance (court order)
- Right
to reject goods
- Suit
for price
Example:
If B refuses to pay after A delivers goods, A may sue B for price and damages.
Conclusion / Summary:
|
Topic |
Key Point |
|
Definition |
Transfer of ownership in goods for a price |
|
Formation |
Needs valid contract conditions |
|
Effects |
Ownership and risk transfer |
|
Performance |
Duties of buyer and seller |
|
Unpaid Seller |
Has lien, stoppage, and resale rights |
|
Auction |
Sale goes to highest bidder under rules |
|
Breach |
Legal remedies available |
