Sale Of Goods Act 1930

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 Sale Of Goods Act 1930

 The Act repeals and replaces Sec. 76 to 123

of the Indian Contract ,1872 which was
adequate for their time, but by 1930, clearly
needed amendments as a result of the
development of modern commerce.

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 Sec. 2 - Definition
1. Buyer – means a person who buys or agrees to buy goods
2. Delivery – means voluntary transfer of possession from one
person to another
3. Deliverable state – goods are said to be in deliverable state
when they are in such state the buyer would under the
contract be bound to take delivery of them.
4. Documents of title to goods – includes a bill of lading, dock
warrant, warehouse keepers certificate, Wharfingers
certificate, railway receipt, multimodal transport document,
warrant of order for the delivery of goods and any other
document used in ordinary course of business as a proof of
possession or control of goods, or authorising either by
endorsement or by delivery, the possessor of the document
to transfer or receive the goods.

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Sec. 2 - Definition
5. Fault – means wrongful act or default
6. Future goods – means any goods to be manufactured
or produced acquired by the seller after the making of
the contract of sale.
7. Goods – means every kind of moveable 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
served before sale or under contract of sale.
Standing timber is moveable property if under the
contract of sale they are to be severed.

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Sec. 2 - Definition
8. A person is said to be “insolvent” who has ceased to
pay his debts in the ordinary course of business, or
cannot pay his debts as they become due, whether he
has committed an act of insolvency or not;

9. Mercantile Agent means a mercantile agent having in

the customary course of business as such agent
authority either to sell goods or to consign goods for
the purpose of sale, or to buy goods, or to raise money
on the security of the goods

14. Specific goods means goods identified and agreed

upon at the time a contract of sale is made

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Section 4 – Sale and Agreement to Sale
1. The 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. There may be a contract
of sale between one part owner and another.
2. A contract of sale may be absolute or conditional.
3. Where under a contract of sale the property in the
goods is transferred from the seller to the buyer, the
contract is called a sale, but where the transfer of
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 sell.
4. An agreement to sell becomes a sale when the time
elapses or all the conditions are fulfilled subject to
which the property in the goods is to be transferred.

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Section 4 – Sale and Agreement to Sale
 Examples:
 Agreement by A to buy 20 tonnes of oil from the seller’s
cisterns (tank). The seller has many cisterns, with more
than 20 tonnes in them. This is merely an agreement to
sale. (White Vs Wilks, 1813)
 A customer who picks up goods in a self-service shop is
merely offering to buy them and the sale is not complete
until they are paid for. (Pharmaceutical Society Vs Boots,
1952)
 One co-owner may sell to another and therefore a
partner may sell to his firm and the firm may sell to a
partner.

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 Essential Requisites of Sale

In the case of (State of Madras Vs Gannon Dunkerley and

Company Limited, 1958) the Supreme Court has held that
in order to constitute a sale,
 it is necessary that there should be an agreement between the
parties for the purpose of transferring title to goods,
 which of course presupposed capacity to contract,
 that it must be supported by money consideration,
 that as a result of transaction, the property must actually pass in
the goods.
Unless all these elements are present there would be no
sale.

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 The essential object of the contract of sale is the exchange
of property for a money price. There must be a transfer of
property or an agreement to transfer it, from one party, the
seller, to the other, the buyer, in consideration of a money
payment or of a promise thereof by the buyer. To
constitute a transaction of sale, there should be an
agreement, expressed or implied relating to goods to be
completed by passing of title in those goods. It is the
essence of the concept that both the agreement and the
sale should relate to the same subject matter.
 An allotment of goods amongst partners on a dissolution
between partners is not a sale. Exchange of property for
something other than money is not a sale.
 In the case of State of Himachal Pradesh V/s. Associated
Hotel of India Ltd. AIR 1972 SC1131 – it was held, that
there is no sale when food and drinks are supplied to
guests residing in a hotel, the supply of meals being
essentially in the nature of services provided to them
which, could not be identified as a transaction of sale.
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Statutory Transactions – Whether Sale

In the case of M/s. Vishnu Agencies (Pvt). Ltd. V/s. Commercial

Tax Officer Eluru AIR 1978 S.C. 449,
When essentials goods are in short supply, various types of
orders are issued under the Essential Commodities Act, 1955,
with a view to making the goods available to the consumer at a
fair price. Such orders may lay down the requirements of holding
a licence for dealing in the commodity and getting a permit for
obtaining the commodity. The permit holder can obtain the
supply of the essentials goods, to the extent of quantity for which
permit is granted, from the named dealer at a controlled price.
The question which came up before a seven bench judge of the
Supreme Court was whether such a transaction amounts to a
sale in the language of the law.

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Statutory Transactions – Whether Sale
The Supreme Court held that
A sale is necessarily a consensual transaction and if the parties have
no volition or option to bargain, there can be no sale, the limitation on
the normal right of dealers and consumers to supply and obtain the
goods, the obligation imposed on the parties and the penalties
prescribed by the Control Order did not militate against the position
that eventually the parties must be deemed to have completed the
transaction under an agreement by which one party bound itself to
supply the stated quantity of goods to the other at a price not higher
than the notified price and the other party consented to accept the
goods on the terms and conditions mentioned in the permit or the
order of in its favour by the concerned authority. Since it is not
obligatory on a trader to deal in such essential commodity strictly in
the terms of the Control Orders is volitional and the customer too on
his own volition decides to obtain the commodity on the terms of the
permit or the order of allotment issued in his favour. The parties enter
into such transaction with their free consent. It is therefore not correct
to say that the transaction between the dealers and the allottees are
not consensual.

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Sale and Contract of Work and Material

 A contract of sale has to be distinguished from a contract

involving the exercise of skill and labour on some material.
In the case of Robinson V.s. Graves, 1935
The defendant orally commissioned the plaintiff, an artist, to paint
the portrait of a lady, and subsequently repudiated the contract
before the portrait was complete. In an action by the Plaintiff for
the agreed price, it was held to be a contract of work and labour.
The painter recovered.
The Court said “ in such cases the proper test is to see whether
work is of the essence of the contract. In case of work of art,
whether in gold, silver, marble, or plaster, where the application
of skill and labour is of the highest description, the material is of
no importance as compared to labour, the price may be
recovered as for work and labour.

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Sale and Contract of Work and Material

 There have been conflicting judgments on the point whether a

particular transaction is to be treated as a contract of sale of
goods or a contract of work.
 A contract to take and supply photograph, to provide food in a
restaurant, to make a mink jacket, to build ships, to prepare
medical prescriptions and a contract to construct bus bodies
have all been held to be contracts of sale of goods. On the other
hand a contract for providing and fixing four different types of
windows of certain size according to “ specifications, drawings
and instructions” set out in the contract and a contract for
fabrication, supply, erection and installation of tow types of rolling
shutters to be manufactured according to the specifications,
drawings, designs and instructions and also to be erected and
installed at the premises, have been held by the S.C. to be
contracts of work and not of sale.

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 Sale and Agreement to Sell
The Supreme Court distinguished these two classes of contract –thus
An agreement to sell is a contact pure and simple whereas a sale is a
contract plus conveyance. By an agreement to sale a jus in personam
is caused, by a sale a jus in rem also is transferred. Where goods
have been sold and the buyer makes default, the seller may sue for
the contract price on the count of ‘goods bargained and sold’ but
when an agreement to buy is broken, the seller’s normal remedy is an
action for unliquidated damages. If an agreement to sell be broken, by
the seller, the buyer has only a personal remedy against the seller.
The goods are still the property of the seller, and he can dispose of
them as he likes, but if there has been a sale and a seller breaks his
engagement to deliver the goods, the buyer has not only a personal
remedy against the seller but also the proprietary remedies in respect
of the goods themselves. In many cases, too, he can follow the goods
into the hands of third parties. Again, if there be an agreement of sale,
and the goods are destroyed, the loss as a rule falls on the seller,
while if there has been a sale, the loss as a rule falls up on the buyer
though the goods may have never come to his possession. (The
Instalment Supply Limited Vs STO Ahmedabad and others,
1974.)
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 Sale and Hire Purchase
 A hire purchase agreement entitles the hirer only to
possession of the goods. He cannot pass a good
title to any buyer from him. But a person who
receives possession under an agreement to buy is
able to pass a good title to a bonafide purchaser
from him.
 A hirer cannot claim the benefit of implied conditions
and warranties created by the Act unless it becomes
a sale.
 A contract of hire purchase is a contract by which
the hirer is granted an option to buy but is not, as
under a contract of sale under a legal obligation to
do so.

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 Sale and Hire Purchase
 The basis of distinction between the Sale and Hire purchase
was explained by the House of Lords in the case of Helby V/s.
Matthews
 Helby let a piano on hire to Brewster on the following terms:
1. Brewster should pay 10s 6d every month
2. Should he punctually pay 36 monthly instalments, the piano
should become his property, until then it should continue to be
the property of Helby.
3. Brewster has the right to terminate the hire at any time by
returning the instrument to Helby.
 After paying a few instalments Brewster pledged the
instruments with the defendant Matthews, who acted in good
faith. Helby sued Mathews to recover the instrument.
 It was held that Brewster could not do so. Brewster was not in
possession having agreed to buy the piano, but under a hire
purchase agreement and therefore had no right to pledge.

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 Contract of Sale - how made
Section 5: Contract of Sale - how made
1. A contract of sale is made by an offer to buy or sell
goods for a price and the acceptance of such
price.
A contract may provide for the immediate delivery
of goods or immediate payment of the price or
both, or for the delivery or payment by instalments.
or that the delivery of payments or both shall be
postponed.
2. Subject to the provisions of any law for the time
being in forced, a contract of sale may be in writing
or by the word of mouth or may be impliedly or
may be implied from the conduct of the parties.

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 Contract of Sale - how made
 A statement or conduct inviting the making of an offer
such as by display of goods in a shop does not buy itself
bind the shopkeeper to accept the customer’s offer even
at the price displayed or advertised. Such invitation to
treat therefore differs from an offer, which is intended to
be binding on the person making it and is capable of
being accepted without any further negotiation.
 Where, however, the accessibility to goods in intended to
an offer capable of acceptance by customer’s act such
as filling the petrol tank of a car from a self service pump
or choosing items in a self service shop or taking goods
intended for sale for an automatic vending machine the
question of obtaining seller’s assent does not arise.

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 Contract of Sale - how made

 Earnest – A buyer may give the seller money

or a present as a token or evidence of
bargain quite apart from the price i.e. earnest,
or he may give him part of the agreed price to
be set off against the money to be finally paid
i.e. part payment.
 If the buyer fails to carry out the contract and
it is rescinded, he cannot recover the earnest
but may recover the part payment.

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 Existing or future goods.-
According to Sec. 6
(1) The goods which form the subject of a contract of
sale may be either existing goods, owned or
possessed by the seller, or future goods.
(2) There may be a contract for the sale of goods the
acquisition of which by the seller depends upon a
contingency which may or may not happen.
(3) Where by a contract of sale the seller purports to
effect a present sale of future goods, the contract
operates as an agreement to sell the goods.

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 Existing or future goods.-
 The statutory definition of ‘future goods’ refers to goods to be
manufactured or produced or acquired by the seller after the
making of the contract of sale.
These would include
a. Goods to be manufactured by the seller, whether from material
now in existence or not.
b. Goods which are to become or may become, property of seller
whether by purchase, gift, succession or otherwise
c. Goods expected to come into existence as the property of the
seller in ordinary course of nature e.g. milk to be produced of
his cows or the young to be born to livestock,
d. Things attached to or forming part of any land which are to be
severed

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 Goods perishing before making of
contract
According to Sec. 7 - Where there is a
contract for the sale of specific goods, the
contract is void if the goods without the
knowledge of the seller have, at the time
when the contract was made, perished or
become so damaged as no longer to answer
to their description in the contract.

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 Goods perishing before making of
contract
 The rule applies subject to the following conditions
1. The contract must be for the sale of “specific goods”. Specific
goods means goods identified and agreed upon at the time a
contract of sale is made.
2. They must have perished before the contract is made and
without the knowledge of the seller.
For example
a sale of cargo of goods is void if unknown to the seller the
goods have, before the contract, become heated and sold at an
intermediate port or destroyed before loading by flood.
sale of 700 bags of nuts, identified by marks, lying in a named
warehouse. Unknown to the seller before the sale, 109 of the
bags had been stolen. The sale is void and the buyer cannot
be compelled to take the remainder.

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 Goods perishing before sale but
after agreement to sell.
 According to Sec. 8 - Where there is an
agreement to sell specific goods, and
subsequently the goods without any fault on
the part of the seller or buyer perish or
become so damaged as no longer to answer
to their description in the agreement before
the risk passes to the buyer, the agreement is
thereby avoided.

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 Goods perishing before sale but
after agreement to sell.
An agreement to sell specific goods becomes void if subsequently the
goods without the fault of the seller or buyer, have perished or
become so damaged as to no longer answer their description in the
agreement, provided this happens before the risk has passed to the
buyer.
For example -Contract for the sale of a horse on the condition that the
buyer should have it for 8 days for trail and be at liberty to return it at
the expiration of that period if he did not find it suitable. The horse
dies without any fault on the part of either party 3 days after it has
been delivered to the buyer for trial. The contract is avoided.
In the case of Howell V/s. Coupland, the defendant agreed to sell to
the plaintiff 200 tons of potatoes to be grown on the land belonging to
the defendant. The defendant sowed sufficient land to grow more
than 200 tons, but without any fault in him, a disease attached the
crop and he was able to deliver only about 8 tons. The agreement
was held to become void.

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 Goods perishing before sale but
after agreement to sell.
 Justice Mellish observed
This is not like the case of contract to deliver so
many goods of a particular kind, where no specific
goods are to be sold.
Here there was an agreement to sell and buy 200
tons out of crop to be grown on specific land, so that
it is an agreement to sell what will be and may be
called specific things, therefore neither party is liable
if the performance becomes impossible.

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 Ascertainment of price
According to Sec. 9 - the price in a contract of sale
may be fixed by the contract or may be left to be
fixed in manner thereby agreed or may be
determined by the course of dealing between the
parties
Where the price is not determined in accordance
with the foregoing provisions, the buyer shall pay
the seller a reasonable price. What is a reasonable
price is a question of fact dependent on the
circumstances of each particular case.

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 Ascertainment of price
 In the case of M.S. Madhusoodhanan V/s. Kerala Kaunmadi (P)
Ltd. AIR 2004 SC 909
where certain shares were transferred for a consideration which
was left to be determined at a later date, the Supreme Court held
that such transfers were not void by reason of uncertainty. The
court observed “the expression intention in this case was to effect
an immediate transfer of the shares and to agree upon the
consideration later. The first stage of the agreement for the
immediate transfer of shares was executed. The question as to
what would be reasonable price for the shares, the mode of its
determination and whether any consideration has already been
paid by the transferee to the transferor were to be considered
subsequently. Sec.9 permits this. Sec. 9 allows the parties not to
fix the price at the time of sale and to leave it to a later date. An
agreement which provides for future fixation of price either by the
parties themselves or by a third party is capable of being made
certain and is not invalid under Sec. 29 of the Indian Contract Act”.

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Agreement to sell at valuation
According to Sec. 10 - Where there is an agreement
to sell goods on the terms that the price is to be
fixed by the valuation of a third party and such third
party cannot or does not make such valuation, the
agreement is thereby avoided.
Provided that, if the goods or any part thereof have
been delivered to, and appropriated by, the buyer,
he shall pay a reasonable price therefor.
Where such third party is prevented from making the
valuation by the fault of the seller or buyer, the party
not in fault may maintain a suit for damages against
the party in fault.

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 Conditions and Warranties

Sec. 11 - Stipulation as to time –

 Unless a different intention appears from the terms of
the contract, stipulation as to time of payment are not
deemed to be of the essence of a contract of sale.
 whether any other stipulation as to time is of the
essence of the contract or not depends on the terms
of the contract.

Thus time of payment is not a condition of the contract

unless the parties make it so by their contract.

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 Stipulation as to time of payment

 In the case of Martindale V/s. Smith, the defendant

sold the plaintiff some stacks of oats, then on the his
ground, under a written agreement by which the
plaintiff was to have liberty to leave the stacks on
the ground for 4 months and was to pay for them in
12 weeks. On the expiry of 12 weeks the buyer
failed to pay and asked for further time which the
seller refused to grant. Later the buyer tendered the
price, but the seller refused at accept. The seller
was held liable to the buyer in an action for recovery
of damages for wrongful taking of property .

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 Stipulations as to time of payment
 As punctual payment does not go to the whole consideration of the
sale, the failure by the buyer to pay on the appointed day does not
as a rule, entitle the seller to treat the contract as repudiated, though
he may be entitled to withhold delivery until the price is paid and to
resell the goods if the buyer does not pay or tender the price within a
reasonable time. Consequently, if before such resale the buyer
tenders the price, even though it be on a date after the date named
in the contract the seller cannot, in the absence of a stipulation to
the contrary, treat the contract as at an end and refuse to allow the
buyer to have the goods. The time cannot be taken to be the
essence of the contract in case where the contract itself does not
stipulate the time for payment of the price.
 Where by their contract the parties contemplate time of payment to
be of the essence of the contract, a failure to pay in time entitles the
seller to treat the contract as repudiated and sue the buyer in
damages.
 In the case of Ryan V.s. Ridley & Co. 1902 where C.I.F contract
provided for payment in cash in London on delivery of bill of lading
and insurance policy, the buyer’s failure to pay amounted to
repudiation entitling the seller to damages.

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 Stipulations as to time of performance
of other terms
 If a man orders a suit of clothes, a promise by the tailor
that he shall have it by a certain date would not,
generally speaking, be of the essence of the contract,
though it might be if he was ordering court dress for the
purpose of attending a court on a particular day. But in
the case of commercial contracts, although occasionally
stipulations as to time may not be of the essence, the
usual rule is that they are.
 The principal adopted by the courts is that “in ordinary
commercial contract for the sale of goods the rule clearly
is that time is prime facie of the essence with respect to
delivery. The reason is obvious. A mercantile contract is
not always an isolated transaction, but a link in a chain of
transactions so that punctual performance may go to the
whole consideration of sale.
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 Stipulations as to time of
performance of other terms
 Time is considered to be of the essence in
the following cases
1. Where the parties have expressly agreed to
treat it as of the essence,
2. Where the delay operates as an injury
3. Where the nature and necessity of the
contract require it to be so construed.

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 Stipulations as to time of
performance of other terms
 In Charles Richards Ltd. V/s. Oppenhaim, 1950, the
seller agreed to supply a Rolls Royce chassis to be
ready at the latest by March 28th 1948. It was not
ready on this day. It was on June 29th that the buyer
lost his patience and prescribed July 25th as the final
date of delivery after which he would not accept.
The chassis was offered for delivery on 18th
October. The buyer refused to accept. The Court of
Appeal held that he was entitled to reject. He had
given the seller a reasonable notice prescribing new
time for delivery. Thereafter he was entitled to
refuse.

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 Stipulations as to time of
performance of other terms
 If the seller happens to do his work earlier than the
stipulated time, even that may be a ground of
rejection irrespective of the fact whether or not the
buyer has suffered any damage.
 In the case of Browes V/s Shand, 1877, in a
contract to deliver Madras rice during the month of
March and / or April, the bulk of the rice was in fact
shipped at the end of February and only 1/8th was
shipped during March. The House of Lords held that
the buyer were entitled to reject the goods. There
was no difference in the quality of the goods and the
buyer has suffered no loss.

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 Waiver of the stipulations
 Stipulations as to time may be waived by the
party in whose favour they are inserted either
expressly or by implication, and if he does so
he cannot afterwards treat the failure to comply
with them by other party as giving a right to
rescind the contract. There can, strictly
speaking, be no waiver after breach, but to
accept goods, though delivered late, is often
spoken of as a waiver of the right of action
which the breach has given.

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 Section 12. Condition and Warranty

1. A stipulation in a contract of sale with reference to goods

which are subject thereof may be a condition or a
warranty.
2. A condition is a stipulation essential to the main purpose
of the contract, the breach of which gives rise to a right to
treat the contract as repudiated.
3. A warranty is a stipulation collateral to the main purpose
of the contract, the breach of which gives rise to a claim
for damages but not to a right to reject the goods and treat
the contract as repudiated.
4. Whether a stipulation in a contract of sale is a condition or
a warranty depends in each case on the construction of
the contract. A stipulation may be a condition, though
called a warranty in the contract.

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 1. Express Conditions
 The parties if they wish, may put the contents of any
particular statement or promise which passes between
them on the same footing as the description of the thing
contracted for, so that if it is not made good by the party
undertaking it, the failure is deemed to be a total failure
of the performance, and the other is at least wholly
discharged, and may in addition recover damages for
such failure of performance. This is a condition in the
proper sense, as defined in sub Sec. (2). In the usual
sense, the condition means an essential undertaking in
the contract which one party promises will be made
good. If it is not made good, not only will the other party
be entitled to repudiate the contract, but also to sue for
damages for breach.

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 1. Express Conditions
 In the case of Baldry V/s. Marshall, the plaintiff consulted a motor
dealear the defendant, for a car suitable for the purpose of
touring purpose. The defendant suggested that a “Bugatti” car
would be appropriate and the plaintiff accordingly brought one.
The car turned out to be unfit for touring purposes and the
plaintiff sought to reject it. The defendant relied upon the term in
the contract which guaranteed the car for two months against
mechanical defects and excluded every other guarantee or
warranty.
 It was held that the suitability of the car for touring purposes was
not a guarantee or warranty, but a condition of the contract. The
term was so vital that its non fulfillment defeated the very
purpose for which the Plaintiff brought the car. He was therefore,
entitled to reject and have refund of the price.

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 2. Express Warranties
There may also be, and there occur in common practice, auxiliary
promises or undertakings of which the breach is not intended to avoid the
contract, but only to give a remedy in damages. These are warranties in
the proper sense, as defined in sub-s (3). Whether a statement is to be
regarded as warranty must be objectively ascertained by asking whether
adopting the standard of a reasonable man, the other party assumed that
the representor was to be regarded as undertaking legal liability for his
assertions. The importance of the statement, the relative knowledge and
means of knowledge of the parties, and the possibility of verification are
the relevant factors which would indicate whether the statement is a
warranty. Thus, statements may be warranties when made by dealers,
though they would not be warranties if made by private sellers; for the
dealers may be in possession of special knowledge, expertise and means
of information not available to ordinary persons.
In the case of Harrison V/s. Knowles and Foster, the plaintiff bought two
small ships from the defendant relying upon particulars furnished by the
Defendant that the dead weight capacity of each ship was 460 tons. The
capacity was if fact only 360 tons. The Plaintiff sought to reject the ships.
It was held that the representation of capacity was not a condition but a
warranty, for which the plaintiff could have sued in damages.

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 3. Representations
 An affirmation as regards the goods, if it is to have contractual
effect, must be part of the contract; if it is not, it is only a
representation, the untruth of which will not, in the absence of
fraud, give rise to an action an for damages, though it may
enable the other party to rescind the contract and sometimes
a representation may amount to a condition precedent to the
formation of the contract, so that if be untrue, the other party
is discharged from all liability. It depends upon the intention of
the parties whether an affirmation made at the time of, or
during the negotiations for sale, is to be treated as a
condition, a warranty or a mere representation: and although
an assertion made by the seller of a fact unknown to the
purchaser may be strong evidence that it was intended as a
warranty. If the representation does not form part of the
contract, that is, if it is neither a condition nor a warranty, it
amounts to an expression of opinion not intended to enter the
bargain and its no fulfilment does not give rise to any right to a
legal action.

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 4. Implied Conditions and Warranty
 Although the parties may have used no expressed words that
would create such a stipulation, the law annexes to many
contracts conditions, the breach of which may be treated by
the buyer as avoiding the contract or given a right to
damages. These are called as implied conditions and are
enforced on the grounds that the law infers from all the
circumstances of the case, that the parties intended to add
such a stipulation to their contract, but did not put it into
expressed words.
 Most of the statutory implied terms as to sellers duties as to
title, conformity with description and quality, terms designated
as conditions by the contract itself, terms similar to those or
already treated as conditions in another case, time clauses in
mercantile contracts where breached of term is to be treated
as giving right to treat the contract as discharged are
considered as terms likely to be treated as conditions.

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 5. Puffs

A mere puff is a vague and extravagant statement so

preposterous in its nature that nobody could believe that
anyone was misled by it. The extent to which a
statement may be so categorised depends on the
degree or obviousness of its untruth, the circumstances
of its making and in particular on the expertise and
knowledge attributable to the person to whom it is made.

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 Section 13 : When condition to be
treated as warranty,
1. Where a contract of sale is subject to any condition to be
fulfilled by the seller, the buyer may waive the condition or
elect to treat the breach of the condition as a breach of
warranty an not as a ground for treating the contract as
repudiate.
2. Where a contract of sale is not severable and the buyer has
accepted the goods or part thereof, or where the contract is
for specific goods, the property in which has passed to the
buyer, the breach of any condition to be fulfilled by the seller
can only be treated as a breach of warranty and not as
ground for rejecting the goods and treating the contract as
repudiated unless, there is a term of a contract, expressed or
implied to that effect

45
 Implied undertaking as to tile
In a contract of sale, unless the circumstances of the contract
are such as to show a different intention there is-
a) an implied condition on the part of the seller that, in the case of a
sale, he has a right to sell the goods and that, in the case of an
agreement to sell, he will have a right to sell the goods at the
time when the property is to pass.
b) an implied warranty that the buyer shall have and enjoy quiet
possession of the goods.
c) an implied warranty that the goods shall be free from any charge
or encumbrance in favour of any third party not declared or
known to the buyer before or at the time when the contract is
made.
 Sale by description

 Where there is a contract for the sale of

goods by description, there is an implied
condition that the goods shall correspond
with the description, and, if the sale is by
sample as well as by description, it is not
sufficient that the bulk of the goods
corresponds with the sample if the goods do
not also correspond with the description.
Implied condition as to quality or fitness
There is no implied warranty or condition as to the quality or
fitness for any particular purpose of goods supplied under a
contract of sale, excepts as follows:-
1. Where the buyer, expressly or by implication, makes known to
the seller the particular purpose for which the goods are
required, so as to show that the buyer relies on the seller’s skill
or judgement, and the goods are of a description which it is in the
course of the seller’s business to supply (whether he is the
manufacturer or producer or not), there is an implied condition
that the goods shall be reasonably fit for such purpose.
2. Where 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.
If the buyer has examined the goods, there shall be no implied
conditions as regards defects which such examination ought to
have revealed.
 Sale by sample
A contract of sale is a contract for sale by sample
where there is a term in the contract, express or
implied, to that effect.
In the case of a contract for sale by sample there is
an implied condition -
a) that the bulk shall corresponded with the sample in
quality.
b) that the buyer shall have a reasonable opportunity
of comparing the bulk with the sample.
c) that the goods shall be free from any defect,
rendering them un-merchantable, which would not
be apparent on reasonable examination of the
sample.
 Transfer of Property as Between Seller
and Buyer
Section 18 – Goods must be ascertained
 Goods must be ascertained: where there is
contract for the sale of unascertained goods, no
property in the goods is transferred to the buyer
unless and until the goods are ascertained
1. Property cannot pass until the goods are identified
2. Part of a specific whole
3. Property and risk
4. Identification of goods

50
 1. Property cannot pass until the
goods are identified
 It is a condition precedent to the passing of the property in
every case that, the ‘individuality of the thing to be delivered’
should be established. It is essential that the article should
be specific and ascertained in a manner binding on both the
parties, for unless that be so, the contract cannot be
construed as contract to pass the property in that category.

 Where according to the terms of the contract, the seller was

to supply waste coal ash as and when it was discharged
from the bunkers of the powerhouse, it was held that the
contract was for the sale of unascertained goods and,
therefore no property passed to the buyer till the goods
were ascertained. (Tej Singh Vs State of Uttar Pradesh
and others 1981)

51
 2. Part of a specific whole
 Mere fact that an order for the delivery is given by the
seller to the buyer, and is lodged by the buyer with a
warehouseman, who holds the specified larger stock
out of which the goods sold are to be taken, is not
sufficient to transfer the property to the buyer. (Laurie
& Morewood Vs. Dudin & sons 1926) Thus, where
the ascertainment of the goods depends upon their
being separated from the bulk by the seller or a third
party or the buyer, by their being severed, weighed or
measured or some other process, no property can
pass until this is done (National Coal Board Vs.
Gamble 1959)

52
 3. Property and Risk
 The risk usually passes with the property, but may pass
independently of it. Thus, acceptance of the delivery
warrant for a certain quantity of spirit out of a larger bulk
which was liable to deteriorate in storage was held to put
the risk of deterioration on the buyer, although he had
acquired, not property but only undivided interest in the
whole bulk.

53
 4. Identification of the goods
 The contract itself may provide that the property shall pass on
the happening of some specified event, sufficient to identify the
goods.

 In State of Karnataka Vs. The West Coast Paper Mills Ltd.

AIR 1986 it was held that where under a contract a company was
permitted to remove bamboos from the forest area at Rs.10 /- per
ton, and the government by a subsequent order enhanced the
price to Rs.20/- per ton, it was held that the enhanced rate was
not applicable to the bamboos cut although not removed prior to
the date of the government order, because on the bamboos
being cut and extricated, the goods being ascertained and in a
deliverable state, the property had passed to the company.

54
 Section 19. Property passes when
intended to pass
1. Where there is a contract for the sale of
specific or ascertained goods the property in
them is transferred to the buyer at such time
as the parties to the contract intend it to be
transferred.
2. For the purpose of ascertaining the intention
of the parties regard shall be had to the
terms of the contract, the conduct of the
parties and circumstances of the case.

55
 Ascertained goods
 Then term ‘ascertained goods’, which also occurs
in Section 58, is not defined by the Act. It is,
however, clear that the words ‘specific goods’ bear
the meaning assigned to them in the definition
clause, ‘goods identified and agreed upon at the
time a contract of sale is made.’ Ascertained’
probably means ‘identified in accordance with the
agreement after the time a contract of sale is
made’. Where teak trees to be cut were of more
than 12 inches girth, it was held that, till it was
ascertained as to which trees fell within the
description they were not ascertained goods. Badri
Prasad Vs. The State of Madhya Pradesh AIR
1970 SC.

56
 Section 20 Specific goods in a
deliverable state
 Where there is an unconditional contract for the sale of
specific goods in a deliverable state, the property in the goods
passes to the buyer when the contract is made, and it is
immaterial whether the time of payment of or the time of
delivery of goods, or both, is postponed.
 Examples

This section may be illustrated by the following examples:

1. Sale on the 4th January of a haystack on the seller’s land at
the price of £145 to the paid on the 4th February, the hay to
be allowed to remain on the seller’s land until the 1st May: no
hay to be cut until the price was paid. The property in the
haystack passed on the making of the contract and on the
stack being destroyed by fire, the buyer must bear the loss
Tarling Vs. Baxter (1827)

57
 Section 21 Specific goods to be put
into a deliverable state
 Where there is a contract for the sale of specific goods and
the seller is bound to do something to the goods for the
purpose of putting them into a deliverable state, the property
does not pass until such thing is done and the buyer has
notice thereof.
 Example
This section may be illustrated by the following example: Sale
of the whole contents of a cistern of oil, the oil to be put into
casks by the seller and then taken away by the buyer. Some
of the casks are filled in the presence of the buyer, but before
any are removed, or the remainder are filled, fire destroys the
whole of the oil. The buyer must bear the loss of the oil which
had been put into the casks, the seller that of the remainder
.Rugg Vs. Minett (1089)

58
 Section 22 : Specific goods in a
deliverable state , when the seller has
to do anything thereto in order to
ascertain price :
 Where there is a contract for the sale of specific
goods in a deliverable state, but the seller is bound
to weigh, measure, test or do some other act or
thing with reference to the goods for the purpose of
ascertaining the price, the property does not pass
until such act or thing is done and the buyer has
notice thereof.

59
 Section 22
 Examples
 This section may be illustrated by the following
examples:
1. Sale of a stack of bark at a certain price per ton, the bark
to be weighed by the seller’s and buyer’s agents. Part
was weighed and taken away, but before anything more
was done a flood carried away the remainder. The loss
of this fell on the seller. Simmons Vs Swift (1826)
2. Sale of 289 specified bales of goatskin, containing 5
dozen in each bale, at a certain price per dozen. By the
usage of the trade, it was the sellers duty to see whether
the bales contain the number specified in the contract.
Before the seller had done this the bales were destroyed
by fire. The loss fell on the seller. Zagury vs
Furnell(1809)
60
 Section 23 : Sale of unascertained
goods and appropriation.
1. Where there is a contract for the sale of unascertained or future
goods by description and goods of that description and in a
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, the property in the goods there
upon passed to the buyer. Such assent may be expressed or
implied, and may be given either before or after the
appropriation made.
2. Delivery to the carrier - Where in pursuance of the contract the
seller delivers the goods to the buyer or to the carrier or other
bailee (whether named by the buyer or not) for the purpose of
transmission to the buyer, and does not reserve the right of
disposal, he is deemed to have unconditionally appropriated the
goods to the contract.

61
 Section 23 : Sale of unascertained
goods and appropriation
 Example
 This section may be illustrated by the following example:

1. Sale of 20 barrels of sugar out of a larger quantity. The

seller fills four barrels which the buyer takes away.
Subsequently the seller fills sixteen more barrels, and
informs the buyer of this asking him to come and take
them away. The buyer promises to do so. The property
has passed to the buyer.
2. Mr A contracts to sell to Mr B a certain quantity of liquor
out of a big cask containing a much larger quantity. The
required quantity is not separated or bottled. The
property in the liquor does not pass to the purchaser.

62
Section 24 Goods sent on approval
or ‘on sale or return’
 When goods are delivered to the buyer on approval
or ‘on sale or return’ or other similar terms, the
property therein passes to the buyer
 (a) when he signifies his approval or acceptance to
the seller or does any other act adopting the
transaction:
 (b) if he does not signify his approval or acceptance
to the seller but retains the goods without giving
notice of rejection, then, if a time has been fixed for
the return of the goods, on the expiration of such
time, and, if no time has been fixed, on the
expiration of a reasonable time.

63
 Section 26 Risk prima facie passes with
property
 Unless otherwise agreed, the goods remain at the seller’s risk until
the property therein is transferred to the buyer, but when the
property therein is transferred to the buyer, the goods are at the
buyer’s risk whether delivery has been made or not.
 Examples
 The defendant contracted to purchase 30 tons of apple juice. The
plaintiff crushed the apples, put the juice in casks and kept it
pending delivery. The defendant delayed taking delivery and the
juice went putrid and had to be thrown away. The defendant was
liable to pay the price; the seller had been in a position to sell the
goods elsewhere and acquire other goods for the postponed time of
delivery and he had not done so and there was some loss in the
meanwhile, the responsibility for the loss would have fallen on him,
but in the present case the seller had to keep the goods ready for
delivery as and when the buyer proposed to take them. Demby
Hammilton & Co. Ltd. Vs. Barden (Endeavour Wines Ltd) 1949

64
Sec. 27 - Sale by person not the owner

Where goods are sold by a person who is not the owner thereof
and who does not sell them under the authority or with the
consent of the owner, the buyer acquires no better title to the
goods than the seller had, unless the owner of the goods is by
conduct precluded from denying the seller’s authority to sell.
Provided that, where a mercantile agent is, with the consent of
the owner, in possession of the goods or of a document of title to
the goods, any sale made by him, when acting in the ordinary
course of business of a mercantile agent, shall be as valid as if
he were expressly authorised by the owner of the goods to make
the same, provided that the buyer act is good faith and has not at
the time of the contract of sale notice that the seller has not
authority to sell.
 PERFORMANCE OF THE CONTRACT

 Section 31. Duties of the seller and buyer It shall be

the duty of the seller to deliver the goods and of the
buyer to accept and pay for them, in accordance with
the terms of the contract of sale.

 There would be breach of the ‘duty to accept’ when the

buyer unjustifiably rejects the goods. Taking of delivery
of the goods is an important aspect of the ‘duty to
accept’ and refusal to do so will constitute rejection of
the goods and therefore , would amount to a non-
acceptance of the goods. There is however a distinction
between acceptance of goods and taking delivery of
them. The buyer signifying his approval of the goods
accepts them though he may not have taken delivery of
the goods.

66
 Section 32 Payment and delivery are
concurrent conditions :
 Unless otherwise agreed, delivery of the goods and payment
of the price are concurrent conditions, that is to say, the
seller shall be ready and willing to give possession of the
goods to the buyer in exchange for the price, and the buyer
shall be ready and willing to pay the price in exchange for
the possession of the goods.

 A contract of sale is an example of a contract consisting of

reciprocal promises to be simultaneously performed. In
accordance, thereof, with the general principle laid down in
S.51 of the contract Act, the seller is not bound to deliver,
and commits no breach of contract in failing to deliver, if the
buyer is not ready and willing to pay the price, and
conversely the buyer is not liable to an action for failure to
accept the goods, if the seller was not ready and willing to let
the buyer have goods on demand.

67
 Section 34. Effect of part delivery

 A delivery of part goods, in progress of the delivery of the whole,

has the same effect, for the purpose of passing the property in
such goods, as a delivery of the whole; but a delivery of the part of
the goods with an intention of severing it from the whole, does not
operate as a delivery of the remainder.

 Examples
 The section may be illustrated by the following examples:
Sale of a quantity of goods lying at a wharf. The seller left an order
with the wharfinger to deliver the goods to the buyer, who had paid
for them by a bill. The buyer subsequently weighed the goods and
took away part of them. This was held to amount to a delivery of
the whole of the goods.

68
 Section 35 Buyer to apply for delivery
 Apart from any express contract, the seller of the goods is not
bound to deliver them until the buyer applies for the delivery

 Even if there is an obligation on the part of the seller to inform the

buyer when the goods are in a deliverable state, it is not a ‘special
promise’, though it may postpone the obligation of the buyer to
apply for delivery, the buyer would be entitled and bound to apply
for delivery.

 When the buyer applies for delivery and the seller then fails to
deliver, the seller is guilty of a breach of contract. So where the
contract provided for delivery in all November on seven day’s
notice from the buyer, and the buyer gave the notice early in
November, it was held that by the terms of the contract the buyer
had the right to fix the date in November on which the delivery
should be made, and the seller having failed to deliver as required
by the notice, was guilty of a breach of contract. Juggernath
Khan Vs. Machlachar (1881)

69
 Section 36. Rules as to delivery
1. Whether it is for the buyer to take possession of the goods or for the
seller to send the goods to the buyer is a question depending in each
case on the contract, express or implied, between the parties. Apart
from any such contract, goods sold are to be delivered at the place at
which they are at the time of the sale, and goods agreed to be sold
are to be delivered at the place at which they are at the time of the
agreement to sell., if not then in existence, at the place at which they
are manufactured or produced.
2. Where under the contract of sale the seller is bound to send the
goods to he buyer, but no time for sending is fixed, the seller is bound
to send them within a reasonable time.
3. Where the goods at the time of sale are in the possession of a third
person, there is no delivery by seller to buyer unless and until such
third person acknowledges to the buyer that he holds the goods on
his behalf
4. Demand or tender of delivery may be treated as ineffectual unless
made at a reasonable hour. What is reasonable hour is a question of
fact.
5. Unless otherwise agreed, the expenses of and incidental to putting
the goods into a deliverable state shall be borne by the seller

70
 Section 36. Rules as to delivery
 Examples
The section may be illustrated by the following examples :
1. Sale of 12 puncheons of rum, made from molasses, of which 4 were
delivered. The buyer pressed for delivery of the remainder, but the
seller delayed and in the meanwhile an Act of Parliament was
passed prohibiting the distillation of spirits from molasses, and
annulling all contracts for the sale of such spirits. The sellers were
held liable in damages as having failed to deliver within a reasonable
time. Phillips Vs. Blair and Martin (1801)

2. Sale of goods to be sold to be delivered in the last fortnight of March.

Delivery is tendered at 9 p.m. on 31 March. It is a question of fact
whether this is a reasonable hour. If it is not, there is no delivery,
and the buyer may repudiate. Startup Vs. Macdonald (1843)

3. Sale of goods for ready money. The seller packs them up in the
buyer’s boxes in the buyer’s presence, but they remain in the seller’s
premises. This is not a delivery. Boulter Vs. Arnott (1833)

71
 Sec. 37 Delivery of wrong quantity
 Where the seller delivers to the buyer a quantity of good less
than he contracted to sell, the buyer may reject them, but if the
buyer accepts the goods so delivered he shall pay for them at the
contract rate.
 Where the seller delivers to the buyer a quantity of goods larger
than he contracted to sell the buyer may accept the goods
included in the contact and reject the rest, or he may reject the
whole. If the buyer accepts the whole of the goods so delivered,
he shall pay for them at the contract rate.
 Where the seller delivers to the buyer the gods he contract to sell
mixed with goods of a different description not included in the
contract., the buyer may accept the goods which are in
accordance with the contract and reject the rest, or may reject
the whole.
 Section 38. Instalment Deliveries
1. Unless otherwise agreed, the buyer of goods is not bound
to accept delivery thereof by instalments.

2. Where there is a contract for the sale of goods to be

delivered by stated instalments which are to be separately
paid for, and the seller makes no delivery or defective
delivery in respect of one or more instalments, or the
buyer neglects or refuses to take delivery of or pay for
one or more instalments, it is a question in each case
depending on the terms of the contract and the
circumstances of the case, whether the breach of the
contract is a repudiation of the whole contract, or whether
it is severable breach giving rise to a claim for
compensation, but not to a right to treat the whole
contract as repudiated.

73
 Section 38. Instalment Deliveries
 Examples
The section may be illustrated by the following examples :
1. Sale of 25 tons of pepper October /November shipment. The
sellers shipped 20 tons in November and 5 tons in December.
The buyers were entitled to reject the whole 25 tons. Reuter
Vs. Sala (1879)
2. Sale of 200-300 tons of coal to be shipped as early as possible
by a named ship or other vessel. The named ship was not
available and the seller shipped 152 tons on another ship,
informing the buyer that he had done so and that he had drawn
on him for the price and proposing to ship the remainder later.
The buyer made no reply to this communication. The ship was
lost. In an action by the seller for the price it was held that the
buyer had impliedly assented to the shipment of the smaller
quantity as an instalment and was liable to pay for it.
Riichardson Vs. Dunn (1841)

74
 Rights of Unpaid Seller against goods
 Section 45. ‘Unpaid seller defined
1. The seller of goods is deemed to be an ‘unpaid seller’ within the
meaning of this Act
(a) when the whole of the price has not been paid or tendered ;
(b) when a bill of exchange or other negotiable instrument has been
received as conditional payment, and the condition on which it
was received has not been fulfilled by reason of the dishonour of
the instrument or otherwise.
2. In this chapter, the term ‘seller’ includes any person who is in the
position of a seller, as, for instance, an agent of the seller to whom
the bill of lading has been indorsed, or a consignor or agent who has
himself paid, or is directly responsible for, the price
 Examples
The section may be illustrated by the following example;
The seller draws bills for the price of the goods on the buyer, who
accepts them, and the seller negotiates them. Before the bills arrive
at maturity the buyer fails. The seller is in position of an unpaid seller.

75
 Section 46. Unpaid Seller’s rights
1. Subject to the provisions of this Act and of and of any law for
the time being in force, notwithstanding that the property in the
goods may have passed to the buyer, the unpaid seller of
goods, as such, has by implication of law—
(a) a lien on the goods for the price while he is in possession of
them;
(b) in case of the insolvency of the buyer a right of stopping the
goods in transit after he has parted with the possession of
them
(c) a right of resale as limited by this Act.
2. Where the property in goods has not passed to the buyer, the
unpaid seller has, in addition to his other remedies, a right of
withholding delivery similar to and co-extensive with his rights of
lien and stoppage in transit where the property has passed to
the buyer.

76
 Section 46. Unpaid Seller’s rights

 Example
The section may be illustrated by the following
example :
 Sale of goods to be delivered by instalments, each
instalment to be paid for in cash fourteen days after
delivery. During the currency of the contract, the
buyer becomes insolvent and the price of one
instalment is unpaid. The seller need not make
further deliveries unless the price of that instalment
is paid and cash is paid against delivery of
subsequent instalments.

77
 UNPAID SELLER’S RIGHT TO LIEN
The unpaid seller of goods who is in possession of goods is entitled
to retain possession of them until payment or tender of the price in
the following cases, namely :
(a) Where the goods have been sold without any stipulation as to credit
(b) Where the goods have been sold on credit, but the term of credit
has expired ;
(c) where the buyer becomes insolvent.

2. The seller may exercise his right of lien notwithstanding that he is in

possession of the goods as agent or bailee for the buyer.

 A seller’s lien is described as an additional security given to a person

who has a right to be paid, but he has a right to be paid besides and
independently of his lien. One of the objects of S.47 which confers
the seller’s lien is ‘ to protect a vendor from incurring an expense in
manufacturing or acquiring goods for which payment remains justly
in doubt ’.

78
 Section 48. Part delivery

 Where an unpaid seller has made part

delivery of the goods, he may exercise his
right of lien on the remainder, unless such
part delivery has been made under such
circumstances as to show an agreement to
waive the lien.

79
 Section 49. Termination of lien

1. The unpaid seller of goods loses his lien thereon—

(a) when he delivers the goods to a carrier or other bailee
for the purpose of transmission to the buyer without
reserving the right of disposal of goods;
(b) when the buyer or his agent lawfully obtains
possession of the goods;
(c) by waiver thereof.

2. The unpaid seller of goods, having a lien thereon,

does not lose his lien by reason only that he has
obtained a decree for the price of the goods.

80
 Section 49. Termination of lien

 Examples

This section may be illustrated by the following examples:

Goods were sold and sent by the sellers at the request of the
buyer to shipping agents of the buyer, and were put on board a
ship by those agents. Subsequently, they were re-landed and
sent back to the sellers for the purpose of re-packing. While
they were still in the possession of the sellers for that purpose,
the buyer became insolvent. Thereupon the sellers refused to
deliver them to the buyer’s trustee in bankruptcy except upon
payment of the price. Held, that the sellers had lost their lien by
delivering the goods to the shipping agents, and their refusal to
deliver the goods to the trustee was wrongful. Valpy Vs.
Gibson 1847

81
 Section 50 Right of stoppage in transit

 Subject to the provisions of this Act, when the buyer of goods

become insolvent, the unpaid seller, who has parted with the
possession of the goods has the right of stopping them in transit,
that is to say, he may resume possession of the goods as long as
they are in the course of transit, and may retain them until payment
or tender of the price.

 In order that the right may be exercised, the following conditions

must all be satisfied—the seller must be unpaid, the seller must
have parted with the possession of the goods and the buyer must
not have acquired it. Further, the right can only be exercised by a
seller or a person in a position analogous to that of a seller, the
right to stop in transit is unknown outside the law of sale of goods.
Lastly, it is a right against the goods themselves only.

82
 Section 52. How stoppage to transit is
effected
1. The unpaid seller may exercise his right of stoppage in transit
either by taking actual possession of the goods, or by giving notice
of his claim to the carrier or other bailee in whose possession the
goods are. Such notice may be given either to the person in actual
possession of the goods or to his principal. In the latter case the
notice, to be effectual, shall be given at such time and in such
circumstances that the principal, by the exercise of reasonable
diligence, may communicate it to his servant or agent in time to
prevent a delivery to the buyer.

2. When notice of stoppage in transit is given by the seller to the

carrier or other bailee in possession of the goods, he shall
redeliver the goods to, or according to the directions of, the seller.
The expenses of such re-delivery shall be borne by the seller.

83
 Section 52. How stoppage to transit is
effected
 Examples
The section may be illustrated by the following
examples :

An unpaid seller stops goods sent by sea at a port

short of their destination. He is liable for the fright, not
only to the part where the goods were actually landed,
but also to the port of their ultimate destination. Booth
& Co. vs. Cargo Fleet Iron Co. Ltd. 1916

84
 Section 64. Auction sale

IN A CASE OF A SALE BY AUCTION

1. Where goods are put up for sale in lots, each lot is prima facie
deemed to be the subject of a separate contract of sale ;

2. the sale is complete when the auctioneer announces its completion

by the fall of the hammer or in other customary manner; and, until
such announcement is made, any bidder may retract his bid;

3. a right to bid may be reserved expressly by or on behalf of the

seller and, where such right is expressly so reserved, but not
otherwise, the seller or any one person on his behalf may, subject
to the provisions hereinafter contained, bid at the auction;

85
 Section 64. Auction sale
IN A CASE OF A SALE BY AUCTION

4. where the sale is not notified to be subject to a right to bid on

behalf of the seller, it shall not be lawful for the seller to bid himself
or to employ any person to bid at such sale, or for the auctioneer
knowingly to take any bid from the seller or any such person ; and
any sale contravening this rule may be treated as fraudulent by the
buyer ;

5. the sale may by notified to be subject to a reserved or upset price ;

6. if the seller makes use of pretended bidding to raise the price, the
sale is voidable at the option of the buyer.

86