Sale of Goods

Initially the provisions for sale of goods were a part of the Indian Contract Act itself in chapter VII (sections 76 to 123). Later these sections in the Contract Act were deleted, and a separate Sale of Goods Act was passed in 1930.

A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. There may be a contract of sale between one part-owner and another. A contract of sale may be absolute or conditional.

Thus, the following are essentials of a contract of sale –

(a) All requirements of contract must be fulfilled, (b) transfer of property i.e. goods is required, (c) the contract is between buyer and seller and the sale should be for ‘price’ and (d) the contract may be absolute or conditional.

A contract of sale is made by an offer to buy or sell goods for a price and the acceptance of such offer. The contract may provide for the immediate delivery of the goods or immediate payment of the price or both, or for the delivery or payment by installments, or that the delivery or payment or both shall be postponed. A contract of sale may be made in writing or by word of mouth, or partly in writing and partly by word of mouth or may be implied from the conduct of the parties. Thus, credit sale is also a sale.

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 the property in the goods is to take place at a future time or subject to some condition thereaf¬ter to be fulfilled, the contract is called an agreement to sell.

An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred. A transfer of general property is required to constitute a sale. If goods are given for hire, lease, hire purchase or pledge, general property is not transferred and hence it is not a sale.

Goods means every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale.

The Sale of Goods Act provides that stipulation in a contract of sale may be conditions or warranties. As per the Act “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”.

“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”.

Hence it is to be borne in mind that condition is an essential stipulation of the contract whereas warranty is merely a collateral stipulation contract.

There are certain implied conditions and warranties in a sale of goods these are:

1) Condition as to title: in a contract of sale it is an implied condition that the seller has a right to sell the goods and in case of agreement to sell he will have the right to sell goods at the time when the property is to pass.

2) Sale by description: where there is contract of sale of goods by description there is an implied condition that the goods shall correspond to the description given by the seller.

3) Sale by description as well as by sample: Where the sale is by sample as well as by description it is essential that the goods should be as per the description as also the sample.

The Act states that subject to the aforesaid three conditions, the seller is not bound to supply goods which should be fit for any particular purpose or which should possess any particular quality. In this the buyer has a duty to select the goods carefully and as per his requirements. The buyer must satisfy himself of the quality and defects of the goods he proposes to purchase.

There are certain warranties that are implied by the law in every sale of goods. These are that the buyer shall have and enjoy quite possession of the goods. The second implied warranty is that that the goods shall be free from any charge or encumbrances in favor of any third party.

The essence of any sale is the passing or transfer of the property in the goods from the seller to the buyer. Property in the goods is said to pass to the buyer when he acquires proprietary rights over then.

A contract of sale is completed not by mere delivery of goods but by acceptance of goods by buyer. Acceptance does not mean mere receipt of goods. It means checking the goods to ascertain whether they are as per contract. Where goods are delivered to the buyer which he has not previously examined, he is not deemed to have accepted them unless and until he has had a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conform¬ity with the contract.

The Act casts various duties and grants certain rights on both buyer and seller. After the goods are sold and the property is transferred to the buyer, the only remedy with seller is to approach Court, if the buyer does not pay. The seller has no right to take forceful possession of goods from buyer, once property in goods is transferred to him. However, the Act gives some rights to seller if his dues are not paid.

Suits for breach of the contract – An unpaid seller can exercise his rights to the extent explained above. In addition, a seller can exercise following rights in case of breach of contract. The buyer also has rights in case of breach of contract.

Measure for compensation and damages – The Sale of Goods Act does not specify how to measure damages. However, since the Act is complimentary to the Contract Act, measure of compensation and damages will be as provided in sections 73 and 74 of Contract Act.