Contents -
1. Meaning, Definitions, Scope and Features of Sale of Goods Act, 1930.
2. Meaning, Essentials Elements and Formalities of Contract of Sale.
3. Meaning, Definition and Differences between Sale and Agreement to Sell.
4. Classification and Documents of Title to Goods.
5. Concept, Ascertainment of Price.
Sale of Goods Act, 1930
- Meaning -
Sale of goods is one of the specific form of contracts recognized and regulated by law in India. The law relating to such contract is contained in the sale of Goods Act, which was enacted in 1930, it is substantially based on the English Sale of Goods Act 1893, Initially this was a part of Indian Contract Act.
In a highly industrialized and commercial economy, sale of various product or goods take different forms and are also processed in a wide manner. Even the word 'goods' will need considerable understanding as this word does not include any or every product which is actually sold in the economy.
According, The Sale of Goods Act, 1930, was enacted to enable the parties to know their mutual rights and obligation in transaction involving sale or purchase of goods.
The provisions of the Contract Act, insofar as they are inconsistent with the express provision of sale of Goods Act, shall apply to contract for the sale of goods e g. provisions relating the capacity of parties legality of contract etc.
The Act also helps to understand validity or otherwise of transaction and the remedies available to the agrieved party. It may be specifically noted that in the Economy "Services" are also sold and purchased. But sale or purchase of goods of services does not fall within the scope of the Sale of Goods Act, as they are not goods.
For example : if a building is sold it will not be considered as a sale of goods. In the complex relationship between parties in sale / purchase transactions there is considerable scope of misunderstanding, fraud etc. and as such possibilities of dusputes are many.
- Scope of the Act -
The act deals with "Goods" but not with other movable property, e.g. actionable claim of money. In other words, this Act does not deals with movable property other than Goods and immovable property.
The sale of goods act deals with "Sale" but not with mortgage (which is dealt with under the Transfer of Property Act, 1882) or pledge (which is dealt with under the Indian Contract Act, 1872).
Short title, extend and commencement (Section 1) -
1. It shall come into force on the 1st day of July, 1930.
2. This Act may be called the sale of Goods Act, 1930.
3. It extends to the whole of India.
- Silent Features of the Act -
The Sale of Goods Act, 1930 is a law of govern the sale of movable property i.e. goods. The act in elaboralely lays down :
1. Conditions of a valid sale in the eyes of law.
2. Rights and duties of buyer and seller.
3. Express and implied conditions and warranties under a contract of sale.
- Definitions ( Section 2 ) -
1. Buyer (Section 2(1)) -
Buyer means a person who buys or agrees to buy goods.
2. Delivery (Section 2(2)) -
Delivery means voluntary transfer of possession from one person to another.
3. Deliverable State (Section 2(3)) -
Goods are said to be in a deliverable state, when they are in a state that the buyer would under the contract be bound to take delivery of them.
4. Document of Title to Goods (Section 2(4)) -
Document of title to goods includes a bill of lading, warehouse keepers certificate, wharfinger certificate, Railway receipt, multi-modal transfer document, warranty or order for the delivery of goods and any other document used in the ordinary course of business as proof of The Possession or control of goods or authorising or purporting to authorities, either by endorsement or by delivery, the possessor of the document to transfer or receive goods there by represented.
5. Fault (Section 2(5)) -
Fault means wrongful act or default.
6. Future Goods (Section 2(6)) -
Future goods means goods to be manufactured or produced or acquired by the seller after the making of the contract of sale.
7. Goods (Section 2(7)) -
Goods means every kind of movable property or other than actionable claim and money and include 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.
8. Insolvent (Section 2(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 (Section 2(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 goods.
10. Price (Section 2(10)) -
Price means the money consideration for a sale of goods.
11. Property (Section 2(11)) -
Property means the general property in goods and not merely a special property.
12. Quality of Goods (Section 2(12)) -
Quality of goods includes their state or condition.
13. Seller (Section 2(13)) -
Seller means a person who sells or agrees to sale goods.
14. Specific Goods (Section 2(14)) -
Specific goods means goods identified and agreed upon at the time a contract of sale is made.
Contract of Sale of Goods -
- Meaning of a Contract of Sale of Goods (Section 4(1)) -
The Sale of Goods Act, 1930, "A contract of sale of goods is a contract whereby the seller transfer or agrees to transfer the property in goods to the buyer for a prise. There may be a contract of the sale between one party owner and another. A contract of sale may be absolute or conditional.
In common parlance, when a seller handovers the goods, property or promises to do the some to the buyer for a price it is called a contract of sale of goods.
- Essentials of Contract of Sale -
1. Two Parties -
There must be two distinctive parties i.e. a seller and buyer. Seller means a person who sells or agrees to sell goods. Buyer means a person who buy or agree to buy goods. A person cannot be a seller as well as buyer as a person cannot by his own goods.
2. Goods -
There must be some goods. "Goods means, every kind of movable property other than actionable claim and money and include stock and share, growing crops, grass and things attached to do or forming part of the land which are agreed to be served before sale or under the contract of sale. Thus, every kind of movable property expect actionable claim and money is regarded as goods.
3. Transfer of General Property -
Property means the general property in goods and not merely a special property. General property in goods means ownership of the goods. Special property in goods means possession of goods. Thus there must be either a transfer of ownership of goods or an agreement to transfer the ownership of goods. The ownership may transfer either immediately on completion of sale for some time in future in agreement to sale.
4. Price -
There must be a price. Price here means the money consideration for the sale of goods. When the consideration is only goods it amounts to a barter and not sale. When there is no consideration it amounts to gift and not sale. However the consideration may be partly in money and partly in goods because the law does not prohibit as such.
5. Essential Elements of Valid Contract -
Being Specie of contract, sale must confirm to all other essential of a valid contract thus,
a) The consent of the parties must be free.
b) The object of the contract must not be unlawful and so on.
c) The parties to the contract must be competent to contract.
- Formalities of Contract of Sale (Section 5)-
The agreement may be express or may be implied from the contract of parties. As stipulated by Section 5(i) of the Sale of Goods Act, 1930 "A contract of sale is made by an offer to buy or sell goods for a price and acceptance of such offer."
Except where specially required by any law no particular form of necessary for entering into a such a contract.
The contact may provide for the immediate delivery of the goods or immediate payment of a price or both are for the delivery or payment by instalments, or that the delivery or payment or both shall be postponed.
As provided by section 5(2) of the Sale of Goods Act, 1930 "A contract of sale may be made in writing or by word of mouth / orally or partly in writing or partly by word of mouth / orally." Therefore it can be said that a contract of sale may be affected in any of the following ways namely :
1. There may be immediate delivery of the goods and immediate payment of price.
2. There may be immediate payment of price, but it may be agreed that the delivery is to be made at some future date.
3. There may be immediate delivery of the goods.
4. It may be agreed that the delivery or payment or both are to be made in installment.
5. It may be agreed that the delivery or payment or both are to be made at the some future date.
- Sale and Agreement to Sell -
The term contract of sale is a generic term and includes both a sale and an agreement to sell.
- Definition of Sales -
According to Section 4(3) of the Indian Contract Act, 1872 :
"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".
According to Chancellor James Kent :
"Sale is a contract for the Transfer of Property from one person to another for a valuable consideration".
According to Justice Blackstone :
"Sale is a a transmatation of property from one man to another in consideration of some price or recompense in value".
- Agreement to Sell or Conditional Sale -
According to Section 4(3) of the Indian Contract Act, 1872 :
"Where the transfer of the property in the goods is to take place at a future time or object to some conditions thereafter to be fulfilled, the contract is called an agreement to sell".
- Differences between Sale and Agreement to Sell :
Basis of Differences | Sale | Agreement to Sell |
1. Definition | Sale is where under a contract of sale of the property in the goods is transferred from the seller to the buyer it is called a sale. | Agreement to sell is a contract of sale under which the Transfer of Property in goods is to take place at a future date object to some conditions thereafter to be fulfilled. |
2. Transfer of Property / Owbership | Transfer of ownership of goods takes place immediately. | Transfer of ownership of goods is to take place at a future time or subject to fulfillment of some condition. |
3. Transfer of Risk | The property in the goods passes to the buyer and so as a rule, the risk also passes to the buyer. | This property does not pass to the buyer the risk also does not pass to the buyer. |
4. Liability | A subsequent loss or destruction of the goods is the liability of the buyer. | The liability remains with the seller where the transaction only amounts to an agreement to sell. |
5. Executed or executory contract | It is an executed contract because nothing remains to be done. | It is an executed contract because something remains to be done. |
6. Rights of the seller against the buyers brench | Seller can sue the buyer or the price even through the goods are in his possession. | Seller can sue the buyer for damages even through the goods are in the possession of the buyer. |
7. Rights of buyer against the sellers brench | Buyer can sue the seller for damages and can sue the third party who brought those goods for goods. | Buyer can sue the seller for damages only. |
8. Effect of insolvency of seller having possession of goods | Buyer can claim the goods from the official receiver or assignce because the ownership of goods has transferred to the buyer. | Buyer cannot claim the goods even when he has paid the price because the ownership has not transferred to the buyer. The buyer who has paid the price can only claim rateable dividend. |
9. Effect of insolvency of the buyer before paying the price | Seller must deliver the goods to the official receiver or assignee because the ownership of goods has transfer to the buyer. He can only claim rateable dividend for the unpaid price. | Seller can refuse to deliver the goods unless he is paid full price of the goods because the ownership has not transferred to the buyer. |
Subject Matter of Contract of Sale
- Introduction -
Actionable claim which means they claim to any debts or any beneficial interest in movable property not in possession. Such claims cannot be sold or purchased like goods, they can only be assigned, Money which means the legal tender and not the old rare coins, Immovable property. These are the things excluded from the term 'Goods'
- Classification of Goods
The goods may be of several types from a legal point of view which are as follows :
1. Future Goods (Section 2(6)) -
Future goods mean 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 sale only. There can be no sale in respect of future goods because one cannot sell what he does not possess.
2. Contingent Goods (Section 6(2)) -
These are the goods the acquisition of which by the seller depends upon a contingency which may or may not happen.
3. Existing Goods (Section 6) -
Goods which are owned and possessed by the seller at the time of sale are called existing goods. Existing goods may be classified under three categories this classification is as follows :
A) Ascertained Goods -
Goods are said to be ascertained when out of the mass of unascertained goods, the quantity extracted for the identified and set aside for a given contract. Thus, when part of the goods lying in bulk are identified and earmarked for sale, such goods are termed as ascertained goods.
B) Unascertained Goods -
These are the goods which are not identified and agreed upon the time when a contract of sale is made e.g. goods in stock or lying in lots.
C) Specific Goods (Section 2(14)) -
These are the goods which are identified and agreed upon at the time when the contract of sale is made.
- Documents of Title of Goods (Section 2(4)) -
Document of title to goods is one, which in titles and enables its rightful holder to deal with the goods represented by it, as if he were the owner. It authorises the possessor to receive the goods. It is used in the ordinary course of business as proof of the ownership, possession or control of goods. It also confers right on the position to transfer the goods to another person, by mere delivery or by proper endorsement the delivery.
According to Section 2(4) under Sale of Goods Act, 1930 :
"Document of title to goods includes a bill of landing, dock warrant, warehouse keepers certificate, Railway receipt, multi modal transport document, warranty or order for the delivery of goods and any other document used in the ordinary course of business as proof of The Possession or control of goods or authorising or purporting to authorise, either by endorsement or by delivery, the possessor of the document to transfer or receive goods there by represented,
These documents are as follows :
1. Dock Warrant -
A dock warrant is a document which is issued by dock owner or wharf owner. It is issued at the request of the merchant who contains the details regarding weight, measurement of specific parts of goods, and a declaration or certificate by the owner of dock or wharf that the goods are held on behalf of the person whose name appears in it as his assignce by endorsement.
Dock is the basin with floodgates where the ship is kept for loading and repairs of the ship. Wharf is the platform alongside the water for loading and unloading a ship.
2. Bill of Landing -
A bill of lending is a receipt given by the ship owner acknowledging the receipt of goods for carriage. It has been defined as a received for goods shipped on board a ship, signed by the person who contracts to carry them or his agent and stating the term on which the goods were delivered to and received by the ship.
3. Wharfingers Certificate -
Wharfinger is a person who is the owner or keeper of the wharf for the purpose of receiving goods in order to ship them. Wharfingers certificate is like a warehouse keeper certificate, a document issued by the wharfinger. He carries on his transaction in consideration of payment for hire. This certifies that the goods specified in it are in the wharf. In order to be the document of of title it must be in the nature of warrant.
4. Warehouse keepers Certificate -
Warehouse is a building in which goods are store. It is certified by the warehouse keeper that the goods specified in the document are in the warehouse. Warehouse keeper certificate is a document which is issued by the warehouse keeper. In order to be a document of title is must be in the nature of warrant.
5. Railway Receipt -
Railway received is a document which is issued by the railway as the acknowledgement of the receipt of goods. It is similar to the bill of landing for the purpose of section 53(1) of the Sale of Goods Act, 1930 and section 178 of the Indian Contract Act, 1872. It is not a negotiable instrument. It provides that on surrender of the receipt at the destination of the goods by the consignee the goods mentioned there in will be delivered to him.
6. Delivery Order -
A delivery order is an order which is given by the owner of goods directing a person who holds the goods on his behalf to deliver them to a person named there in. It must be a document representing the goods.
7. Mate's Receipt -
Mate's receipt is not a document of title of goods. It is an acknowledgement of receipt of the goods. The holder of the mate's receipt is entitled to receive the bill of landing in its exchange.
8. Test -
The test to determine whether a particular document is a document showing title or a document of title is whether the document is used in the ordinary course of business as authorising a transfer or receipt of the goods.
9. Consignment Note -
A consignment note does net stand in the same position as bill of landing and as such section 2(4) of the Sale of Goods Act does not apply to such document.
10. Conditional Delivery Order -
A conditional delivery order is not a document of title as defined in section 2(4) of the Sale of Goods Act.
- Concept of Price
Section 9 to 11 of the Sale of Goods Act, 1930 provide several provisions in regarding to price and time to be followed during the contract of sale of goods.
According to Section 2(10) of Sale of Goods Act :
"The price in a contract of sale means the money consideration for a sale of goods".
Money means legal tender or money in circulation. Old and rare coins not come under the scope of this definition. Price must be either certain and definite or must be determined. It must be expressed in money. It is the consideration for the transfer or agreement to transfer the property in goods from the seller to the buyer. It is not essential that the price should be fixed at the time of sale. If it is not fixed or is not capable of being fixed the whole contract is void. It must however be payable through it may not have been fixed.
- Ascertainment of Price (Section 9)
Section 9 of the Sale of Goods Act, 1930 provide that the price may be fixed in the following ways :
a) By the contract
b) It may be determined by the course of dealing between the parties.
c) May be left to be fixed in a manner agreed in the contract e.g. by valuer
In case price is not capable of being fixed in any of the above ways, the buyer is bound to pay reasonable price. What is reasonable price is a question of fact dependent on the circumstances of each particular case.
- Agreement to sale at Valuation (Section 10) -
Where there is an agreement to sale 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. Where such third party is prevented from making the valuation by the the fault of the seller or buyer the party not in fault may maintain a suit for damages against the party is fault. It is provided that if the goods or any part thereof of have been delivered to and appropriate by the buyer, he shall pay a reasonable price therefore.
For example : A agrees to sell certain goods to B at a price to be fixed by C. If C refuses to value the goods and fixed the price the agreement is avoided. If however C is willing to value the goods, but is prevented from making the valuation by the wrongful act or fault of A or B, the party in fault may become liable in damages to the party not in fault.
- Stipulation as to Time (Section 11)
Unless a different intention appears from the term of the contract, stipulations as to time of payment are not deemed to be of the essence of the contract of sale. Whether any orders stipulation as to time is of the essence of the contract or not depends on the terms of the contract.