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Sales of Goods Act, 1930: Section-Wise Notes


1. Concept of Sale and Agreement to Sell

1.1 Definitions

  • Sale of Goods (Section 4(b)):
    Sale is a contract whereby the ownership (property) in goods is transferred from the seller to the buyer for a price. Both the transfer of ownership and payment of price distinguish a sale.

  • Agreement to Sell (Section 4(a)):
    Agreement to sell is a contract where the transfer of ownership is to take place at a future time or subject to certain conditions to be fulfilled later. Ownership passes only when those future conditions or time arrive.

1.2 Difference between Sale and Agreement to Sell

AspectSaleAgreement to Sell
Transfer of OwnershipImmediate transfer of ownershipTransfer is future or conditional
Nature of ContractExecuted contractExecutory contract
RiskPasses to buyer immediatelyRemains with seller until transfer
Remedies on Seller’s insolvencyBuyer becomes owner; goods not affectedBuyer has only contractual claim

1.3 Essential Elements of a Contract of Sale

  • Two parties: buyer and seller.

  • Goods: Must be existing or future goods capable of transfer.

  • Price: Must be in money.

  • Transfer of ownership or agreement thereof.

  • Mutual consent.

1.4 Subject Matter: Goods (Section 2(7))

  • Goods are all movable property other than actionable claims and money.

  • Can be existing, future, or specific/ascertained goods.

  • Includes growing crops, grass, things attached to or forming part of land that are agreed to be severed before sale.

2. Performance of Contract of Sale

2.1 Delivery of Goods (Section 31)

  • Delivery means transferring possession from seller to buyer.

  • Delivery must correspond with the contract terms.

  • Mode of delivery could be actual, constructive, or symbolic.

2.2 Time of Delivery (Section 33)

  • If no time is specified, delivery must be within a reasonable time.

  • Time of delivery is crucial for the performance and passing of risk.

2.3 Payment of Price (Section 32)

  • Price is payable at the time and place where the goods are delivered, unless otherwise agreed.

  • Buyer entitled to examine goods before payment unless waived.

2.4 Obligations of Seller

  • To deliver goods conforming to the contract.

  • To transfer the ownership in goods.

2.5 Obligations of Buyer

  • To accept and pay for the goods per contract.

  • To examine the goods on delivery when the contract allows.

2.6 Passing of Property and Risk (Section 18 onwards)

  • Ownership usually passes when the parties intend it to pass.

  • Risk passes with ownership, unless otherwise agreed.

  • In sale, risk generally passes on delivery.

  • In agreement to sell, risk remains with seller until ownership passes.

2.7 Delivery of Wrong Quantity or Defective Goods

  • Seller liable for delivering wrong quantity or non-conforming goods.

  • Buyer entitled to reject goods, claim damages or specific performance per contract terms.

3. Rights of Unpaid Seller

3.1 Who is an Unpaid Seller? (Section 45)

  • A seller who has not received the whole of the price of goods sold or has been tendered part payment only.

  • Includes cases where the buyer has become insolvent.

3.2 Rights of Unpaid Seller (Sections 46 – 54)

3.2.1 Right of Lien (Section 47)

  • The seller can retain possession of the goods until the price is paid.

  • Applies only if goods are in possession of seller or in possession of a third party on behalf of the seller.

  • Right ceases if delivery is made or goods are sold/delivered on credit.

3.2.2 Right of Stoppage in Transit (Section 50)

  • If the buyer becomes insolvent after goods are dispatched but before delivery, seller can stop goods in transit and regain possession.

  • Must be exercised before the goods reach the buyer.

3.2.3 Right of Resale (Section 54)

  • The unpaid seller may resell the goods:

    • If the buyer fails to pay within reasonable time.

    • After stopping goods in transit.

    • Sale must be in good faith and after giving reasonable notice (except in certain conditions).

3.3 Exercise of Rights

  • Rights coexist and may be exercised cumulatively.

  • Seller may pursue legal remedies without losing these rights.

4. Suit for Breach of Contract of Sale

4.1 Breach of Contract Definition

  • Occurs when either party fails to perform obligations as per contract terms.

  • Could be denial of contract, refusal/delay in delivery/payment, non-conforming goods, or repayment failure.

4.2 Remedies Available to Buyer (Section 55 onwards)

4.2.1 Specific Performance

  • Buyer may seek court order compelling seller to perform the contract in special cases.

  • Usually not granted for sale of goods except when goods are unique or specific.

4.2.2 Damages for Non-Delivery (Section 56)

  • Buyer entitled to compensation for loss directly caused by seller’s breach.

  • Damages calculated to put the buyer in the position as if contract was performed.

4.2.3 Suit for Price (Section 59)

  • Seller can sue for price if:

    • Goods have been delivered but price remains unpaid.

    • Buyer has accepted goods.

    • Buyer wrongfully refuses delivery after goods are ready.

4.2.4 Rejection of Goods and Damages (Section 57)

  • Buyer can reject goods that do not conform and claim damages for non-delivery.

4.3 Remedies Available to Seller

  • Suit for price.

  • Suit for damages for non-acceptance.

  • Resale rights as discussed.

  • Sue for specific performance in limited cases.

4.4 Anticipatory Breach and Effects

  • If breach is anticipated, the aggrieved party may sue for damages immediately.

  • Party may suspend performance and claim compensation.

4.5 Concurrent Remedies (Section 55)

  • Remedies for breach are cumulative.

  • Pursuing one remedy does not bar the party from pursuing any others concurrently or subsequently.

Conclusion

The Sales of Goods Act, 1930 carefully structures sales contracts, balancing rights and duties of buyers and sellers. Through the concepts of sale and agreement to sell, clear guidelines on performance, detailed rights of unpaid sellers, and remedies for breach, it provides a comprehensive legal framework empowering both parties.

Understanding the nuanced difference between sale and agreement to sell, the conditions for transfer of ownership, and the seller’s protective rights like lien and stoppage in transit, is crucial.

Moreover, breach of contract remedies ensure contracts are enforceable and losses recoverable either by damages or specific performance where appropriate.

This statutory framework strongly supports commercial certainty and fairness in the Indian marketplace.

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