Sale of Goods Act, 1930 – Important Terms

The Sale of Goods Act, 1930 herein referred to as the Act, is the law that governs the sale of
goods in all parts of India. It doesn’t apply to the state of Jammu & Kashmir. The Act
defines various terms which are contained in the act itself. Let us see below:

I. Buyer And Seller

As per the sec 2(1) of the Act, a buyer is someone who buys or has agreed to buy goods.
Since a sale constitutes a contract between two parties, a buyer is one of the parties to the
contract.

The Act defines seller in sec 2(13). A seller is someone who sells or has agreed to sell
goods. For a sales contract to come into existence, both the buyers and seller must be
defined by the Act. These two terms represent the two parties of a sales contract.

A faint difference between the definition of buyer and seller established by the Act and the
colloquial meaning of buyer and seller is that as per the act, even the person who agrees to
buy or sell is qualified as a buyer or a seller. The actual transfer of goods doesn’t have to
take place for the identification of the two parties of a sales contract.

II. Goods

One of the most crucial terms to define is the goods that are to be included in the contract
for sale. The Act defines the term “Goods” in its sec 2(7) as all types of movable property.
The sec 2(7) of the Act goes as follows:

“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 will be
considered goods”

As you can see, shares and stocks are also defined as goods by the Act. The term actionable
claims mean those claims which are eligible to be enforced or initiated by a suit or legal
action. This means that those claims where an action such as recovery by auction, suit,
refunds etc. could be initiated to recover or realize the claim.

We say that goods are in a deliverable state when their condition is such that the buyer
would, under the contract, be bound to take delivery of these goods. Goods may be further
understood in the following subtypes:
1. Existing Goods

The goods that are referred to in the contract of sale are termed as existing goods if they
are present (in existence) at the time of the contract. In sec 6 of the Act, the existing goods
are those goods which are in the legal possession or are owned by the seller at the time of
the formulation of the contract of sale. The existing goods are further of the following
types:

A) Specific Goods

According to the sec 2(14) of the Act, these are those goods that are “identified and agreed
upon” when the contract of sale is formed. For example, you want to sell your mobile
phone online. You put an advertisement with its picture and information. A buyer agrees
to the sale and a contract is formed. The mobile, in this case, is specific good.

B) Ascertained Goods:

This is a type not defined by the law but by the judicial interpretation. This term is used for
specific goods which have been selected from a larger set of goods. For example, you have
500 apples. Out of these 500 apples, you decide to sell 200 apples. To sell these 200 apples,
you will need to separate them from the 500 (larger set). Thus you specify 200 apples
from a larger group of unspecified apples. These 200 apples are now the ascertained
goods.

C) Unascertained Goods:

These are the goods that have not been specifically identified but have rather been left to
be selected from a larger group. For example, from your 500 apples, you decide to sell 200
apples but you don’t specify which ones you want to sell. A seller will have the liberty to
choose any 200 apples from the lot. These are thus the unascertained goods.

2. Future Goods
In sec 2(6) of the Act, future goods have been defined as the goods that will either be
manufactured or produced or acquired by the seller at the time the contract of sale is
made. The contract for the sale of future goods will never have the actual sale in it, it will
always be an agreement to sell.

For example, you have an apple orchard with apples in it. You agree to sell 1000 apples to
a buyer after the apples ripe. This is a sale that has to occur in the future but the goods
have been identified already and the agreement made. Such goods are known as future
goods.

3. Contingent Goods

Contingent goods are actually a subtype of future goods in the sense that in contingent
goods the actual sale is to be done in the future. These goods are part of a sale contract that
has some contingency clause in it. For example, if you sell your apples from your orchard
when the trees are yet to produce apples, the apples are a contingent good. This sale is
dependent on the condition that the trees are able to produce apples, which may not
happen.

III. Delivery

The delivery of goods signifies the voluntary transfer of possession from one person to
another. The objective or the end result of any such process which results in the goods
coming into the possession of the buyer is a delivery process. The delivery could occur
even when the goods are transferred to a person other than the buyer but who is
authorized to hold the goods on behalf of the buyer.

There are various forms of delivery as follows:

 Actual Delivery: If the goods are physically given into the possession of the
buyer, the delivery is an actual delivery.

 Constructive delivery: The transfer of goods can be done even when the
transfer is effected without a change in the possession or custody of the
goods. For example, a case of the delivery by attornment or acknowledgment
will be a constructive delivery. If you pick up a parcel on behalf of your friend
and agree to hold on to it for him, it is a constructive delivery.

 Symbolic delivery: This kind of delivery involves the delivery of a thing in

token of a transfer of some other thing. For example, the key of the godowns
with the goods in it, when handed over to the buyer will constitute a
symbolic delivery.

IV. The Document of Title to Goods

From the Sec 2(4) of the act, we can say that this “includes the bill of lading, dock-warrant,
warehouse keeper’s certificate, railway receipt, multimodal transport document, warrant
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 authorizing or purporting to
authorize, either by endorsement or by delivery, the possessor of the document to transfer
or receive goods thereby represented.”

V. Mercantile Agent [Section 2(9)]

Mercantile agent is someone who has authority in the customary course of business, either
to sell or consign goods under the contract on behalf of the one or both of the parties.
Examples include auctioneers, brokers, factors etc.

VI. Property [Section 2(11)]

In the Act, property means ‘ownership’ or the general property i.e. all ownership right of
the goods. A sale constitutes the transfer of ownership of goods by the seller to the buyer
or an agreement of the same.

VII. Insolvent [Section 2(8)]

The Act defines an insolvent person as someone who ceases 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.

VIII. Price [Section 2(10)]

In the Act, the price is defined as the money consideration for a sale of goods.

IX. Quality of Goods

In Sec 2(12) of the Act, the quality of goods is referred to as their state or condition.

Sale and Agreement of Sale (Section 4)

A contract is a formal or verbal agreement that is enforceable by law. Every contract must
have an agreement but every agreement is not a contract. The section 4(1) of the Sale of
Goods Act, 1930 states that – ‘A contract of sale of goods is a contract whereby the seller
either transfers or agrees to transfer the property in goods to the buyer for a decided
price.’

In Section 4(4) of the Act, it is maintained that for an agreement of sale to become a sale,
the time has to elapse or the conditions have to be fulfilled subject to which the property in
the goods is to be is to be transferred.
The point that is to be understood from the above discussion is that a contract for the sale
of goods can either be a sale or an agreement of sale. Let us see both the cases in the light
of the Act.

Sale

Here the property in goods is transferred at once to the buyer from the seller. The Section
4(3) of the Act says that “where under a contract of sale the property in the goods is
transferred from the seller to the buyer, the contract is then known as a sale.” A sale is
carried out on deliverable goods. Goods are said to be in a deliverable state when they are
in such a condition that the buyer would, under the contract, be bound to take delivery of
them [Section 2(3)].

The transfer of goods may be affected directly, after the fulfillment of a contingency or to a
party authorized by the seller.

Agreement To Sell

We saw that in a sale the property in the goods is transferred from the seller to the buyer.
However, in an agreement to sell, the ownership of the property in goods is not
transferred immediately. The objective of the agreement is to transfer the goods at a future
date, once some contingent clauses in the agreement or certain conditions are satisfied.

The Act in Section 4(3), defines what an agreement to sell is. The section 4(3) of the sale of
Goods Act defines it as, “where the transfer of the property in the goods is to take place at a
future time or subject to some condition thereafter to be fulfilled, the contract is called an
agreement to sell.”

Thus we see that a contract for the sale of goods may be either sale or agreement to sell.
This depends on the condition whether it postulates an immediate transfer of property
from the seller to the buyer or whether it postulates the transfer to take place at some
future date.

Now the question is that how does this transition from agreement to sell to sale occur?
The agreement to sell will become a sale if and only when the time elapses or the
conditions are fulfilled subject to which the contract of sale is to be fulfilled.

Elements of A Contract Of Sale

From the Sale of Goods Act, 1930, we see that certain elements must co-exist for a contract
of sale to be constituted. they are as follows:
 1. The presence of two parties is a must. As is the case with a contract, there
must be at least two parties in the contract of sale. One shall become the
seller and the other a buyer.

2. The clauses therein present in the contract of sale must limit their scope to
only the movable property. This “movable property” may constitute existing
goods, goods in the possession or the ownership of the seller or future goods.

3. One of the important elements is the consideration of price. A price in value

(currency and not in kind) has to be paid or promised. The price
consideration or the actual payment could be partly in kind and partly in
money but never in kind alone.

4. The ownership of the property of goods must change from the seller to the
buyer. In the contract of sale, like we saw in the elements of a contract, an
offer has to be made and then accepted. The offer is made by a seller and then
accepted by the buyer.

5. The contract of sale may be absolute or conditional.

6. The other essential elements of a contract, that we have already seen must
also be present here. The crucial elements of a contract like competency of
parties, the legality of object and consideration etc. have to be present like in
any other contract.

Warranty And Conditions

In a contract of sale, parties may make certain statements about the stipulation or the
course of trade. These stipulations in the contract of sale are made with reference to
the subject matter of the sale. These stipulations may either be a condition or in the
form of a warranty.

The provisions of the conditions and warranty are provided in the sections 11 to 17 of the
Act. The stipulations are the essence of the contract of sale and a breach of these
stipulations provides a remedy to the grieved party.

Conditions
A condition is a stipulation essential to the main purpose of the contract, the breach of
which gives the right to repudiate the contract and to claim damages. (Sec 12 (2)). We can
understand this with the help of the following example:

Say ‘X’ wants to purchase a car from ‘Y’, which can have a mileage of 20 km/lt. ‘Y’ pointing
at a particular vehicle says “This car will suit you.” Later ‘X’ buys the car but finds out later
on that this car only has a top mileage of 15 km/ liter. This amounts to a breach of
condition because the seller made the stipulation which forms the essence of the contract.
In this case, the mileage was a stipulation that was essential to the main purpose of the
contract and hence its breach is a breach of condition.
Warranty

A warranty is a stipulation collateral to the main purpose of the said contract. The breach
of warranty gives rise to a claim for damages. However, it does give a right to reject the
goods or treat the contract as repudiated. (Sec 12(3)). Let us understand this with the help
of an example below.

A man buys a particular car, which is warranted to be quite to drive and very comfortable.
It turns out that after some days the car starts to make a very unpleasant noise every time
it is operated. Also sitting inside it is also not very comfortable.

Thus the buyer’s only remedy is to claim damages. This is not a breach of the condition but
rather a breach of warranty, because the stipulation made by the seller was only a
collateral one.

Identification of a Stipulation as a Condition or Warranty

Whether a stipulation is a condition or a warranty is a very important aspect to have the

knowledge about. A stipulation in a contract of sale is either a condition or is a warranty
depending in either case on the construction of the contract. A stipulation may be a
condition, though called a warranty in the contract.

Implied Conditions

Conditions and Warranties may be either express or implied. The implied conditions and
warranties are those which are presumed by law to be present in the contract though they
have not been put into it in expressed words. Implied conditions are dealt with in Sections
14 to 17 of the Sale of Goods Act, 1930. Unless otherwise agreed, the law incorporates into
a contract of a sale of goods the following implied conditions:

Condition As To Title

In every contract of sale, the first implied condition on the part of the seller is that:

a. in case of a sale, he has a right to sell the goods,

b. and in the case of an agreement to sell, he will have the right to sell the goods
at the time when the property is to pass. Buyer is entitled to reject the goods
and to recover the price if the title turns out to be defective. [Section 14(a)].
Let us try to understand this with the help of an example. Let us say that person A bought a
tractor from another person B. The person B had no title to the tractor. Person A then goes
on to use the tractor for three months. Three months later, the legal owner of the tractor
spots it and demands it back from A. In this, the law holds that A is bound within the law to
hand over the tractor to the real owner of the tractor. A has the right to sue B, for the
recovery of the purchase price.
Condition As To Description

If there is a contract of sale of goods by description, a default implied condition is that

these goods must correspond with this description. The buyer is not bound to accept and
pay for the goods which are not in accordance with the description of goods. [Section (15)]

Let us consider an example. Suppose a ship was contracted to be sold as “copper-fastened

vessel” but actually it was only partly copper-fastened. This means that the goods did not
correspond to the description and hence they can be returned or if the buyer took the
goods, he could claim damages for breach.

Sale By Sample

In a contract of sale by sample, there is an implied condition that:

a. the bulk shall correspond with the sample in the quality;

b. the buyer shall have or shall be given a reasonable opportunity/chance of

comparing the bulk with the sample, and

c. the goods shall be free from any defect that may render them
unmerchantable, which would not be apparent on a reasonable examination
of the sample. [Section (17)]
For example, a company sells certain belts made up of a special material by sample for the
Indian Army. The belts are found to be made up of plastic of cheaper quality, not
discoverable by ordinary inspection. In this case, the buyer is entitled to the refund of the
price plus damages.

Sale By Sample As Well As By Description

Where the goods are sold by a sample as well as by description the implied condition is
that the bulk of the goods supplied must correspond both with the sample and the
description. In case the goods correspond with the sample but do not tally with the
description or vice versa, the buyer can repudiate the contract. [Section 15]

For example, A agrees to sell a certain oil described as refined rapeseed oil to B, warranted
only equal to sample. The goods that A tenders are found to be equal to the sample but
containing a mixture of hemp oil. In such a case B can reject the goods.

Condition As To Quality Or Fitness

Generally, there is no implied condition as to the quality or fitness of the goods that are
sold for a particular purpose. However, the condition as to the reasonable fitness of goods
for a particular purpose may be implied on the part of the seller for which the buyer wants
them. Following are the conditions to be satisfied:
 a. If the buyer had made known to the seller the purpose of his purchase

b. and the buyer relied on the seller’s skill and judgment, and

c. seller’s business to supply goods of that description. [Section 16]

For example, A purchases a hot water bottle from a chemist. The bottle burst and injured
A’s wife. A breach of condition as to the fitness was thus committed. Hence A is liable for a
refund of the price and also the damages.

Condition As To Merchantability

This is implied only where the sale is by description and the goods should be of
‘merchantable quality’ i.e. the goods must be such as are reasonably saleable under the
description by which they are known in the market. [Section 16(2)]

For example, A purchases a certain quantity of black yarn from B who is a dealer in yarn. A
finds the black yarn to be damaged by the white ants. Thus the condition as to
merchantability has been broken and A is entitled to reject it as unmerchantable.

Conditions As To Wholesomeness

In the case of eatables and provisions, there is another implied condition that the goods
shall be wholesome, in addition to the implied condition as to merchantability.

For example, A supplies B with milk. The milk contains bacteria and B’s wife consumes the
milk and is diagnosed with a disease. She later succumbs to the disease. Hence, there was a
breach of condition as to the fitness of the supplies and A was liable to pay damages to B in
this case.

Express Condition

An express condition is any stipulation, essential to the main function of the contract,
which is put in the contract at the will of the two parties.

Implied Warranties

In case the buyer is content is content with his right to damages or can’t reject the goods,
a condition (implied or express) may reach to the level of a warranty. Implied Warranties
are disclosed in Section 14 and 16 of the Sale of Goods Act, 1930 and are the warranties
which the law implies into the contract. In case the parties don’t want any of the implied
warranties to be included, they will have to expressly mention that in the contract. Implied
Warranties are as follows.
Warranty As To Undisturbed Possession

Well once you buy the goods, they shouldn’t be taken away from you. This warranty means
that the buyer should have and enjoy quiet possession of the goods after having gotten the
possession of the goods. If he is disturbed in his possession, he is entitled to sue the seller
for the breach of the warranty.

For example, A buys a laptop from B. After the purchase, A spends some money on its
repair and uses it for some time. Unknown to the parties, it turns out that the laptop was
stolen and was taken from A and delivered to its rightful owner. B shall be held
responsible for a breach and A is entitled to damages of not only the price but also the cost
of repairs.

Warranty As To Non-Existence Of Encumbrances

This is an implied warranty which maintains that the goods are free from any
encumbrance or charge from any third party who has not been introduced or known to
the buyer at or before the time of the contract of sale is entered into.

For example, a person A pledges his computer to another person B against a loan of Rs.
30,000. “A” also promises B that A will produce the laptop and give it to B the next day.
Later that day, A goes on to sell the laptop to C who is unaware of the course of dealings
between A and B. In this case, C can ask A to clear the loan immediately or clear the loan by
himself or herself and then proceed to file a suit against A for the recovery of the money
spent including the interest.

Learn Sale and Agreement of Sale here.

Disclosure Of Dangerous Nature Of Goods

In case the goods are inherently dangerous or they are likely to be dangerous to the buyer
and the buyer is ignorant or unaware of the danger, an implied warranty on the part of the
seller emerges. The seller must warn the buyer duly about the dangerous nature of the
goods if any. In case of a breach of this warranty, the seller will be liable in damages.

For example, a person X purchases a bottle of disinfectant from a person Y. Y knows that
the cap of the bottle is defective or cheap and if opened by a novice without care, it may
spill and result in partial burning or other damages of the person. When X opens the bottle,
he is injured. In this case, X is liable in damages to Y as Y should have been duly warned of
the probable danger.

Warranty As To Qualify Or Fitness By Usage Of Trade

An implied warranty as to the quality or the fitness for a particular purpose may be
annexed by the usage of the trade. For example, consider the following example:
A drug was sold through an auction and according to the usage of trade. It was to disclose
in advance any sea-damage, otherwise, it will be taken as a breach of warranty if no such
disclosure has been made and the goods found to be defective.

This concludes the topic of the Implied Warranties. We can say that any warranty that is
not expressed becomes an implied warranty. Let us now understand the Express
Warranties.

Express Warranties

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. [Section 12(3)]

Warranties that are inserted into the contract at the will and knowledge of the parties are
said to be expressed warranties or the Express Warranties.

The Doctrine of Caveat Emptor

The doctrine of Caveat Emptor is an integral part of the Sale of Goods Act. It translates to
“let the buyer beware”. This means it lays the responsibility of their choice on the buyer
themselves.

It is specifically defined in Section 16 of the act “there is no

implied warranty or condition as to the quality or the fitness for any particular purpose of
goods supplied under such a contract of sale“

A seller makes his goods available in the open market. The buyer previews all his options
and then accordingly makes his choice. Now let’s assume that the product turns out to be
defective or of inferior quality.

This doctrine says that the seller will not be responsible for this. The buyer himself is
responsible for the choice he made.

So the doctrine attempts to make the buyer more conscious of his choices. It is the duty of
the buyer to check the quality and the usefulness of the product he is purchasing. If the
product turns out to be defective or does not live up to its potential the seller will not be
responsible for this.

Let us see an example. A bought a horse from B. A wanted to enter the horse in a race.
Turns out the horse was not capable of running a race on account of being lame. But A did
not inform B of his intentions. So B will not be responsible for the defects of the horse. The
Doctrine of Caveat Emptor will apply.
However, the buyer can shift the responsibility to the seller if the three following
conditions are fulfilled.

 if the buyer shares with the seller his purpose for the purchase

 the buyer relies on the knowledge and/or technical expertise of the seller

 and the seller sells such goods

Learn more about Sale and Agreement of Sale here in detail

Exceptions to the Doctrine of Caveat Emptor

The doctrine of caveat emptor has certain specific exceptions. Let us take a brief look at
these exceptions.

1] Fitness of Product for the Buyer’s Purpose

When the buyer informs the seller of his purpose of buying the goods, it is implied that he
is relying on the seller’s judgment. It is the duty of the seller then to ensure the goods
match their desired usage.

Say for example A goes to B to buy a bicycle. He informs B he wants to use the cycle for
mountain trekking. If B sells him an ordinary bicycle that is incapable of fulfilling A’s
purpose the seller will be responsible. Another example is the case study of Priest v. Last.

2] Goods Purchased under Brand Name

When the buyer buys a product under a trade name or a branded product the seller cannot
be held responsible for the usefulness or quality of the product. So there is no implied
condition that the goods will be fit for the purpose the buyer intended.

3] Goods sold by Description

When the buyer buys the goods based only on the description there will be an exception. If
the goods do not match the description then in such a case the seller will be responsible
for the goods.

4] Goods of Merchantable Quality

Section 16 (2) deals with the exception of merchantable quality. The sections state that the
seller who is selling goods by description has a duty of providing goods of merchantable
quality, i.e. capable of passing the market standards.
So if the goods are not of marketable quality then the buyer will not be the one who is
responsible. It will be the seller’s responsibility. However if the buyer has had a reasonable
chance to examine the product, then this exception will not apply.

5] Sale by Sample

If the buyer buys his goods after examining a sample then the rule of Doctrine of Caveat
Emptor will not apply. If the rest of the goods do not resemble the sample, the buyer
cannot be held responsible. In this case, the seller will be the one responsible.

For example, A places an order for 50 toy cars with B. He checks one sample where the car
is red. The rest of the cars turn out orange. Here the doctrine will not apply and B will be
responsible.

6] Sale by Description and Sample

If the sale is done via a sample as well as a description of the product, the buyer will not be
responsible if the goods do not resemble the sample and/or the description. Then the
responsibility will fall squarely on the seller.

7] Usage of Trade

There is an implied condition or warranty about the quality or the fitness of

goods/products. But if a seller deviated from this then the rules of caveat emptor cease to
apply. For example, A bought goods from B in an auction of the contents of a ship. But B did
not inform A the contents were sea damaged, and so the rules of the doctrine will not
apply here.

8] Fraud or Misrepresentation by the Seller

This is another important exception. If the seller obtains the consent of the buyer by fraud
then caveat emptor will not apply. Also if the seller conceals any material defects of the
goods which are later discovered on closer examination then again the buyer will not be
responsible. In both cases, the seller will be the guilty party.

Transfer of Title

A Latin maxim says: ‘Nemo dat quod non habet’ which means that no one can give what he
doesn’t have. This is the ground principle regarding the transfer of title. Sections 27 to 30
of the Sale of Goods Act, 1930 specify these laws about the transfer of title. Let us take a
look.

Section 27 deals with the sale by a person who is not the owner. Imagine a
sale contract where the seller –
  Is not the owner of the goods

 Does not have consent from the owner to sell the goods

 Has not been given authority by the owner to sell the goods on his behalf
In such cases, the buyer acquires no better title to these goods than the seller had,
provided the conduct of the owner precludes the seller’s authority to sell.

Let us see an example. Peter steals a mobile phone from his office and sells it to John, who
buys it in good faith. However, John will get no title to the phone and will have to return it
to the owner when he demands, i.e. there is no transfer of title.

Now, this seems to be a really straight-forward rule. However, enforcing this rule can
mean that innocent buyers might suffer losses in most cases. Therefore, to protect the
interest of the buyers, certain exceptions are provided.

Exceptions to Section 27

In the following scenarios a non-owner of goods can transfer a better title to the buyer:

1] Sale by a Mercantile agent (Proviso to Section 27)

Consider a mercantile agent, who is in possession of the goods or a document to the title of
the goods, with the consent of the owner. Such an agent can sell the goods when acting in
the ordinary course of business of a mercantile agent. The sale shall be valid provided the
buyer acts in good faith and has no reason to believe that the seller doesn’t have any right
to sell the goods. The transfer of title is valid in such a case.

2] Sale by one of the Joint Owners (Section 28)

Many times goods are purchased in joint ownership. In many cases, the goods are kept in
the possession of one of these joint owners by the permission of the co-owners. If this
person (who has the sole possession of the goods) sells the goods, the property in the
goods is transferred to the buyer. This is provided the buyer acts in good faith and has no
reason to believe that the seller does not have a right to sell the goods.

Example: Peter, John, and Oliver are three friends to buy a 42-inch television set to watch
the upcoming cricket World Cup. They unanimously decide to keep the television set at
Oliver’s house. Once the World Cup is over, the TV is still at his house.
One day, Oliver’s office colleague Julia visits his house and he sells the TV to her. She buys
it in good faith and has no knowledge about the fact that it was purchased jointly. In this
case, she gets a good title to the TV.

3] Sale by a Person in Possession of Goods under a Voidable Contract (Section 29)

Consider a person who acquires possession of certain goods under a contract voidable on
grounds of coercion, misrepresentation, fraud or undue influence. If this person sells the
goods before the contract is terminated by the original owner of the goods, then the buyer
acquires a good title to the goods.

Example: Peter fraudulently obtains a gold diamond ring from Olivia. Olivia can void the
contract whenever she wants. Before she realizes the fraud, Peter sells the ring to Julia – an
innocent buyer. In this case, Olivia cannot recover the ring from Julia since she didn’t void
the contract before the sale was made.

4] Sale by a Person who has already sold the Goods but Continues to have
Possession [Section 30 (1)]

Consider a person who has sold goods but continues to be in possession of them or of the
documents of title to them. This person might sell the goods to another buyer.

If this buyer acts in good faith and is unaware of the earlier sale, then he will have a good
title to the goods even though the property in the goods was passed to the first buyer. A
pledge or other disposition of the goods or documents of title by the seller
in possession are valid too.

5] Sale by Buyer obtaining possession before the Property in the Goods has
Vested in him [Section 30 (2)]

Consider a buyer who obtains possession of the goods before the property in them is
passed to him, with the permission of the seller. He may sell, pledge or dispose of the
goods to another person.

If the second buyer obtains delivery of the goods in good faith and without notice of the
lien or any other right of the original seller, he gets a good title to them.

This rule does not hold true for a hire-purchase agreement which allows a person the
possession of the goods and an option to buy unless the sale is agreed upon.

Example: Peter takes a car from John under the conditions that he will pay Rs. 5,000 every
month as rent of the vehicle and that he can choose to purchase it for Rs. 100,000 to be
paid in 24 equal installments. Peter pays Rs. 5,000 for three months and then sells the car
to Oliver. In this case, John can recover his car from Oliver since Peter had neither
purchased the car nor agreed to purchase it. He only had an option to buy the car.

6] Estoppel

If an owner of goods is stopped by the conduct from denying the seller’s authority to sell,
the buyer gets a good title. However, to get a good title by estoppel, it needs to be proved
that the original owner had actively suffered or held out the seller in question as a person
authorized to sell the goods.

Let us see an example. Peter, John, and Oliver are having a conversation. Peter tells John
that he owns the BMW car parked nearby which actually belongs to Oliver. However,
Oliver remains silent. Subsequently, Peter sells the car to John.

In this case, John will get a good title to the car even though the seller is Peter who has no
title to it. This is because, Oliver, by his conduct, did not deny Peter’s authority to sell the
car.

7] Sale by an Unpaid Seller [Section 54 (3)]

If an unpaid seller exercises his right of lien or stoppage in transit and sells the goods to
another buyer, then the second buyer gets a good title to the goods as against the original
buyer. So in such a case transfer of title will occur.

8] Sale under the Provisions of other Acts

 Sale by an Official Receiver or Liquidator of the Company will give the

purchaser a valid title.

 Purchase of goods from a finder of goods will get a valid title under
circumstances [Section 169 of the Indian Contract Act, 1872]

 A sale by a pawnee can convey a good title to the buyer [Section 176 of
the Indian Contract Act, 1872]

Rights of Unpaid Seller Against Goods

Rights of Lien

Seller’s Lien (Section 47)

According to subsection (1) of Section 47 of the Sale of Goods Act, 1930, an unpaid seller,
who is in possession of the goods can retain their possession until payment. This is
possible in the following cases:
 1. He sells the goods without any stipulation for credit

2. The goods are sold on credit but the credit term has expired.

3. The buyer becomes insolvent.

Subsection (2) specifies that the unpaid seller can exercise his right of lien
notwithstanding that he is in possession of the goods acting as an agent or bailee for the
buyer.

Part-delivery (Section 48)

Further, Section 48 states that if an unpaid seller makes part-delivery of the goods, then he
may exercise his right of lien on the remainder. This is valid unless there is an agreement
between the buyer and the seller for waiving the lien under part-delivery.

Termination of Lien (Section 49)

According to subsection (1) of Section 49 of the Sale of Goods Act, 1930, an unpaid seller
loses his lien:

 If he delivers the goods to a carrier or other bailee for transmission to the

buyer without reserving the right of disposal of the goods.

 When the buyer or his agent obtain possession of the goods lawfully.

 By waiver.
Further, subsection (2) states that an unpaid seller, who has a lien, does not lose his lien by
reason only that he has obtained a decree for the price of the goods.

Right of Stoppage in Transit

This right is an extension to the right of lien. The right of stoppage in transit means that an
unpaid seller has the right to stop the goods while they are in transit, regain possession,
and retain them till he receives the full price.

If an unpaid seller has parted with the possession of the goods and the buyer becomes
insolvent, then the seller can ask the carrier to return the goods back. This is subject to
the provisions of the Act.

Duration of Transit (Section 51)

Goods are in the course of transit from the time the seller delivers them to a carrier or a
bailee for transmission to the buyer until the buyer or his agent takes delivery of the said
goods.
Some scenarios of the transit ending:

 The buyer or his agent obtain delivery before the goods reach the
destination. In such cases, the transit ends once the delivery is obtained.

 Once the goods reach the destination and the carrier of bailee informs the
buyer or his agent that he holds the goods, then the transit ends.

 If the buyer refuses the goods and even the seller refuses to take them back
the transit is not at an end.

 In some cases, goods are delivered to a ship chartered by the buyer.

Depending on the case, it is determined that if the master is functioning as an
agent or carrier of the goods.

 If the carrier or other bailee wrongfully refuses to deliver the goods to the
buyer or his agent, the transit ends.

 If a part-delivery of the goods has been made and the unpaid seller stops the
remaining goods in transit, then the transit ends for those goods. This is
provided that there is no agreement to give up the possession of all the
goods.

How Stoppage is Affected (Section 52)

There are two ways of stopping the transit of goods:

1. The seller takes actual possession of the goods

2. If the goods are in the possession of a carrier or other bailee, then the seller
gives a notice of stoppage to him. On receiving the notice, the carrier or bailee
must re-deliver the goods to the seller. The seller bears the expenses of the
re-delivery.

Effect of Stoppage

Even if the unpaid seller exercises his right of stoppage in transit, the contract stays valid.
The buyer can ask for delivery of the goods after making the payment.

Right of Resale (Section 54)

The right of resale is an important right for an unpaid seller. If he does not have this right,
then the right of lien and stoppage won’t make sense. An unpaid seller can exercise his
right of resale under the following conditions:

 Goods are perishable in nature: In such cases, the seller does not have to
inform the buyer of his intention of resale.
  Seller gives a notice to the buyer of his intention of resale: The buyer
needs to pay the price of the goods and ask for delivery within the time
mentioned in the notice. If he fails to do so, then the seller can resell the
goods. He can also recover the difference between the contract price and
resale price if the latter is lower. However, if the resale price is higher, then
the seller keeps the profits.

 Unpaid seller resells the goods post exercising his right of lien or
stoppage: The subsequent buyer acquires a good title to the goods even if
the seller has not given a notice of resale to the original buyer.

 Resale where the right of resale is reserved in the contract of sale: If

the contract of sale specifies that the seller can resell the goods if the buyer
defaults, then the seller reserves his right of sale. He can claim damages from
the original buyer even if he does not give a notice of resale to him.

 Property in the goods has not passed to the buyer: The unpaid seller can
exercise his right of withholding delivery of goods. This is similar to the right
of lien and is called quasi-lien.

Rights of Unpaid Seller Against Buyer

When the buyer of goods does not pay his dues to the seller, the seller becomes an unpaid
seller. And now the seller has certain rights against the buyer. Such rights are the seller
remedies against the breach of contract by the buyer. Such rights of the unpaid seller are
additional to the rights against the goods he sold.

1] Suit for Price

 Under the contract of sale if the property of the goods is already passed but he
refuses to pay for the goods the seller becomes an unpaid seller. In such a case. the
seller can sue the buyer for wrongfully refusing to pay him his due.
 But say the sales contract says that the price will be paid at a later date irrespective
of the delivery of goods,. And on such a day the if the buyer refuses to pay, the
unpaid seller may sue for the price of these goods. The actual delivery of the goods
is not of importance according to the law.

2] Suit for Damages for Non-Acceptance

 If the buyer wrongfully refuses or neglects to accept and pay the unpaid seller, the
seller can sue the buyer for damages caused due to his non-acceptance of goods.
Since the buyer refused to buy the goods without any just cause, the seller may face
certain damages.
 The measure of such damages is decided by the Section 73 of the Indian Contract
Act 1872, which deals with damages and penalties. Take for example the case of
seller A. He agrees to sell to B 100 liters of milk for a decided price. On the day, B
refuses to accept the goods for no justifiable reason. A is not able to find another
buyer and the milk goes bad. In such a case, A can sue B for damages.
3] Repudiation of Contract before Due Date
 If the buyer repudiates the contract before the delivery date of the goods the seller
can still sue for damages. Such a contract is considered as a rescinded contract, and
so the seller can sue for breach of contract. This is covered in the Indian Contract
Act and is known as Anticipatory Breach of Contract.

4] Suit for Interest

 If there is a specific agreement between the parties the seller can sue for
the interest amount due to him from the buyer. This is when both parties have
specifically agreed on the interest rate to be paid to seller from the date on which
the payment becomes due.
 But if the parties do not have such specific terms, still the court may award the
seller with the interest amount due to him at a rate which it sees fit.