CENTRE FOR DISTANCE AND ONLINE EDUCATION

CENTRE FOR DISTANCE AND ONLINE EDUCATION

Live Session – Session No. 3

BCOM103 – Corporate Legal Environment

Unit No. 3: SALES OF GOODS ACT 1930
B.Com. Semester-I
SURAJ AGARWAL
M.COM, M.B.A, UGC NET
(Qualified)
FACULTY CDOE, SMU
Learning Outcomes

1 2 3 4
Describe joint Describe the Distinguish between Know accounting
venture. features of joint joint ventures and treatment in joint
ventures. consignment sales. ventures.
Meaning of Contract Of Sale.
According to the Sale of Goods Act, 1930, a contract of sale of goods is one in which the seller transfers
or agrees to transfer the property in goods to the buyer for a price.
The following essential elements are necessary for a contract of sale:
i) Two parties: There must be two parties, i.e., a buyer and a seller, to effect a contract of sale, and they
must be competent to contract.
ii) Goods: There must be some goods, the property which is to be transferred from the seller to the
buyer. The goods which form the subject matter of the contract of sale must be movable. Transfer of
immovable property is not regulated by the Sale of Goods Act.
iii) Price: The consideration for the contract of sale of goods is called price, and it must be expressed in
monetary terms. When goods are exchanged for goods, it is not a sale, but barter.
iv) Transfer of general property: There must be a transfer of general property as distinguished from
special property in goods from the seller to the buyer. For example, if Mr. Amarjit owns certain goods, he
has general property in the goods. If he pledges them with Mr Bhagat, the latter has a special property in
the goods.
v) Essential elements of a valid contract: All the essential elements of a valid contract must be present
in the contract of sale.
DIFFERENCE BETWEEN SALE AND AGREEMENT TO SELL

PARAMETERS SALE AGREEMENT TO SELL

Meaning Immediate transfer of ownership once The agreement of selling to a buyer under
the payment is made. certain conditions on the specified future
date.
Type of Contract It is an executed contract. It is an executory contract.
What happens if there The buyer can return the product or get The buyer can claim only for damages and
is a breach of contract a refund if the product or service does not the price.
not meet expectations.
Reselling The seller cannot resell after a sale. The seller can resell when conditions are
not met.
Existence of The property already exists, and only The property doesn’t need to exist when
property/product then is a sale made. signing an agreement to sell because the
sale is made on a future date.
Meaning of Goods.
'Goods' means every kind of moveable property 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 a sale or under a
contract of sale. Thus, goods include all kinds of moveable properties other than actionable claims or
money. A few examples of goods are goodwill, copyright, trademark, patents, water, gas and electricity;

1. Existing Goods – Existing goods are those which are owned or possessed by the seller at the time of
the contract. Instances of sale of goods possessed but not owned by the sellers are sale by agents and
pledgees. Existing goods may be either:
Goods may be classified into:
(a) Specific and ascertained – goods identified and agreed upon at the time a contract of sale is made.
(b) Generic and unascertained – goods indicated by description and not specifically identified.
2. Future Goods – These are the goods to be manufactured or, produced or acquired by the seller after
making the contract of sale.
3. Contingent Goods – Contingent goods are the acquisition of goods by the seller, depending upon a
contingency, which may or may not happen. Contingent goods are a part of future goods.
 Condition and Warranty
Condition [Sec.12 (2)]: A condition is a stipulation which is essential to the main purpose of the
contract. It goes to the root of the contract. Its non-fulfilment upsets the very basis of the contract.
Warranty [Sec.12 (3)]: A warranty is a stipulation which is collateral to the main purpose of the
contract. It is not of such vital importance as a condition.
Difference between condition and warranty:
1. Difference as to value: A condition is a stipulation which is essential to the main purpose of the
contract. A warranty is a stipulation which is collateral to the main purpose of the contract.
2. Difference as to breach: If there is a breach of condition, the aggrieved party can repudiate the
contract of sale. In case of breach of warranty, the aggrieved party can claim damages only.
3. Difference as to treatment: A breach of a condition may be treated as a breach of warranty. This
would happen where the aggrieved party is content with damages only. A breach of warranty,
however, cannot be treated as a breach of a condition.
 Condition treated as
Warranty
The circumstances under which a condition can be treated as a warranty are:
a) If the condition needs to be fulfilled by the seller and the buyer agrees to waive the
condition or treats its breach as a breach of warranty and does not repudiate the contract on
the basis of the same.
b) If the contract is not severable and the buyer has accepted delivery of the whole or a part
of the goods, a breach of condition by the seller is normally treated as a breach of warranty,
and the contract cannot be rejected, unless there are express or implied terms in the contract
to that effect.
c) In circumstances under which the condition or warranty becomes impossible to perform as
per law.
 Meaning of Unpaid Seller.
The seller of goods is deemed to be an ’unpaid seller’ within the meaning of this Act under the following circumstances:
(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 conditions on
which it was received have not been fulfilled by reason of dishonour of the instrument or otherwise.
Such an unpaid seller has the following rights as per the Act:
1. Right of lien [Sec. 46 (1) (a) and 47]: A lien is a right to retain procession of the goods until payment of the price [Sec.
41(a)]. It is available to the unpaid seller in possession of the goods
2. Right of stoppage in transit [Sec. 46 (1) (b)]: The right of stoppage in transit is a right of stopping the goods in transit,
after the unpaid seller has parted with the possession of goods. This right is normally exercised when the buyer
becomes insolvent.
3. Right of re-sale (Sec. 46 (1) (c)]: The unpaid seller can resell the goods if the goods are of a perishable nature, or if
notice is given to the buyer of his intention to re-sell the goods and the buyer does not pay or tender the price, within a
reasonable time.
4. Right of withholding the delivery [Sec. 46(2)]: Where the property in goods has not passed to the buyer, the unpaid
seller has the right to withhold delivery, similar to and coextensive with the rights of lien and stoppage in transit where
the property has passed to the buyer. This right is in addition to his other remedies.
RIGHT OF BUYER.
Rights of a Buyer
According to the Sale of Goods Act, the buyer has the following rights:
i) Right to have delivery as per contract (Sec. 31 and 32). The first right of the buyer is to have delivery of the goods as
per the terms of the contract of sale.
ii) Right to reject the goods (Sec. 37). If the seller sends to the buyer a larger or smaller quantity of goods than ordered,
the buyer has three options – to reject the whole, accept the whole, or accept the quantity that was ordered and reject
the rest.
iii) Right to repudiate [(Sec. 38 (1)]. Unless otherwise agreed, the buyer of goods has the right to not accept delivery by
instalments.
iv) Right to examine (Sec. 41). The buyer has a right to examine the goods which were not previously examined before
accepting them [Sec. 41(1)].
v) Right against the seller for breach of contract. The following rights are available to the buyer for breach of contract by
the seller:
a) Suit for damages (Sec. 57). Where the seller wrongfully neglects or refuses to deliver goods to the buyer, the buyer may
sue the seller for damages for non-delivery.
b) Suit for price. If the buyer has paid the price and the goods are not delivered, the buyer can recover the amount paid.
c) Suit for specific performance (Sec. 58). The buyer may sue the seller for specific performance of the contract to sell. If
the goods are specific or ascertained, the court may order for the specific performance of the contract.
DUTIES OF BUYER.
Duties of a Buyer
The Sale of Goods Act specifies certain duties for the buyer, apart from the above rights. They are:
1. Duty to accept the goods and pay for them in exchange for possession (Sec. 31 and 32) – It is the duty of the buyer to
accept the goods and pay for them, in accordance with the terms and contract of sale (Sec. 31). Further, the buyer must
be ready and willing to pay the price in exchange for possession of the goods (Sec. 32).
2. Duty to apply for delivery (Sec. 35) – Apart from any express contract, it is the duty of the buyer to apply for delivery.
3. Duty to demand delivery at a reasonable hour [Sec. 36 (4)] – It is the duty of the buyer to demand delivery at a
reasonable hour.
4. Duty to take the risk of deterioration in the course of transit [Sec. 40] – Where the seller of goods agrees to deliver
them at their own risk at a place other than where they are sold, the buyer shall take any risk of deterioration in the goods
necessarily incidental to the course of transit.
5. Duty to intimate the seller in case of rejecting the goods (Sec. 43) – Unless otherwise agreed, it is the duty of the
buyer to inform the seller in case there is any refusal to accept the goods.
6. Duty to take delivery (Sec. 44) – It is the duty of the buyer to take delivery of the goods within a reasonable time after
the tender of delivery. The buyer becomes liable to the seller for any loss occasioned by neglect or refusal to take delivery.
7. Duty to pay price (Sec. 55) – Where property in goods has passed to the buyer, it is the duty to pay the price according
to the terms of their contract.
8. Duty to pay damages for non-acceptance (Sec. 56) – Where the buyer wrongly neglects or refuses to accept the goods,
the buyer will have to compensate the seller for damages caused by such non-acceptance.
Miscellaneous
The Doctrine of Caveat Emptor means that the responsibility lies on the buyer of goods and he must
perform due diligence before the purchase of the goods. It is expected from the buyer to be alert in a
contract of sale. He cannot hold the seller responsible for inferior goods unless the contact is based on
fraud.
Exceptions to the Doctrine of Caveat Emptor
Fitness of the Product for the Buyer’s Purpose of Purchase- Section 16 (1): If the buyer informs the
seller about his purpose behind purchasing the goods and the seller does not sell the goods according
to that knowingly, it relieves the buyer from the responsibility.
Sale of Goods Under the Trade Name : If the buyer purchases a branded product or a product sold
under a trading name, then he is assured of the quality that is associated with that brand name.
Goods Sold by Description: The seller will be held liable only if he provides an incorrect description of
the goods.
Merchantable Quality of Goods- Section 16(2): The seller must provide goods of merchantable quality
to the buyer. This means that the goods must be fit for resale in the market and must pass the market
standards. If the goods are not of merchantable quality, then the seller can be held liable for the same.
Fraudulent Representation by the Seller: If the seller provides fraudulent information about the goods
or conceals some important information about them, the buyer is not responsible.
Human resources slide 9

Thank
You