SALE OF GOODS ACT, 1930

The law relating to sale of goods is contained in the Sale of Goods Act, 1930. It has
to be read as part of the Indian Contract Act, 1872 [Sections 2(5) and (3)].
Contract of Sale of Goods
According to Section 4, a contract of sale of goods is a contract whereby the
seller:
(i) transfers or agrees to transfer the property in goods,
(ii) to the buyer,

(iii) for a money consideration called the price.

It shows that the expression “contract of sale” includes both a sale where the
seller transfers the ownership of the goods to the buyer, and an agreement to sell
where the ownership of goods is to be transferred at a future time or subject to
some conditions to be fulfilled later on.

Essentials of a contract of sale of goods:

(i) Bilateral contract: It is a bilateral contract because the property in goods has to
pass from one party to another. A person cannot buy the goods himself.

(ii) Transfer of property: The object of a contract of sale must be the transfer of
property (meaning ownership) in goods from one person to another.

(iii) Goods: The subject matter must be some goods.

(iv)Price or money consideration: The goods must be sold for some price, where
the goods are exchanged for goods it is barter, not sale.

(v) All essential elements of a valid contract must be present in a contract of sale.

Q. DIFFERENCE BETWEEN SALE AND AGREEMENT TO SELL

No                           Sale Agreement to Sell  

1
Meaning: where the Meaning:  where the transfer
Property immediately of property in goods is to
transferred from seller to take place in future, from
buyer, it is called ‘Sale’.    seller to buyer is called
‘Agreement to Sell’.  

2 Definition: Sale can be Definition: in case where the

defined as “transfer of seller agrees with the buyer
ownership in the goods by to transfer the title of
the seller to buyer in ownership on a future date
exchange of price paid or upon satisfying certain
promised or partly paid and condition is called as
partly promised.   ‘Agreement to Sale’.  

3 Example: ‘X’ sold 10 bags Example:  ‘X’ agrees to sell 10

of Wheat to ‘Y’ against bags of wheat to ‘Y’ for
payment of Rs. 3,000.  Rs.3,000  after getting the
stock.

4 In contract of sale property In agreement to sell,

in goods transfers from property in goods does not
seller to buyer immediately transfer immediately

  

5 Contract of sale is an Agreement to Sell is an

 executed contract executory contract

6 It creates right in rem  It creates rights in personam

7 The seller can sue the buyer The seller can sue the buyer
for case of breach of only for damages but not for
contract. the price.

8 Sale is liable for the Sale Agreement to sale is not

Tax. liable for the Sale Tax.

9 Seller has no right of resale. Seller has right of resale.

 

10 If the goods are destroyed, The loss fall on the seller

the loss is borne by the even though the goods are in
buyer even though the the possession of the buyer.  
goods are in the possession
of the seller.

Q. DIFFERENCE BETWEEN SALE AND HIRE PURCHASE AGREEMENT

The main points of distinction between the ‘sale’ and ‘hire-purchase’ are as
follows:

1. In a sale, property in the goods is transferred to the buyer immediately at the

time of contract, whereas in hire-purchase, the property in the goods passes to
the hirer upon payment of the last installment.

2. In a sale, the position of the buyer is that of the owner of the goods but in hire
purchase, the position of the hirer is that of a bailee till he pays the last
installment
3. In the case of a sale, the buyer cannot terminate the contract and is bound to
pay the price of the goods. On the other hand, in the case of hire-purchase, the
hirer may, if he so likes, terminate the contract by returning the goods to its
owner without any liability to pay the remaining installments.

4. In the case of a sale, the seller takes the risk of any loss resulting from the
insolvency of the buyer. In the case of hire purchase, the owner takes no such
risk, for if the hirer fails to pay an installment, the owner has the right to take
back the goods.

5. In the case of a sale, the buyer can pass a good title to a bonafide purchaser
from him but in a hire-purchase, the hirer cannot pass any title even to a bonafide
purchaser.

6. In a sale, sales tax is levied at the time of the contract whereas in a hire-
purchase, sales tax is not leviable until it eventually ripens into a sale.

Subject matter of Contract of Sale of Goods

Q. Define Goods?

The subject matter of the contract of sale is essentially goods. According to

Section 2(7) of the Sale of Goods Act, “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.

Actionable claims and money are not goods and cannot be brought and sold
under this Act.

Q. CLASSIFICATION OF GOODS?
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 or may not happen.

A agrees to sell a certain TV set provided he is able to get it from its present
owner. This is an agreement to sell contigent goods.

Q. Define 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.

Q. Effect of Perishing of Goods ?

In a contract of sale of goods, the goods may perish before sale is complete.

Section 7: Goods perishing before making of contract. — Where there is a

contract for the sale of specific goods, the contract is void if the goods without
the knowledge of the seller have, at the time when the contract was made,
perished or become so damaged as no longer to answer to their description in the
contract.
Section 8.: Goods perishing before sale but after agreement to sell.—Where there
is an agreement to sell specific goods, and subsequently the goods without any
fault on the part of the seller or buyer perish or become so damaged as no longer
to answer to their description in the agreement before the risk passes to the
buyer, the agreement is thereby avoided.

Q. Modes of Fixing Price?

The sec 9 of the Act states the following:
 The price in a contract of sale may be fixed by the contract, or it may be left to be
fixed in manner thereby agreed or it can be determined by the course of dealing
between the parties to the contract.

 Where the price is not determined in accordance with the said provisions, the

buyer shall pay the seller a reasonable price. Reasonable price will depend on
the individual case or circumstance.

According to Section 9 (1) of the said Act, it can be stated that:

i. the contract, i.e. the price is explicitly mentioned or decided within the
contract of sale itself or
ii. the contract has some clause(s) that has the or defines the authority that will
eventually ascertain the price. For example, the contract asks for a valuer to be
commissioned for the purpose of the ascertainment of price.
iii. the price may also be determined by the course of dealings. For example, if
the two parties have a long history of dealing with each other, then the price if
not specified clearly can be ascertained from the previous history of dealings
and prices. Clearly, this portion of the section is only applicable if the parties
have a tradition or history of similar deals.
Similarly, Sec 9 (2) says that if the price is not determined through either of the
methods discussed in sec 9 (1) then the buyer will have to pay the seller a
reasonable price. This price will be decided in accordance with the market value.

For example: if the Government of your State has been purchasing its electricity
from a neighboring state at a given price. If they enter into a new contract, then the
price will either be:

i. explicitly mentioned in the contract.

ii. fixed by the two parties after due consideration with each other.
iii. or the price will be the same as was traditionally accepted by the two parties.
Agreement to sell at Valuation (Section 10)
Section 9 of the said Act explains the direct modes of ascertaining the price.
However, there are other modes of price determination that are laid down in
Section 10, they are as follows:

 Where there is an agreement to sell 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; PROVIDED that,
if the goods or any part thereof have been delivered to and appropriated by,
the buyer, he shall pay a reasonable price, therefore.

 Where such third party is prevented from making the valuation by the fault
of the seller or buyer, the party not in fault may maintain a suit for damages
against the party in fault.”
The method of determination or mode of ascertaining the price here is by a third
party. This comes into effect when both the parties have decided to the clause that
the price will be decided by the third party. However in case the third party is not
capable or refuses to make a proper valuation of the goods to be purchased, then
the agreement will be void.

In some cases, the third party may be obstructed by the default of one of the
parties. In such case, the party at fault will be responsible to pay proper
compensation in terms of damages to the other party, provided that the other party
is not at fault. Once the goods have been appropriated and received, the buyer is
liable to pay the price thereof.

Q. Define CONDITION AND WARRANTY?

Condition
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)]
Example:

‘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)]
Example:
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.

Q. Difference between CONDITION and WARRANTY?

 BASIS FOR
CONDITION WARRANTY
COMPARISON

Meaning A requirement or event A warranty is an assurance

that should be performed given by the seller to the
before the completion of buyer about the state of the
another action is known as product, that the prescribed
Condition. facts are genuine.

Defined in Section 12 (2) of Indian Sale Section 12 (3) of Indian Sale

of Goods Act, 1930. of Goods Act, 1930.

What is it? It is directly associated with It is a subsidiary provision

the objective of the related to the object of the
contract. contract.

Result of breach Termination of contract. Claim damages for the

breach.

Violation Violation of condition can Violation of warranty does

be regarded as a violation not affect the condition.
of the warranty.

Remedy available Repudiate the contract as Claim damages only.

to the aggrieved well as claim damages.
party on breach

Q. When CONDITION to be treated as WARRANTY ?

According to Section 13 of the said Act, a condition may be treated as a warranty

under the following circumstances:
 (1) Where a contract of sale is subject to any condition to the fulfilled by the
seller, the buyer may waive the condition or elect to treat the breach of the
condition as a breach of warranty and not as a ground for relating the contract as
repudiated.

(2) Where a contract of sale is not severable and the buyer has accepted the
goods or part thereof, the breach of any condition to be fulfilled by the seller can
only be treated as a breach of warranty and not as a ground for rejecting the
goods and treating the contract as repudiated, unless there is a term of the
contract, express or implied, to that effect.

(3) Where the aggrieved party is contended with the damages the breach of
condition may be treated as warranty as the breach of warranty.

Q. Implied Conditions and Warranties under the Sale of Goods Act?

Section 14-17 of the Sale of Goods Act, 1930 deal with the implied conditions and
warranties attached to the subject matter for the sale of a good which may or
may not be mentioned in the contract.

Implied Condition in a contract of Sale:

1. Condition as to Title [Section 14(a)]

Section 14(a) of the Sale of Goods Act 1930 explains the implied condition as to
title as ‘in the case of a sale, he has a right to sell the goods and that, in the case
of an agreement to sell, he will have a right to sell the goods at the time when the
property is to pass’.
This means that the seller has the right to sell a good only if he is the true owner
and holds the title of the goods or is an agent of the title holder. When a good is
sold the implied condition for the good is its title, i.e. the ownership of the good.
If the seller does not own the title of the said good himself and sells it to the
buyer, it is a breach of condition. In such a situation the buyer can return the
goods to the seller and claim his money back or refuse to accept the good before
delivery or whenever he learns about the false title of the seller.

CASE LAW: Rowland v Divall, 192210 – The plaintiff had purchased a car from the
defendant and was compelled to return it to the true owner after having used it
for a while. The plaintiff then sued the defendant for the purchase money, since
the defendant didn’t receive the consideration as per the condition of the title of
ownership.

2. Sale by Description (Section 15)

(a) Goods must correspond with description: Section 15 of the Sale of Goods Act,
1930 explains that when a buyer intends to buy goods by description, the goods
must correspond with the description given by the buyer at the time of formation
of the contract, failure in which the buyer can refuse to accept the goods.

(b) Goods must also be of merchantable quality: 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 on the said issue.

(c) Condition 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.

(d) Condition as to quality or fitness for a particular purpose:

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:

I. If the buyer had made known to the seller the purpose of his purchase and
the buyer relied on the seller’s skill and judgment
II. 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.

3. Sale by Sample (Section 17)

When the goods are to be supplied on the basis of a sample provided to the seller
by the buyer while the formation of a contract the following conditions are
implied:

 Bulk supplied should correspond with the sample in quality

 Buyer shall have a reasonable opportunity to compare the goods with
the sample
 The good shall be free from any apparent defect on reasonable
examination by the buyer.
4. Sale by sample as well as Description (Section 15)

When the sale of goods is by a sample as well as a description the bulk of the
goods should correspond with both, i.e. description and sample provided to the
seller in the contract and not only sample or description.

Implied Warranty

1. Enjoy Possession of the Goods [Section 14(b)]

Section 14(b) of the Act mentions ‘an implied warranty that the buyer shall
have and enjoy quiet possession of the goods’ which means a buyer is entitled
to the quiet possession of the goods purchased as an implied warranty which
means the buyer after receiving the title of ownership from the true owner
should not be disturbed either by the seller or any other person claiming
superior title of the goods. In such a case, the buyer is entitled to claim
compensation and damages from the seller as a breach of implied warranty.

2. Goods are free from any charge or encumbrance in favour of any third
party [Section 14(c)]

Any charge or encumbrance pending in favour of the third party which was not
declared to the buyer while entering into a contract shall be considered as a
breach of warranty, and the buyer is be entitled to compensation and claim
damages from the seller for the same.

Q. 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.

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.

Example: A bought a horse from B and wanted to enter in a race. Later it turns
out that 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.

Exceptions: However, the buyer can shift the responsibility to the seller if the
following conditions are fulfilled. Section 16 lays down the following exceptions
to the doctrine of Caveat Emptor:

(1) Where the seller makes a false representation and the buyer relies on it.

(2) When the seller actively conceals a defect in the goods which is not visible on
a reasonable examination of the same.

(3) When the buyer, relying upon the skill and judgement of the seller, has
expressly or impliedly communicated to him the purpose for which the goods are
required.

(4) Where goods are bought by description from a seller who deals in goods of
that description.

Q. Transfer of Property in Goods

The property in the goods is said, to be transferred from the seller to the buyer
when the latter acquires the proprietary rights over the goods and the obligations
linked thereto. 'Property in Goods' which means the ownership of goods, is
different from ' possession of goods' which means the physical custody or control
of the goods.

The transfer of property in the goods from the seller to the buyer is the essence
of a contract of sale. Therefore the moment when the property in goods passes
from the seller to the buyer is significant for following reasons:

a)Ownership -- The moment the property in goods passes, the seller ceases to be
their owner and the buyer acquires the ownership. The buyer can exercise the
proprietary rights over the goods. For example, the buyer may sue the seller for
non-delivery of the goods or when the seller has resold the goods, etc.

b)Risk follows ownership -- The general rule is that the risk follows the
ownership, irrespective of whether the delivery has been made or not. If the
goods are damaged or destroyed, the loss shall be borne by the person who was
the owner of the goods at the time of damage or destruction. Thus the risk of loss
prima facie is in the person in whom the property is.

c)Action Against Third parties -- When the goods are in any way damaged or
destroyed by the action of third parties, it is only the owner of the goods who can
take action against them.

d) Suit for Price - The seller can sue the buyer for the price, unless otherwise
agreed, only after the gods have become the property of the buyer.

e) Insolvency - In the event of insolvency of either the seller or the buyer, the
question whether the goods can be taken over by the Official Receiver or
Assignee, will depend on whether the property in goods is with the party who has
become insolvent.

Essentials for Transfer of Property -- The two essentials requirements for transfer
of property in the goods are:

 Goods must be ascertained: Unless the goods are ascertained, they (or the
property therein) cannot pass from the seller to the buyer. Thus, where
 there is a contract for the sale of unascertained goods, no property in the
goods is transferred to the buyer unless and until the goods are ascertained

 Intention to PASS Property in Goods must be there: In a sale of specific or

ascertained goods the property in them is transferred to the buyer at such
time as the parties to the contract intend it to be regard shall be had to the
terms of the contract, the conduct of the parties and the circumstances of
the case.

Q. Who is a seller?

The definition of the seller is given in Section 2(13) of the Sale of Goods Act, 1930.
The seller can be defined as a person who agrees to sell goods.

Q. Rights of the Seller (Section 31)

 He can reserve the rights of the goods until and unless payment of goods is
done.

 He can assume that the buyer has accepted the goods or not.

 He will only deliver the goods when the buyer would apply for the delivery.

 He can make the goods delivered in instalments when so agreed by the

buyer.

 He can have the possession of the goods until the buyer hasn’t paid for the
goods.

 He can stop the delivery of goods and resume possession of the goods
unless and until the payment is done for the goods.

 He can resell the goods under certain conditions.

 He can bring the goods back if it is not delivered to the buyer.

 He can sue the buyer if the buyer fails to make the payment on a certain
day, in terms of the contract.
Duties of seller

 He should make an arrangement for the transfer of property to the buyer.

 He should check whether the goods are delivered properly or not.

 He should give a proper title to the goods which he has to pass to the
buyer.

 He should deliver the goods according to the terms of the agreement.

 He should ensure that the goods supplied should be agreed to the implied
condition and warranties.

 He should keep the goods in a deliverable state and deliver the goods when
the buyer asks for it.

 He should deliver the goods within a specific time fixed in the contract.

 He should bear all the expenses for which the good should be delivered.

 He should deliver the goods as said by the buyer in the contract in an

agreed quantity.

 To deliver the goods in instalments only when the buyer wants.

 He should make arrangements for the goods while they are in the custody
of the carrier.

Q. Who is a buyer?

The definition of the buyer is given in Section 2(1) of the Sale of Goods Act, 1930.
The buyer can be defined as a person who buys goods from the seller.

Q. Rights of the Buyer (Section 31)

 He should get the delivery of the goods as per contract.

 He can reject the goods if the quality and quantity are not as specified in
the contract.
  To deny the contract when goods are delivered in instalments without any
agreement to the effects.

 The seller should inform him when the goods are to be sent by sea route,
so that the buyer may arrange for their insurance.

 He can examine the goods for checking whether they are in the agreement
with the contract.

 If he has already paid he can sue the seller for recovery of the price if the
seller fails to deliver the goods.

 He can also sue the seller for damages or the seller’s wrongful neglect or
the seller refuses to deliver the goods to the buyer.

 He can sue the seller for damages for breach of a warranty or for breach of
a condition.

 He can sue the seller for the damages of breach of contract.

Q. Duties of the Buyer

 He should accept the delivery of goods when the seller is prepared to make
the delivery as per the contract.

 To have possession on it he should pay the price for the goods as per the
contract.

 He should apply for the delivery of the goods.

 He can ask to deliver the goods at a particular time.

 He should accept delivery of the goods in instalments and pay for it

according to the contract.

 He should bear the risk of failure of delivery of goods if the delivery point is
a distant place.
  He should pay the price on the transfer of possession of the goods as given
in the term of the contract.

 He has to pay for not accepting the goods.

Q. Who is an Unpaid seller?

As defined by Section 45 of Sale of Goods Act, 1930, a person has sold some
goods and has not got the whole price and if the transaction is done through
negotiable instruments like cheque, bill of exchange and a promissory note, then
the person can be said as an unpaid seller.

Illustration- If A is a seller and he delivers the goods to B and transfers the

possession, and if B hasn’t paid the sum then A becomes an unpaid seller.

Q. Rights of an unpaid seller?

Section 46 of the Sale of Goods Act 1930, discusses the rights of an unpaid seller.
This can be of two types:

a)Against the goods – jus in rem ( right against property)

b)Against the buyer – jus in personam (right against the person)

a) Right against the goods

1. Right of lien/Right of Retention which means the seller has the right on the
possession over the goods. An unpaid seller in possession of goods sold, may
exercise his lien on the goods, i.e., keep the goods in his possession and refuse to
deliver them to the buyer until the fulfilment or tender of the price in cases
where:

(i) the goods have been sold without stipulation as to credit ; or

(ii) the goods have been sold on credit, but the term of credit has expired ; or

(iii) the buyer becomes insolvent.

2. Right to stoppage in transit which means the seller can call up the carrier
transporter and tell not to deliver the goods. The right to stop goods is available
to an unpaid seller

(i) when the buyer becomes insolvent; and

(ii) the goods are in transit.

3. Right to resale means the seller can again sell the goods as he has the
possession of the goods.

The unpaid seller may re-sale:

(i) where the goods are perishable;

(ii) where the right is expressly reserved in the contract;

(iii) where in exercise of right of lien or stoppage in transit, the seller gives notice
to the buyer of his intention to re-sell, and the buyer, does not pay or tender the
price within a reasonable time.

4. The right to withhold delivery - If the property in the goods has passed, the
unpaid seller has right as described above. If, however, the property has not
passed, the unpaid seller has a right of withholding delivery similar to and co-
extensive with his rights of lien and stoppage in transit.

b) Rights against the buyer

 The seller has the right to sue the buyer for the price if the seller has
already sold the goods and the buyer hasn’t paid the sum.

 The seller has the right to sue for the damages, for e.g. if the seller has sent
the carrier for the delivery and the buyer isn’t available to receive the
delivery and the goods returned back by the carrier to the seller then he
can sue the buyer for damages like the packing of goods, transportation
charges and so many.
  If the buyer hasn’t paid the price of the goods to the seller after the
delivery within a stipulated time period as given in the contract, then the
seller can sue for the interest on the buyer.

Q. Sale by Non-Owner?

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.

Transfer of Title/Sale by Non-Owner

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.

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.

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 of the said Act:

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

1) Sale by a mercantile agent (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 (Sec 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) Good Title by 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.

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]

Q. Define Auction Sale?

An auction sale is a public sale. The goods are sold to all members of the public at
large who are assembled in one place for the auction. Such interested buyers are
the bidders.

The price they are offering for the goods is the bid. And the goods will be sold to
the bidder with the highest bid.

The person carrying out the auction sale is the auctioneer. He is the agent of the
seller, so all the rules of the law of agency will apply on him.

But if an auctioneer wishes to sell his own property as the principal he can do so.
And he is not required to disclose this fact under the law.

Rules of an Auction Sale:

Section 64 of the Act specifically deals with the rules governing an auction sale.
They are as follows:

1) Goods Sold in Lots

In an auction sale, there can be many goods up for sale of many kinds. If some
particular goods are put up for sale in a lot, then each such lot will be considered
a separate subject of a separate contract of sale. So each lot ill prima facie be the
subject of its own contract of sale.

2) Completion of Sale

The sale is complete when the auctioneer says it is complete. This can be done by
actions also – like the falling of the hammer, or any such customary action. Till the
auctioneer does not announce the completion of the sale the prospective buyers
can keep bidding.
3) Seller may Reserve Right to Bid

The seller may reserve his right to bid. To do so he must expressly reserve such
right to bid. In this case, the seller on any person on his behalf can bid at the
auction.

4) Sale Not Notified

If the seller has not notified of his right to bid he may not do so under any
circumstances. Then neither the seller nor any person on his behalf can bid at the
auction. If it is done then it will be unlawful.

The auctioneer also cannot accept such bids from the seller or any other person
on his behalf. And any sale that contravenes this rule is to be treated as
fraudulent by the buyer.

5) Reserve Price

An auction sale may be subject to a reserve price or an upset price. This means
the auctioneer will not sell the goods for any price below the said reserve price.

6) Pretend Bidding

But if the seller or any other person appointed by him employs pretend bidding to
raise the price of the goods, the sale is voidable at the option of the buyer. That
means the buyer can choose to honor the contract or he can choose to void it.

7) No Credit

The auctioneer cannot sell the goods on credit as per his wishes. He cannot
accept a bill of exchange either unless the seller is expressly fine with it.