CONTRACT OF SALE UNDER THE SALE OF GOODS ACT

This article will be discussing in details about the Contract of Sale under the Sale of Goods Act, 1930, including concept of sale and agreement to sell, seller and buyer – their rights and duties; and delivery of goods.

 

1. INTRODUCTION

 

On July 1, 1930, the Sale of Goods Act 1930, which had previously been a part of the Indian Contract Act of 1872, separated from the Contract Act. This was applicable to the entirety of India except for the state of Jammu and Kashmir, but since it was recognized as Indian territory in 2019, it is extended to Jammu and Kashmir. The Sale of Goods Act was known as “The Indian Sale of Goods Act” later in 1963 on 23 September the act was amended and renamed as “The Sales of Goods Act 1930”.

 

The Sales of Goods Act of 1930 states that the performance of the contract of sale is covered in Chapter IV, Sections 31 to 44, where it is explained how the goods are moved and how their possession is voluntarily transferred from one person to another. In essence, there are only two parties to the agreement: the seller and the buyer. The goods are purchased by the buyer after being sold by the seller.

 

2. SALE AND AGREEMENT FOR SALE:

 

Section 4 of the Sale of Goods Act, 1930 defines a contract of sale of goods as ‘a contract whereby the seller transfer of agrees to transfer the property in goods to the buyer for a price. There may be a sale between one part owner and another’.

 

It may be noted that ‘Barter’ is included in the above definition. Further the definition includes an agreement to sell as well as sale.

 

3. DIFFERENCE BETWEEN SALE AND AGREEMENT TO SALE:

 

Section 4(3) of the Sale of Goods Act, 1930 brings out the difference between the sale and agreement to sale,

 

“Where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale, but where the transfer of 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”.

 

The vital difference between the two is that while in the case of sale there is a transfer of property in the goods from the seller to the buyer, in the case of an agreement to sell, the transfer takes place at a future time or transfer is subject to some condition to be fulfilled thereafter.

 

4. ESSENTIALS OF CONTRACT OF SALE:

 

The essentials to constitute a Contract of Sale are as follows;

 

                
i. It is a contract between two parties, one known as the Seller and the other is Buyer.
ii. The subject-matter of a Contract is Goods.
iii. The seller should transfer or agree to transfer the property i.e., ownership, in the goods of the buyer.
iv. The transfer of the property (ownership) in the goods from the seller to the buyer is for consideration known as Price.

 

5. WHO IS A SELLER?

 

According to Section 2(13) of the Sale of Goods Act, 1930, “Seller” means a person who sells or agrees to sell goods.

 

6. RIGHTS OF A SELLER:

 

a. Damages for non-acceptance:

 

Where the buyer wrongfully neglects or refuses to accept and pay for goods, the seller may sue him for damages for non-acceptance.

 

b. Suit for price:

 

Where, under a contract of sale, the property in goods has passed to the buyer and the buyer wrongfully neglects or refuses to pay for the goods, according to the terms of the contract, the seller may sue him for the price of the goods.

 

c. Right of interest:

 

While suing the buyer for the price, the seller can also claim interest on the same, from the date on which the price is payable.

 

d. Right of unpaid seller:

 

If the seller is unpaid vendor within the meaning of the Act, he is entitled to the following rights notwithstanding that the property in the goods has passed to the buyer, such as

 

i.    A lien on the goods for the price while he is in possession of them.

ii.   In case of the insolvency of the buyer, a right of stopping the goods in transit.

iii. A right of re-sale

 

In case where the seller is an unpaid vendor and the property has not passed to the buyer, the seller has, besides other remedies, a right of withholding delivery similar to and co-extensive with the right of lien and stoppage in transit.

 

7. DUTIES OF A SELLER:  

i. It is the duty of the seller to deliver the goods in accordance with the term of the contract.

ii. Where, under the Contract of Sale, the seller is bound to send the goods to the buyer.

iii. In the absence of a contract to the contrary, delivery of goods and payment of the price are concurrent condition, that is to say, the seller shall be ready and willing to give possession of the goods to the buyer in exchange for the price and the buyer shall be ready and willing to pay the price in exchange for possession of the goods.

iv. In the absence of contract to the contrary, the seller of goods is not bound to deliver them until the buyer implies for delivery. Demand of delivery may be treated as ineffectual unless made at a reasonable hour.

v. Unless otherwise agreed, the expenses of and incidental to putting the goods into a deliverable state shall be borne by the seller.

vi. Where there is a breach of warranty on the part of a seller, the seller is bound to pay the damages to the buyer for the breach of warranty.

vii. Where the seller fails to deliver the goods to the buyer, he must pay back the price of the goods to the buyer which he had received in advance.

viii. Unless otherwise agreed, where goods are sent by the seller to the buyer by a route involving sea transit, in circumstances in which it is usual to insure, the seller shall give such notice to the buyer as may enable him to insure them during their sea-transit, and if the seller fails to do so, the goods shall be deemed to be at his risk during such sea-transit.

8. WHO IS BUYER?

According to Section 2(1) of the Sale of Goods Act 1930, “Buyer” means a person who buys or agrees to buy goods.

 

9. RIGHTS OF BUYER:

 

 i.   Buyer has the right to receive the goods delivery in accordance with the contract.

ii. If the quality and quantity of the goods do not meet the contract's requirements, buyer may reject them.

iii. When goods are delivered in instalments without prior consent, the buyer has the right to reject the contract.

iv. If the goods are being shipped by sea, the seller must let the buyer know so that he can make insurance arrangements.

v. If the seller fails to deliver the goods after he has been paid, the buyer may file a lawsuit to recover the cost.

vi. Buyer also can sue the seller for damages or the seller’s wrongful neglect or the seller refuses to deliver the goods to the buyer as per the contract.

vii. Buyer can sue the seller for damages for breach of a warranty or for breach of a condition.

viii. Buyer has the right to sue against the seller for damages caused by breach of contract.

 

10. Duty of Buyer:

 

According to Section 31 of the Act, buyer’s first duty is to accept the goods and the second duty is to pay for the goods in accordance with the contract.

 

i. Buyer’s duty to accept the goods:

 

The buyer is bound to accept the goods if they are being properly tendered. But buyer not bound to take goods if there is default from the seller.

 

ii. Buyer’s duty to pat the price:

 

The buyer’s duty is to pay the price in accordance with the contract. If the buyer does not pay the price after it become due, the seller may sue him for the price.

 

11. DELIVERY OF GOODS

Section 33 of the Sale of Goods Act, 1930 defines, Delivery of goods sold may be made by doing anything which the parties agree shall be treated as delivery or which has the effect of putting the goods in the possession of the buyer or of any person authorized to hold them on his behalf.

11.1. ESSENTIALS

 

The basic elements of delivery are:

 

           i.      There must be two parties.

          ii.     The possession of the goods should belong to one of those two parties.

         iii.    Possession should be transferred from one party to the other.

          iv.     This should be done voluntarily.

 

11.2. RULES AS TO DELIVERY:

 

Section 36 of the Sale of Goods Act, 1930, has provides for the Rule as to delivery as summed below;

 

                   1)       “Whether it is for the buyer to take possession of the goods or for the seller to send them to the buyer is a question depending in each case on the contract, express or implied, between the parties. Apart from any such contract, goods sold are to be delivered at the place at which they are at the time of the sale, and goods agreed to be sold are to be delivered at the place at which they are at the time of the agreement to sell, or, if not then in existence, at the place at which they are manufactured or produced.

                   2)       Where under the contract of sale the seller is bound to send the goods to the buyer, but no time for sending them is fixed, the seller is bound to send them within a reasonable time.

                   3)       Where the goods at the time of sale are in the possession of a third person, there is no delivery by seller to buyer unless and until such third person acknowledges to the buyer that he holds the goods on his behalf:

                   4)       Provided that nothing in this section shall affect the operation of the issue or transfer of any document of title to goods.

                   5)       Demand or tender of delivery may be treated as ineffectual unless made at a reasonable hour. What is a reasonable hour is a question of fact.

                   6)       Unless otherwise agreed, the expenses of and incidental to putting the goods into a deliverable state shall be borne by the seller”.

 

12. CONCLUSION:

 

The provisions of the Sale of Goods Act are set against the background of the general law of the Contract and the personal property and lays down special rules of law which are peculiar to the sale of goods. This article has discussed the provisions relating to Contract of sale under Sale of Goods Act 1930.