Most of economic activities involve buying and selling of movable goods. The sale of goods may on cash or credit basis. The goods may be sold on the spot these may be a promise to sell the some in future. It is one of the special types of contract. The law relating to the sale of goods or movable in India is contained in the Sale of Goods Act, 1930. Till 1930, the law relating to sale and purchase of goods were regulated by the Indian contract act , 1872. In 1930, sections 76 to 123 of Chapter VII of the Indian contract act, 1872 were repealed and separate act called ‘The Indian sale of goods act, 1930 was passed. It came into force on 1st July 1930. It contains 66 Sections and extends to the whole of the India.
The objective of the Act was to set up the contracts where the seller agrees to sell the goods or transfer the ownership of the goods to the other person called the buyer against a reasonable amount of consideration.
Goods:
According to Section 2(7) of the Sale of Goods Act, 1930, “goods” means every kind of moveable 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.
According to the definition the term “goods” includes:-
- All types of movable property except money and actionable claims
- All kinds of stocks, share, timber, grass, growing crops.
- It also includes things attached to the land or forming a part of the land subject to severed before its sale.
Notes:
- Money means current money and it includes rare and old coins.
- Actionable claim means what a person cannot make a present use of or enjoy, but can recover it by means of a suit or an action. Thus, a debt due to a man from another is an actionable claim and cannot be sold as goods, although it can be assigned. Under the provisions of the Transfer of Property Act, 1882, goodwill, trade marks, copyrights, patents are all goods, so is a ship. As regards water, gas, electricity, it is doubtful whether they are goods.
In State of M.P. v. Oriental paper Mills Ltd., (1977) 2 SCC 77 case, the Court held that standing timber is ‘movable property’ if under the contract for sale they (the trees) are severed. But the severance must take place when the timber still vests in the contracting party. Hence trees which are to be severed before sale or under the contract of sale are ‘goods’ for the purpose of the Sale of Goods Act, 1930.
Electricity comes under the definition of ‘goods’ since it is capable of delivery, and it does not matter whether it is a tangible or intangible form of energy. In Commissioner of Sales Tax, Madhya Pradesh v. Madhya Pradesh Electricity Board, AIR 1970 SC 732 case, the Supreme Court while discussing about the definition of ‘goods’ as mentioned in the Madhya Pradesh Sales Tax Act (2 of 1959), found that the definition included all kinds of movable property. The court further held that: “The term “movable property” when considered with reference to “goods” as defined for the purposes of sales tax cannot be taken in a narrow sense and merely because electric energy is not tangible or cannot be moved or touched like, for instance, a piece of wood or a book it cannot cease to be movable property when it has all the attributes of such property……It can be transmitted, transferred, delivered, stored, possessed etc., in the same way as any other movable property.”
In H. Anraj v. Government of T.N., (1986) 1 SCC 414 case, the Supreme Court held that a lottery ticket primarily involved two rights: (1) the right to participate in the draw and (2) the right to win the prize, depending on chance. In that case it was held that the former right was a “transfer of a beneficial interest in movable goods” and hence was a sale within the meaning of Art 366 (29-A)(d) of the Constitution whereas the latter right was a chose in action and thus not “goods” for the purpose of levy of sales tax. Thus, the classification of the right to participate as right in praesenti and the right to win as a right in futuro, was incorrect as both these rights are in futuro. Lottery tickets are goods and not actionable claims.
In TCS v. State of Andhra Pradesh, (2005) 1 SCC 308 case, the Supreme Court held that a software program on a CD or a floppy drive would be a “good” for the purposes of levy of sales tax.
In St Albans City and District Council v. International Computers Ltd, [1995] FSR 686 case, where Sir Iain Glidewell observed that a hardware device has no use of its own unless it is supplemented with a software and it was only because of necessity that software was contained in a physical medium like a disk or a floppy furthermore, in case the disk is sold and there is a defect with the program, then there would be a prima facie liability against the disk manufacturer as well. Thus, he held that the tangible disk and the software program both will be included within the definition of “goods”.
Once a software is uploaded on a medium like a CD or a floppy drive, it ceases to be a work of intellectual creation. This is primarily because each of these mediums becomes a marketable commodity in itself. “Marketability” of a commodity was the determining factor whether it is a “good” or not.
In Pondicherry v. ACER India Ltd., 2004 (8) SCALE 169 case, the Court held that “operational software” which was uploaded on a hard-disk does not lose its character as a tangible good.
Types of Goods:
A) Existing Goods:
Existing goods mean the goods which are either owned or possessed by the seller at the time of contract of sale. The existing goods may be specific or ascertained or unascertained as follows:
a) Specific Goods[Section 2(14)]:
These are the goods which are identified and agreed upon at the time when a contract of sale is made. For example, specified TV, Car, Ring.
b) Ascertained Goods:
Goods are said to be ascertained when out of a mass of unascertained goods, the quantity extracted for is identified and set aside for a given contract. Thus, when part of the goods lying in bulk are identified and earmarked for sale, such goods are termed as ascertained goods.
c) Unsanctioned Goods:
These are the goods which are not identified and agreed upon at the time when a contract of sale is made e.g., goods in stock or lying in lots.
B) Future Goods [Section 2(6)]
Future goods mean goods to be manufactured or produced or acquired by the seller after the making of the contract of sale. There can be an agreement to sell only. There can be no sale in respect of future goods because one cannot sell what he does not possess.
C) Contingent Goods [Section 6(2)]
These are the goods the acquisition of which by the seller depends upon a contingency which may or may not happen.