Exception to the General Rule:

(a) Sale by a mercantile agent:

A buyer will get a good title if he buys in good faith from a mercantile agent who is in possession either of the goods or documents of title to the goods with the consent of the owner.

 According to Section 27 of the Sale of Goods Act, 1930 subject to the provisions of this Act and of any other law for the time being in force, where goods are sold by a person who is not the owner thereof and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller’s authority to sell:

Provided that, where a mercantile agent is, with the consent of the owner, in possession of the goods or of a document of title to the goods, any sale made by him, when acting in the ordinary course of business of a mercantile agent, shall be as valid as if he were expressly authorised by the owner of the goods to make the same; provided that the buyer acts in good faith and has not at the time of the contract of sale notice that the seller has not authority to sell.

(b) Sale by a co-owner:

A buyer who buys in good faith from one of the several joint owners who is in sole possession of the goods with the permission of his co[1]owners will get good title to the goods.

According to Section 28 of the Sale of Goods Act, 1930 if one of several joint owners of goods has the sole possession of them by permission of the co-owners, the property in the goods is transferred to any person who buys them of such joint owner in good faith and has not at the time of the contract of sale notice that the seller has not authority to sell.

(c) Sale by a person in possession under a voidable contract:

A buyer buys in good faith from a person in possession of goods under a contract which is voidable, but has not been rescinded at the time of the sale.

According to Section 29 of the Sale of Goods Act, 1930 when the seller of goods has obtained possession thereof under a contract voidable under section 19 or section 19A of the Indian Contract Act, 1872 (9 of 1872), but the contract has not been rescinded at the time of the sale, the buyer acquires a good title to the goods, provided he buys them in good faith and without notice of the seller’s defect of title.

(d) Sale by seller in possession after sale:

Where a seller, after having sold the goods, is in possession of the goods and again sells them to a person who buys in good faith and without notice of the previous sale, such a buyer gets a good title to the goods.

According to Section 30(1) of the Sale of Goods Act, 1930 where a person, having sold goods, continues or is in possession of the goods or of the documents of title to the goods, the delivery or transfer by that person or by a mercantile agent acting for him, of the goods or documents of title under any sale, pledge or other disposition thereof to any person receiving the same in good faith and without notice of the previous sale shall have the same effect as if the person making the delivery or transfer were expressly authorised by the owner of the goods to make the same

(e) Sale by buyer in possession:

If a person has brought or agreed to buy goods, any sale by him to a buyer who takes in good faith, will give a good title to the buyer. In any of the above cases, if the transfer is by way of pledge or pawn only, it will be valid as a pledge or pawn.

According to Section 30(2) of the Sale of Goods Act, 1930 where a person, having bought or agreed to buy goods, obtains, with the consent of the seller, possession of the goods or the documents of title to the goods, the delivery or transfer by that person or by a mercantile agent acting for him, of the goods or documents of title under any sale, pledge or other disposition thereof to any person receiving the same in good faith and without notice of any lien or other right of the original seller in respect of the goods shall have effect as if such lien or right did not exist.

(f) Estoppel:

If the true owner stands by and allows an innocent buyer to pay over money to a third-party, who professes to have the right to sell an article, the true owner will be estopped from denying the third-party’s right to sell.

(g) Sale by an unpaid seller:

Where an unpaid seller has exercised his right of lien or stoppage in transit and is in possession of the goods, he may resell them and the second buyer will get absolute right to the goods (S. 54).

(h) Sale by person under other laws:

A pawnee, on default in repayment, has a right to sell the goods, pawned and the buyer gets a good title to the goods. The finder of lost goods can also sell under certain circumstances. The Official Assignee or Official Receiver, Liquidator, Officers of Court selling under a decree, Executors, and Administrators, all these persons are not owners, but they can convey better title than they have.

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Significance of Passing of Property:

The time of transfer of ownership of goods decides various rights and liabilities of the seller and the buyer. Thus, it becomes very important to know the exact time of transfer of ownership of goods from seller to buyer for the following reasons:

• Who shall bear the risk?
• Who can take action against third party?
• Whether a seller can sue for price?
• In case of insolvency of a buyer whether the official receiver or assignee can take possession of goods from seller?
• In case of insolvency of a seller whether the official receiver or assignee can take the possession of goods from buyer?
• Who has right of resale?

Who shall bear the risk?

Risk follows the ownership or risk passes with property, whether the delivery has been made or not. Thus, in a sale, the buyer immediately becomes the owner of the goods and the risk as a rule passes to the buyer; under an agreement to sell, the seller remains the owner and the risk is with him. If the goods are lost or damaged by accident, then the loss falls on the owner of the goods at the time they are lost or damaged. Thus, it is the owner who has to bear the risk and not the person who merely has the possession. Thus, under a sale, if the goods are destroyed the loss falls on the buyer, even though the goods are in the possession of the seller. But, under an agreement to sell, the loss will fall on the seller in the case of destruction of goods even though they are in the possession of the buyer.

According to Section 26 of the Sale of Goods Act, 1930 unless otherwise agreed, the goods remain at the seller’s risk until the property therein is transferred to the buyer, but when the property therein is transferred to the buyer, the goods are at the buyer’s risk whether delivery has been made or not:

Provided that, where delivery has been delayed through the fault of either buyer or seller, the goods are at the risk of the party in fault as regards any loss which might not have occurred but for such fault:

Provided also that nothing in this section shall affect the duties or liabilities of either seller or buyer as a bailee of the goods of the other party.

Who can take action against third party?

When there is a danger of the goods being damaged by the action of third parties, it is generally the owner who can take action. Thus, it is the owner who can take action and not the person who merely has the possession.

Whether a seller can sue for price?

In case of sale, if the buyer wrongfully neglects or refuses to pay the price of the goods, the seller can sue for the price, even though the goods are still in his possession. In case of an agreement to sell, if the buyer fails to accept and pay for the goods, the seller can only sue for damages and not for the price, even though the goods are in the possession of buyer.

What happens on the insolvency of buyer?

In a sale, if the buyer is adjudged an insolvent, the seller in the absence of a lien over the goods is bound to deliver the goods to the official Receiver or Assignee. The seller, will, however, be entitled to a rateable dividend for the price of the goods. On the other hand, in an agreement to sell, when the buyer becomes insolvent before he pays for the goods, the seller may not part with the goods.

What happens on the insolvency of Seller:

In a sale, if the seller becomes insolvent, the buyer being the owner is entitled to recover the goods from the Official Receiver or Assignee. In an agreement to sell, if the buyer, who has paid the price, finds that the seller has become insolvent, he can only claim a rateable dividend and not the goods because property in them has not yet passed to him.

Who has the right of resale:

According to Section 30 of the Sale of Goods Act, 1930, in a sale, the property is with the buyer and as such the seller (in possession of goods after sale) cannot resell the goods. If he does so, the subsequent buyer having knowledge of the previous sale does not acquire a title to the gods. The original buyer can sue and recover the goods from the third person on owner, and can also sue the seller for the breach of contract as well as for the tort conversion. The right to recover the goods from the third person is, however, lost if the subsequent buyer had bought them bonfire without notice of the previous sale. On the other hand, in an agreement to sell, the property in the goods remains with the seller and as such he can dispose of the goods as he likes and the original buyer can sue him for the breach of contract only.

Rules Relating to Passing of Property/Transfer of Ownership From Seller to Buyer:

For the purposes of ascertaining the time at which the ownership is transferred from seller to the buyer, the goods have been classified into the following three categories:

• Specific or ascertained goods
• Unascertained goods
• Goods sent ‘on approval’ or ‘on sale on return’ basis.

Passing of Property in Specific / Ascertained Goods (Ss. 19 to 22):

According to Section 19(1) of the Sale of Goods Act, 1930, where there is a contract for the 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 he transferred and according to Section 19(3) of the Act, unless a different intention appears, the rules contained in sections 20 to 24 are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer.

According to Section 20 of the Sale of Goods Act, 1930, where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment of the price or the time of delivery of the goods, or both, is postponed.

The ownership is transferred immediately at the time of making the contract if all the following conditions are satisfied:

• The contract is for the specific goods.
• The goods are in deliverable state.
• The contract is unconditional
• The goods are not required to be weight or measured for determining price.

According to Section 21 of the Sale of Goods Act, 1930, where there is a contract for the sale of specific goods and the seller is bound to do something to the goods for the purpose of putting them into a deliverable state, the property does not pass until such thing is done and the buyer has notice thereof.

According to Section 22 of the Sale of Goods Act, 1930, where there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to weigh, measure, test or do some other act or thing with reference to the goods for the purpose of ascertaining the price, the property does not pass until such act or thing is done and the buyer has notice thereof.

Passing of Property in Unascertained Goods (Ss. 18 and 23):

According to Section 18 of the Sale of Goods Act, 1930 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.

According to Section 23(1) of the Sale of Goods Act, 1930 where there is a contract for the sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be express or implied, and may by given either before or after the appropriation is made.

According to Section 23(2) of the Sale of Goods Act, 1930 where, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) for the purpose of transmission to the buyer, and does not reserve the right of disposal, he is deemed to have unconditionally appropriated the goods to the contract.

Passing of Property in Goods Sent ‘On Approval’ or ‘On Sale or Return’ Basis (S. 24):

According to Section 24 of the Sale of Goods Act, 1930 when goods are delivered to the buyer on approval or “on sale or return” or other similar terms, the property therein passes to the buyer—

(a) when he signifies his approval or acceptance to the seller or does any other act adopting the transaction;

(b) if he does not signify his approval or acceptance to the seller but retains the goods without giving notice of rejection, then, if a time has been fixed for the return of the goods, on the expiration of such time, and, if no time has been fixed, on the expiration of a reasonable time.

Reservation of Right of Disposal

According to Section 25 of the Sale of Goods Act, 1930

(1) Where there is a contract for the sale of specific goods or where goods are subsequently appropriated to the contract, the seller may, by the terms of the contract or appropriation, reserve the right of disposal of the goods until certain conditions are fulfilled. In such case, notwithstanding the delivery of the goods to a buyer or to a carrier or other bailee for the purpose of transmission to the buyer, the property in the goods does not pass to the buyer until the conditions imposed by the seller are fulfilled.

(2) Where goods are shipped or delivered to a railway administration for carriage by railway and by the bill of lading or railway receipt, as the case may be, the goods are deliverable to the order of the seller or his agent, the seller is prima facie deemed to reserve the right of disposal.

(3) Where the seller of goods draws on the buyer for the price and transmits to the buyer the bill of exchange together with the bill of lading or, as the case may be, the railway receipt, to secure acceptance or payment of the bill of exchange, the buyer is bound to return the bill of lading or the railway receipt if he does not honour the bill of exchange; and, if he wrongfully retains the bill of lading or the railway receipt, the property in the goods does not pass to him.

Conclusion:

The Sale of Goods Act, 1930 gives provision regarding the passing of property during a contract pertaining to the sale of goods. Section 18 to 25 of the Sale of Goods Act, 1930 provides the contracting parties several principles, through which rights and liabilities of the buyer and seller are determined. Passing of the property in goods from the seller to the buyer portrays the transfer of ownership from one party to another, which is without an exception a different concept from that of the possession of goods as possession only involves custody of goods.

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Sale and Bailment:

A ‘bailment’ is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them. The person delivering the goods is called the ‘bailor’ and one receiving is called bailee. The bailment of goods as security for payment of a debt or performance of a promise is called pledge. Section 148-171 of Indian Contract Act, 1872 deal with bailment.

Let us distinguish contract of sale and bailment

Sale and Contract for Work or Labour:

According to Sec 2(43) TNVAT Act “Works Contract” includes any agreement for carrying out for cash, deferred payment or other valuable consideration, building construction, manufacture, processing, fabrication, erection, installation, fitting out, improvement, modification, repair or commissioning of any movable or immovable property. 

In State Of Andhra Pradesh vs Kone Elevators (India) Ltd on 17 February, 2005 case, the three Judge Bench of the Hon’ble Supreme Court applied the “Dominant nature test” and finally ruled that the assessee (Kone Elevator India Private Limited) carries on business of selling lifts and elevators and the major component of the end product is the material consumed in producing the lift to be delivered and the skill/ labour employed for converting the main components into the end product are incidentally used. Therefore, the delivery of the end product by the assessee has to be constituted as a “Sale” and not a “Works contract”.

In Kone Elevators (India) Ltd v. State of T N, (2014) 7 SCC 1 case, the larger bench of the Supreme Court held that a contract for  supply and installation of lift is a composite contract for supply of goods as well  as provision  of service and that the service element is obvious is such a contract. Thus, the activity of supply  and installation of lift would constitute to be a works contract. The Larger Bench, thus, reversed its earlier decision based on the logic that the major component  was the lift and that the skill and labour employed was only incidental to the supply of lift and  that this is a contract for sale of goods.

In Larsen and Toubro Limited and another v. State of Karnataka and another, 26 September, 2013  case, It is held by the five Judge Constitution Bench of the Hon’ble Supreme Court of India that four concepts have emerged from various SC judgments, which are:

• The Works contract is an indivisible contract but, by legal fiction, is divided into two parts, one for sale of goods, and the other for supply of labour and services;
• The concept of “Dominant nature test” or for that matter, the “Degree of intention test” or “Overwhelming component test” for treating a contract as a Works contract is not applicable;
• The term “Works contract” as used in Clause (29A) of Article 366 of the Constitution takes in its sweep all genre of Works contract and is not to be narrowly construed to cover one species of contract to provide for labour and service alone; and
• Once the characteristics of Works contract are met with in a contract entered into between the parties, any additional obligation incorporated in the contract would not change the nature of the contract.

Dominant nature test” or “overwhelming component test” or “the degrees of labour and service test” are really not applicable. If the contract is a composite one which falls under the definition of Works contracts as engrafted under clause (29A)(b) of Article 366 of the Constitution, the incidental part as regards labour and service pales into total insignificance for the purpose of determining the nature of the contract.

Sale and Hire Purchase:

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Two parties Buyer and Seller:

To constitute a contract there must be two parties, viz., a buyer and a seller, as a person cannot buy his own goods. According to Section 2(1) of the Act, “buyer” means a person who buys or agrees to buy goods and according to Section 2(13) of the Act, “seller” means a person who sells or agrees to sell goods.

According to Section 4(1), there may be a contract of sale between one part-owner and another, e.g., if A and B jointly own a typewriter, A may sell his ownership in the typewriter to B, thereby making B sole owner of the goods.

In State of Gujarat v Raman Lal S & Co, AIR 1965 Guj 60 case, where a partnership firm was dissolved and the surplus assets; including the stock in trade, were divided among the partners, in spite. The Court held that it was not a sale as the partners themselves were the joint owners of the goods and they could not be both sellers and buyers.

There are certain other exceptions to the rule that the same person cannot be both a purchaser and a seller. These are:

• A part owner can sell his share to the other part owner so as to make the other part owner the sole owner of the goods.
• A partner may also buy the goods from the firm in which he is a partner and vice versa.
• Where a pawnee sells the goods pledged with him on non-payment of bill money, the pawnor may himself buy such goods.
• In case there is a sale by auction, the seller may reserve right of making a bid at the auction and may thus purchase his own goods.

Goods:

According to Section 2(7) of the Act, “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.

Thus every kind of movable property except actionable claim and money is regarded as goods. Goodwill, trade-marks, patents right, copyrights, electricity, water, gas, decree of a court of law, shares and stocks are all regarded as goods. Money is not regarded goods because it is the medium of exchange through which goods can be bought. Old and rare coins, however, may be treated as goods and sold as such.

Transfer of property:

According to Section 2(11) of the Act, “property” means the general property in goods, and not merely a special property.

A mere transfer of possession of the goods cannot be termed as sale. To constitute a contract of sale the seller must either transfer or agree to transfer the property in the goods to the buyer for price in money.

In Draper & Sons Ltd. v. Edward Turner & Sons Ltd., 1965 I QB 424 case, the Court held that the word “Sale” properly connotes the transfer of absolute or general property in a thing, for a price in money.

In Pharmaceutical Society of Great Britain v. Boots, 1952 ALL E.R. 456 case, the Court held that where a customer who picks up goods in self-service shop is merely offering to buy them, and the sale is not complete untill they are paid for.

Price:

According to Section 2(10) of the Act, “price” means the money consideration for a sale of goods.

To constitute a valid contract of sale, consideration for transfer must be money paid or promised. Where there is no money consideration the transaction is not a contract of sale, as for instance goods given in exchange for goods or as remuneration for work or labour.

Valid Contract:

All Essential elements of a valid contract must be fulfilled. It presumes free consent on the part of the parties who should be competent to contract. There should be consideration. The essentials of valid contract are

• Proposal and Acceptance
• Free consent
• Capacity to contract
• Intention to create legal relationship
• Intent of legal obligation
• Possibility of performance
• Legal consideration

Includes Both Sale and Agreement to Sale:

Where the seller transfer the property in the goods immediately to the buyer is a sale. But where the transfer of the property in the goods is to take place in a future time a subject to some conditions thereafter to be fulfilled, the contract is called an agreement to sell. An agreement to sell becomes a sale when the time passed as the conditions are fulfilled subject to which the property in the goods is to be transferred.

Distinguishing Sale and Agreement of Sale:

Conclusion:

A contract of sales of goods is a contract whereby the sellers transfers or agrees to transfer the property in goods to the buyer for a price. Where the seller transfer the property in the goods immediately to the buyer is a sale. But where the transfer of the property in the goods is to take place in a future time a subject to some conditions thereafter to be fulfilled, the contract is called an agreement to sell. A valid contract of sale must contain all its essential ingredients.

The post Essentials of Contract of Sale appeared first on The Fact Factor.

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.

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Mercantile Laws:

Mercantile laws are the laws those deals with international commerce, business transactions and operations like agreements, contracts, copyrights, franchising, insurance, licensing, patents, shipping, transport, trademarks, etc.

Examples of Mercantile Laws:

• The Indian Contract Act, 1872
• The Sale of Goods Act, 1930
• The Indian Partnership Act, 1932
• The Companies Act, 2013
• The Copyrights Act, etc.

The Sale of Goods Act, 1930:

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.

Important Definitions Under the Act:

Buyer:

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

Seller:

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

Goods:

According to Section 2(7) of the Act, “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.

Future Goods:

According to Section 2(6) of the Act, “future goods” means goods to be manufactured or produced or acquired by the seller after the making of the contract of sale.

Specific Goods:

According to Section 2(14) of the Act, 1930, “specific goods” means goods identified and agreed upon at the time a contract of sale is made;

Contingent Goods:

According to Section 6(2) of the Act, “contingent goods” are the goods the acquisition of which by the seller depends upon a contingency which may or may not happen.

Property:

According to Section 2(11) of the Act, “property” means the general property in goods, and not merely a special property.

General property in goods means ownership of the goods. Special property in goods means possession of goods. Thus, there must be either a transfer of ownership of goods or an agreement to transfer the ownership of goods. The ownership may transfer either immediately on completion of sale or sometime in future in agreement to sell.

Quality of Goods:

According to Section 2(12) of the Sale of Goods Act, 1930, “quality of goods” includes their state or condition.

Price:

According to Section 2(10) of the Sale of Goods Act, 1930, “price” means the money consideration for a sale of goods.

In Gopal Krishna Pillai v. K. M. Mani, (1984) 2 SCC 83 case, the Court held that fees charged by professional likes doctors, architects, counsels, lawyers, etc are not in the category of price. They are their professional charges for rendering services. There is nothing which is sold for a price.

Deliverable State:

According to Section 2(3) of the Sale of Goods Act, 1930, goods are said to be in a “deliverable state” when they are in such state that the buyer would under the contract be bound to take delivery of them;

Delivery:

According to Section 2(3) of the Sale of Goods Act, 1930, “delivery” means voluntary transfer of possession from one person to another.

Document of Title to Goods:

According to Section 2(4) of the Sale of Goods Act, 1930, “document of title to goods” includes a bill of lading, dock-warrant, warehouse keeper’s certificate, wharfingers’ 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 authorising or purporting to authorise, either by endorsement or by delivery, the possessor of the document to transfer or receive goods thereby represented.

Fault:

According to Section 2(5) of the Sale of Goods Act, 1930, “fault” means wrongful act or default.

Insolvent:

According to Section 2(8) of the Sale of Goods Act, 1930, a person is said to be “insolvent” who has ceased 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.

Mercantile Agent:

According to Section 2(8) of the Sale of Goods Act, 1930, “mercantile agent” means a mercantile agent having in the customary course of business as such agent authority either to sell goods, or to consign goods for the purposes of sale, or to buy goods, or to raise money on the security of goods;

According to Section 2(15) of the Sale of Goods Act, 1930, expressions used but not defined in this Act and defined in the Indian Contract Act, 1872 (9 of 1872), have the meaning assigned to them in that Act.

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