November 12, 2024
Overview: The Sales of Goods Act forms an essential part of almost all state Judicial exams. Knowing the important sections, concepts, and everything around it is a must. For example, if you are preparing for MPCJ, DJS, HPSC-J or any other state exam, you should properly study the Sales of Goods Act.
In this article, we will cover:
Introduction:
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Definition:
Essential Features of a Contract of Sale:
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The Sale of Goods Act encompasses several essential elements, a few of which are elucidated below:
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Formation of a Contract of Sale:
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Breach and Remedies:
Remedies: In the event of a breach of contract, the injured party possesses several available remedies, including:
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CONDITIONS AND WARRANTIES (SECTIONS 11 TO 17 & 62)
In contracts of sale, conditions and warranties are vital terms. Sections 11 to 17 and Section 62 of the Sale of Goods Act, 1930, outline the provisions pertaining to conditions and warranties. Let's delve into these sections in detail:
Conditions (Sections 12 to 15):
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Warranties (Sections 12 to 15):
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Implied Conditions and Warranties (Sections 16 & 17):
Sale by Description (Section 15):
Section 15 applies when goods are sold by description, whether verbally or in writing. It establishes an implied condition that the goods must conform to the description provided by the seller.
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Sale by Sample (Section 17):
Section 17 pertains to situations where goods are sold by sample, with the condition that the bulk of the goods must match the quality of the sample.
Application of Sections 11 to 17 (Section 62):
Section 62 explicitly clarifies that Sections 11 to 17 of the Sale of Goods Act, 1930, exclusively apply to contracts for the sale of goods and do not extend to any other types of contracts.
In summary,
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EFFECT OF BREACH OF CONDITIONS AND WARRANTIES WHEN CONDITION IS CONSIDERED AS A WARRANTY CONSEQUENCES OF CONTRACT TRANSFER OF PROPERTY IN GOODS (SECTIONS 18 TO 25)
Breach of Conditions: In the event of a breach of a condition within a sale contract, the injured party possesses the following entitlements: • Right to Terminate the Contract: The injured party may regard the contract as terminated, signifying its conclusion, and demand compensation for any resulting losses.
Breach of Warranties: In cases of a breach of warranties within a sale contract, the injured party has the following rights:
When a Condition is to be Regarded as a Warranty: Section 13 of the Sale of Goods Act, 1930 provides criteria for determining when a condition should be treated as a warranty.
It stipulates that if a sale contract includes a condition that is not fundamental to the primary purpose of the contract, and any breach of the condition can be adequately compensated through damages, then the condition can be regarded as a warranty.
In such instances, the injured party is not entitled to terminate the contract but may seek damages for the breach.
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Effects of Contract: The Sale of Goods Act, 1930, outlines various effects stemming from a contract of sale, which encompass:
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Title Transfer in the Sale of Goods Act, 1930 (Sections 27 to 30)
Sections 27 to 30 of the Sale of Goods Act, 1930, are focused on the conditions and guidelines for transferring ownership of goods from a seller to a buyer. These sections provide a framework for understanding how title to goods is legally moved under various circumstances. Here's a closer look at each section:
Section 27 - Sale by a Person Who is Not the Owner:
This section covers scenarios where goods are sold by someone who doesn't actually own them.
If the buyer isn't aware of the seller's lack of ownership and purchases the goods in good faith without any knowledge of the seller’s defective title, they legally acquire ownership of the goods.
Section 28 - Sale by a Co-owner:
This applies when goods have multiple joint owners. If one of these owners, who has been entrusted with the goods by the others, sells the goods, the buyer gains legal ownership.
This is contingent on the buyer purchasing the goods in good faith and without knowing about the seller’s limited authority to sell.
Section 29 - Sale under a Voidable Contract:
When the seller has goods in their possession due to a contract that is voidable (as per Sections 19 or 19A of the Indian Contract Act, 1872), but the contract has not been annulled at the sale time, the buyer can obtain legal title.
This is valid if the buyer is unaware of any flaws in the seller's title and acts in good faith.
In summary, these sections from the Sale of Goods Act, 1930, lay down the legal groundwork for the transfer of goods' title under various conditions, emphasizing the importance of good faith and awareness (or the lack thereof) of the buyer regarding the seller’s ownership or authority.
Section 30 - Possession of Goods After Sale by Seller or Buyer:
This section pertains to scenarios where an individual who has either sold goods or entered into an agreement to buy goods still retains possession of the said goods or the associated documents of title. Under such circumstances:
• If the seller, or a mercantile agent acting on their behalf, proceeds to deliver or transfer the goods or documents of title to the goods to another party in good faith and without prior knowledge of any previous sale, pledge, or alternative disposition, this delivery or transfer is deemed valid. The recipient of the goods or documents of title obtains a rightful title to the goods, as if the entity effecting the delivery or transfer had received explicit authorization from the owner of the goods.
• If the buyer, with the approval of the seller, gains possession of the goods or documents of title to the goods and subsequently, in good faith and without awareness of any lien or other claim by the original seller, delivers or transfers them to a third party, this delivery or transfer is considered legitimate. The recipient of the goods or documents of title is not affected by any lien or claim by the original seller and can rightfully acquire title to the goods.
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These sections are designed to safeguard the interests of bona fide purchasers who acquire goods in good faith and without knowledge of any defects or limitations in the seller's rights. They establish protocols for the transfer of title in specific scenarios, ensuring that innocent buyers secure rightful ownership of the goods, even when concerns arise regarding the seller's title or authority to sell.
These provisions regulate the transfer of title in various contexts, guaranteeing that a purchaser who acquires goods in good faith and without knowledge of any issues with the seller's title obtains lawful ownership of the goods.
However, it is important to acknowledge that these provisions are subject to other applicable laws and legal principles, such as those concerning fraud, theft, or the rights of legitimate owners. Consequently, it is advisable for buyers to exercise due diligence and seek appropriate legal counsel to ensure the validity of the title when entering into a sales contract.
Performance of Contract of Sale of Goods (Sections 31-44):
The Sale of Goods Act, 1930, sets forth the provisions governing the execution of a contract for the sale of goods. Here are the key sections pertaining to this:
Duties of Seller and Buyer: 31. Responsibilities of Seller and Buyer: The seller bears the responsibility of delivering the goods, while the buyer is responsible for accepting and making payment for them, as per the terms outlined in the contract.
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Section 36 - Guidelines for Delivery:
• Whether the buyer should take possession of the goods or the seller should dispatch them is determined by the contract. In the absence of a specific agreement, goods that have been sold must be delivered at their location at the time of the sale, while goods agreed to be sold must be delivered at the agreed-upon location or, if not specified, at the place of manufacture or production.
• If the seller is obligated to send the goods to the buyer but no specific timeframe is mentioned, the seller must dispatch them within a reasonable timeframe.
• If, at the time of sale, the goods are in the possession of a third party, there is no delivery by the seller to the buyer unless the third party acknowledges holding the goods on behalf of the buyer.
• Delivery or tender of delivery must occur during reasonable hours.
• The expenses incurred to place the goods in a deliverable state are borne by the seller, unless otherwise agreed upon.
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Section 37 - Delivery of Incorrect Quantity:
• If the seller delivers fewer goods than specified in the contract, the buyer may reject them. However, if the buyer accepts the delivered goods, they must pay for them at the contracted rate.
• If the seller delivers more goods than specified in the contract, the buyer may accept the goods that were part of the contract and reject the excess, or reject the entire delivery.
• If the seller delivers goods of a different description, not part of the contract, mixed with the contracted goods, the buyer may accept the conforming goods and reject the rest, or reject the entire delivery.
• These provisions are subject to any trade usage, special agreement, or customary practice between the parties.
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Section 38 - Instalment Deliveries:
The buyer is not obligated to accept goods delivered in instalments unless otherwise agreed upon. In the case of a contract for the sale of goods to be delivered in instalments, if there is a breach in the delivery of one or more instalments, whether it constitutes a repudiation of the entire contract or a severable breach leading to a claim for compensation depends on the contract terms and circumstances.
Section 39 - Delivery to Carrier or Wharfinger:
• If the seller is authorized or required to dispatch the goods to the buyer, delivering the goods to a carrier (whether specified by the buyer or not) for onward transmission to the buyer, or to a wharfinger for safekeeping, is considered as delivery to the buyer.
• If the seller fails to make a reasonable contract with the carrier or wharfinger on the buyer's behalf, and the goods are lost or damaged during transit or while in the wharfinger's custody, the buyer can refuse to accept the delivery or hold the seller responsible for any damages incurred.
• When the seller sends goods via sea transit, where it is customary to insure them, the seller must notify the buyer to allow them to arrange for insurance during the transit. Failure to provide such notice places the goods at the seller's risk during sea transit.
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Section 40 - Risk in Distant Delivery:
If the seller agrees to deliver the goods at a location different from the place of sale, any risk of deterioration in the goods that naturally occurs during transportation is borne by the buyer.
Section 41 - Buyer's Right to Examine Goods:
Suppose the buyer receives goods without prior examination. In that case, they are not considered to have accepted the goods until they have had a reasonable opportunity to inspect them for compliance with the contract. The seller must grant the buyer a reasonable opportunity to examine the goods upon offering delivery.
Section 42 - Acceptance:
The buyer is deemed to have accepted the goods when they notify the seller of their acceptance, perform an action inconsistent with the seller's ownership, or retain the goods for an unreasonable period without informing the seller of their intention to reject them.
Section 43 - Buyer's Refusal to Accept Goods:
If the buyer rightfully refuses to accept delivered goods, they are not obligated to return the goods to the seller. Simply notifying the seller of the refusal is sufficient.
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Section 44 - Buyer's Responsibility for Neglecting or Refusing Delivery:
When the seller is prepared and willing to deliver the goods and urges the buyer to accept delivery, but the buyer neglects or declines to do so within a reasonable timeframe, the buyer becomes liable to the seller for any losses resulting from the neglect or refusal.
Additionally, the buyer is accountable for a reasonable fee associated with the care and safekeeping of the goods.
It is important to note that this section does not impact the seller's rights if the buyer's neglect or refusal constitutes a repudiation of the contract.
Rights of the Unpaid Seller Against the Goods (Section 45 to 54)
Section 45 - Definition of "Unpaid Seller": The term "unpaid seller" is defined within the Sale of Goods Act under two circumstances:
Section 46 - Rights of the Unpaid Seller: Despite the transfer of ownership in the goods to the buyer, an unpaid seller retains certain implicit rights under the law, including:
Section 47 - Unpaid Seller's Lien: The unpaid seller of goods in possession has the right to retain possession until payment or tender of the price under the following conditions:
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Partial Delivery: In cases where an unpaid seller has made a partial delivery of the goods, they retain the right to exercise their lien on the remaining portion, unless the circumstances suggest an agreement to waive the lien.
Termination of the Lien: The unpaid seller loses their lien on the goods under the following circumstances:
Right to Stoppage in Transit: When the buyer becomes insolvent, the unpaid seller who has already relinquished possession of the goods retains the right to stop the goods in transit. This means they can regain possession and hold the goods until the price is paid or tendered.
Duration of Transit:
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52. How stoppage in transit is effected:
• The unpaid seller can exercise the right of stoppage in transit by either taking actual possession of the goods or by giving notice of their claim to the carrier or bailee in possession of the goods.
• The notice can be given to the person in actual possession or to their principal. If given to the principal, it must be communicated to the servant or agent of the principal in a timely manner to prevent delivery to the buyer.
• If notice is given to the carrier or bailee, they must redeliver the goods to the seller, and the expenses of redelivery are borne by the seller.
53. Transfer by buyer and seller:
Effect of sub-sale or pledge by buyer:
54. Sale not generally rescinded by lien or stoppage in transit:
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Section 55 to 61 of the Sale of Goods Act cover the legal options available to parties when there is a breach of contract in the sale of goods. Below are concise explanations of each section:
Seller's Remedies: When a buyer breaches the contract, the seller has the right to initiate legal action for damages due to the buyer's failure to accept the goods.
Damages for Non-Acceptance: The seller can claim damages from the buyer if the buyer wrongfully refuses to accept the goods or neglects to pay the agreed-upon price.
Specific Performance: In cases where the goods are unique or when monetary compensation is insufficient, the seller may seek a court order for specific performance, compelling the buyer to fulfil the contract.
Damages for Non-Delivery: If the seller fails to deliver the goods as per the contract, the buyer can seek damages for non-delivery.
Specific Performance by Seller: When the goods are unique or when damages alone won't suffice for non-delivery, the buyer has the option to request specific performance from the seller.
Repudiation of Contract Before Due Date: If either the buyer or seller prematurely abandons the contract before the agreed-upon performance date, the innocent party can treat the contract as breached and pursue damages.
Now, on to Section 64, which relates to the sale of goods by auction.
Section 64 of the Sale of Goods Act pertains to auctions and includes the following regulations:
(a) The auctioneer has the prerogative to retract the goods at any point before concluding the auction by the fall of the hammer.
(b) The auctioneer is permitted to make bids on behalf of the seller, unless explicitly disallowed.
(c) The sale is finalized when the auctioneer declares it as such, typically by the fall of the hammer or through other established auction practices.
These stipulations delineate the unique procedures and responsibilities associated with auctions, particularly focusing on the auctioneer's role and actions.
The enactment of the Sale of Goods Act in 1930 brought about a significant transformation in the landscape of sale and purchase in India.
This legislation has instilled a heightened sense of accountability and transparency among both buyers and sellers, discouraging fraudulent practices.
As a result, the rights and interests of both parties involved in transactions are safeguarded and upheld by this pivotal legal framework.
For the Sales of Goods Act, make sure that you focus on the important sections that have been listed in this article:
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