The Sale of Goods Act, 1930 governs contracts relating to the sale of goods in India. It provides the rights and duties of buyers and sellers and defines rules for the transfer of ownership and delivery of goods.
Originally part of the Indian Contract Act, it became a separate law on 1st July 1930.
Definition of Sale (Section 4)
A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price.
- If the transfer is immediate → Sale
- If transfer is to take place in the future or subject to a condition → Agreement to Sell
Essential Elements of a Contract of Sale
- Two parties: Seller and Buyer
- Goods must be involved
- Transfer or agreement to transfer ownership
- Price (monetary consideration)
- All essentials of a valid contract must be present
Types of Goods (Section 6)
- Existing Goods: Owned/possessed by the seller at the time of contract
- Specific Goods
- Ascertained Goods
- Unascertained Goods
- Future Goods: To be manufactured, produced, or acquired in the future
- Contingent Goods: Depends on a contingency or uncertain event
Conditions and Warranties (Sections 12–17)
- Condition: A term essential to the contract. Breach → Repudiation and Damages.
- Warranty: A term collateral to the contract. Breach → Only Damages.
Implied Conditions:
- Title
- Description
- Sample and quality
- Fitness for purpose
- Merchantable quality
Implied Warranties:
- Quiet possession
- Freedom from encumbrances
Transfer of Property (Ownership) (Sections 18–25)
Rules for when ownership passes:
- Specific goods in a deliverable state → When contract is made
- When goods to be put in deliverable state → After action completed and buyer informed
- Unascertained goods → When goods are ascertained
Ownership is different from possession. Risk follows ownership unless otherwise agreed.
Performance of Contract (Sections 31–44)
- Seller must deliver goods
- Buyer must accept and pay for goods
- Delivery can be actual, symbolic, or constructive
- Time of delivery and payment depends on terms of contract
Rights of an Unpaid Seller (Sections 45–54)
If the seller has not been paid in full:
Against the Goods:
- Right of Lien
- Right of Stoppage in Transit
- Right of Resale
Against the Buyer:
- Suit for Price
- Suit for Damages
- Suit for Interest
Doctrine of Caveat Emptor (Section 16)
Means “Let the buyer beware.”
The buyer must examine goods before purchase. The seller is not liable for any defects unless:
- Buyer relies on seller’s skill or judgment
- Goods are bought by description from a seller who deals in such goods
Auction Sales (Section 64)
- Each lot is treated as a separate contract
- Sale is complete when the auctioneer announces it (usually with a fall of the hammer)
- Right to bid may be reserved by the seller
- Seller cannot bid unless expressly reserved
Important Case Laws
Ward v. Hobbs (1878)
Established caveat emptor; seller not liable for latent defects if buyer didn’t inquire.
Rowland v. Divall (1923)
Seller liable for breach of implied condition as to title even if unaware of defect.
