Sales of Goods Act 1930

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Sale of Goods Act, 1930

In trade and commerce, sales and purchase of goods are very common transactions. Originally, the transactions related to sale and purchase of goods was regulated by Chapter VII (Sections 76 to 123) of the Indian Contract Act, 1872 – which was broadly based on English common law.

A separate act, the Sales of Goods Act 1930 came into force on 1st July 1930. It extends to the whole of India. It does not affect rights, interests, obligations and titles acquired before the commencement of the Act. The Act deals with the sale but not with mortgage or pledge of the goods.


Definitions

Buyer – Sec 2 (1)

Buyer means a person who buys or agrees to buy goods.

Delivery- Sec 2 (2)

Delivery means voluntary transfer of the possession from one person to another.

Deliverable state- Sec 2 (3)

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.

Document of Title- Sec 2 (4)

A document of the title to goods may be described as any document used as proof of the possession or control of goods, authorizing or purporting to authorize, either by endorsement or by delivery, the possessor of the document to transfer or receive goods thereby represented.

Fault – Sec 2 (5)

Fault means wrongful act or default.

Future goods- Sec 2 (6)

Future goods mean goods to be manufactured or produced or acquired by the seller after the making of the contract of sale.

Goods- Sec 2 (7)

Goods mean every kind of movable 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.

Insolvent- Section 2 (8)

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- Section 2 (9)

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.

Price – Section 2(10)

Price means the money consideration for a sale of goods.

Property- Section 2(11)

Property means the general property in goods and not merely a special property.

Seller- Section 2 (13)

Seller means a person who sells or agrees to sell goods.

Specific goods- Section 2(14)

Specific goods mean goods identified and agreed upon at the time a contract of sale is made.


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. There may be a contract of sale between one part-owner and another.Sec. 4 (1), The Sale of Goods Act, 1930

Essentials of Valid Sales

The five essential features of a contract of sale are as discussed below:

  • Two parties
  • Movable goods
  • Price
  • Transfer of general property
  • Valid contract

Features

Explanation

Example

Two partiesThere must by two parties, buyer and seller, to contract.You go to a dealer and buy a computer and pay for it. The dealer is the seller and you are the buyer.
Movable goodsAny goods that are movable and the ownership is transferred. (Immovable property does not come under the Sales of Goods Act.)When you fly, the airline sells you the service to take you from one place to another; it does not sell you the aircraft. So also when you buy grain, you only buy grain and not the land of the farmer.
PriceSale is about exchange goods for money. Under Contract Act it is termed as consideration, but this consideration must be only in money. Exchange of goods for goods is barter and not sale.You buy a computer and pay money for it as the price for the value you
Transfer of general
property
Property is distinguished as general
property and special property. General
property consists of as goods owned and
special property as goods under
possession.
You own a clock. It is general property. You pledge the clock to a pawn shop—the shop owner is in possession of your property which is owned by you; it is a special property for the shop owner.
Valid contractThe principles of valid contract are applicable to sale of contract.The principles of contract that are enshrined in the Contract Act: offer, acceptance, consideration, communication, and competency to contract.

You may form a mental model (see Figure 5.2) of the formation of contract. In other words, you will deal with four main concepts of the formation of a contract.


How the Contract of Sale Comes About

As you have learnt in the Contract Act, no particular form is necessary to constitute a contract of sale.

There are offer and acceptance, the communication may be formal, informal, or implied. The sale and transfer may occur immediately before, after simultaneous, or payment in instalments.

In order to understand exactly how the contract of sale comes about, you must learn some fundamental distinctions. Table: distinguishes between each of the following:

  1. Sale and agreement to sell
  2. Sale and hire-purchase
  3. Agreement to sell and hire-purchase
  4. Sale and bailment
  5. Sale and contract for work and materials

The table is a logical consequence of the principles of contract that you studied in Contract Act Chapter which covered the Contract Act, 1872.

It goes to prove that both the Contract Act and Sale of Goods Act are complementary and both are based fundamentally on the same principles.

Difference Between Sale And Agreement To Sell

Distinction

Sale

Agreement to sell

MeaningWhen in a contract of sale, the exchange of goods for money consideration takes place immediately, it is known as SaleWhen in a contract of sale the parties to contract agree to exchange the goods for a price at a future specified date is known as an Agreement to Sell.
NatureAbsoluteConditional
Type of ContractExecuted ContractExecutory Contract
Transfer of riskYesNo
TitleIn sale, the title of goods transfers to the buyer with the transfer of goods.In an agreement to sell, the title of goods remains with the seller as there is no transfer of goods.
Right to sellBuyerSeller
Consequences of subsequent loss or damage to the goodsResponsibility of buyerResponsibility of seller
TaxVAT is charged at the time of sale.No tax is levied.
Suit for breach of contract by the sellerThe buyer can claim damages from the seller and proprietary remedy from the party to whom the goods are sold.Here the buyer has the right to claim damages only.
Right of unpaid sellerRight to sue for the price.Right to sue for damages.

The goods are the subject matter of any contract. They can be classified as follows:


Business Law Notes

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Business Law Book References

  1. Goel, P. K. (2006). “Business Law for Managers” Wiley
  2. Sheth, T. (2017). “Business Law” (2ed.) Pearson.
  3. Kuchhal. M.C. & Prakash. “Business Legislation for Management” (2ed.) Vikas Publishing.

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