Unit -III

The Sale of Good Act. 1930

3.1           Contract of Sale, meaning and difference between sale and agreement to sell.

HISTORY

• Sale of Goods act was enacted in 1930.

• Borrowed from English Sales of Goods Act, 1893.

• Came into force in July 01, 1930.

• Prior to the act, the law of sale of Goods was contained in chapter VII of the Indian contract act, 1872.

• It extends to whole India except J& K.

(a)  Meaning

As per Sec 4(1) of the Indian Sale of Goods Act, 1930 defines the contract of sale of Goods within the following manner: “A contract of sale of Goods may be a contract whereby the vendor transfers or agrees to transfer the property in goods to the customer for a price”.

ESSENTIALS OF CONTRACT OF SALE

From the above definition, the subsequent essentials of a contract of sale may by noted:

• There must be a minimum of two parties

• Transfer or Agreement to transfer the ownership of Goods.

• The material of the contract must necessarily be 'goods'. Sale of immovable property isn't covered under this act.

• The consideration is Price.

• A Contract of sale could also be in writing or by words

• All other essentials of a legitimate contract must be present

(b) Difference between Sale and Agreement to Sell

A. SALE

B. AN AGREEMENT TO SALE

Where the vendor transfers the ownership rights to the customer immediately on making the contract, it's the contract of sale, but where the ownership rights are to expire some future date upon the fulfillment of certain conditions then it's called an agreement to sell.

DISTINGUISHED BETWEEN “SALE” AND “AGREEMENT TO SELL”

SALE:

• It may be a contract where the ownership within the goods is transferred by seller to the customer immediately at the conclusion contract. Thus, properly speaking, sale takes place when there's a transfer of property in goods from the vendor to the customer. A purchase is an executed contract.

• It must be noted here that the payment of price is immaterial to the transfer of property in goods.

• Ex - A sells his Yamaha Motor Bicycle to B for Rs. 10,000. It’s a purchase since the ownership of the motorcycle has been transferred from A to B.

AGREEMENT TO SALE

• It may be a contract of sale where the transfer of property in goods is to require place at a future date or subject to some condition thereafter to be fulfilled.

• Ex- A agreed to shop for from B a particular quantity of nitrate of soda. The ship carrying the nitrate of soda was yet to arrive. This is often an agreement to sale. During this case, the ownership of nitrate of soda is to be to transferred to A on the arrival of the ship containing the required goods (i.e. nitrate of soda)

• On 1st March 1998, A agreed to sell his car to B for Rs. 80,000. It had been agreed between themselves that the ownership of the car will transfer to B on 31st March 1998 when the car is not registered in Bs name. It’s an agreement to sell and it'll become sale on 31st March when the car is registered in the name of B. Other points of distinction between a sale and an agreement to sell are

DIFFERENCE BETWEEN

3.2   Unpaid Seller

(a)  Meaning

A seller of Goods is deemed to be an unpaid seller when-

• The whole of the worth has not been paid or tendered;

• A bill of exchange or other legal document has been received as a conditional payment, and therefore the condition on which it had been received has not been fulfilled by reason of the dishonor of the instrument or otherwise.

CONDITIONS:

• The term "seller" includes a person who is within the position of a seller, as, as an example, an agent of the vendor to whom the bill of lading has been endorsed or agent who has himself paid, or is directly liable for, the price.

• The seller shall be called an unpaid seller even when only a little portion of the worth remains to be unpaid.

• It is for the non-payment of the worth and not for other expenses that a seller is termed as an unpaid seller.

• Where the complete price has been tendered by the customer and therefore the seller refused to simply accept it, the vendor can't be called as unpaid seller.

• Where the Goods are sold on credit, the vendor can't be called as an unpaid seller. Unless

• If during the credit period seller becomes insolvent, or

• On the expiry of the credit period, if the worth remains unpaid, then, only the vendor will become an unpaid seller.

(b)  RIGHTS OF AN UNPAID SELLER

• Against goods: Where the property in goods has passed to the buyer: Right of lien, right of stoppage in transit, right of resale

• Against buyer personally: Where the property in goods has not passed to the buyer: Withholding delivery, Stoppage in transit, Resale

Right of lien (sec.47-49)

• The right of lien means the proper to retain the possession of the Goods until the complete price is received.

• Circumstances under the proper of lien are often exercised

• Where the Goods are sold with none stipulation to credit

• Where the Goods are sold on credit, but the term of credit has expired

• Where the customer becomes insolvent

Right of stoppage of Goods in transit (sec.50-52)

• Right of stoppage in transit means the proper of stopping the Goods while they're in transit, to regain possession and to retain them till the complete price is paid.

• Conditions under which Right of stoppage in transit are often exercised

(i) Seller must have parted with the possession of Goods, i.e., the Goods must not be within the possession of the vendor

(ii) The goods must be in course of transit

(iii)          Buyer must become insolvent

Right of resale (sec.54)

An unpaid seller can resell the Goods under the subsequent circumstances:

Where the Goods are of a perishable nature

i. Where the vendor expressly reserves the proper of resale if the customer commits a default in making payment

Ii. Where the unpaid seller who has exercised his right of lien or stoppage in transit gives a notice to the customer about his intention to resell and buyer doesn't pay or tender within an inexpensive time.

REMEDIAL MEASURES:

Remedies for Breach of Condition and Breach of Warranty

As has already appeared (52), in the case of a breach of warranty, the injured party is entitled to damages, whereas in the case of a breach of condition, he has the alternative of treating the contract as being completely broken by non-performance.

The fact that the buyer has resold the goods does not necessarily preclude him from exercising his right to reject them for breach of condition if the inspection and rejection take place within a reasonable time.

The injured party may, however, elect to treat a breach of condition as merely a breach of warranty.

The Sale of Goods Act (Ont. s. 13; U.K. s. 11) provides: 13-(1) Where a contract of sale is subject to any condition to be fulfilled by the seller, the buyer may waive the condition, or may elect to treat the breach of such condition as a breach of warranty, and not as a ground for treating the contract as repudiated.

In this section the word "or" must be read as a conjunction coordinating two phrases which are equivalent one to the other. The meaning seems reasonably plain, namely, that the injured party, instead of insisting on his right to be discharged on account of the other party's breach of condition, and to reject the goods, may waive this right, that is, may content himself with his right of action for damages as on a breach of warranty.

Ewart (Waiver Distributed, pp. 148-150) criticizes the wording of the section on the ground that it seems to allow an alternative between waiving the condition (that is treating the condition as non-existent) and treating the breach of condition as a breach of warranty, and doubtless the section would be improved if the word "and" were substituted for "or," or if the words "may waive the condition or" were omitted.

Under a contract for the sale of goods to be delivered within a certain period of time; the buyer's right to require delivery within that period may be waived even after that period has expired; but it would seem that where the contract is within the Statute of Frauds (Sale of Goods Act, Ont. s. 6; U. K. s. 4), the waiver must be evidenced by writing.

3.3 Auction Sale

An auction may be a public sale. The goods are sold to all or any members of the general public at large who are assembled in one place for the auction. Such interested buyers are the bidders.

The price they're offering for the goods is that the bid and therefore the goods are going to be sold to the bidder with the very best bid.

The person completing the auction is that the auctioneer. He’s the agent of the vendor.

So, all the principles of the Law of Agency apply to him

But if an auctioneer wishes to sell his own property because the principal he can do so. And he needn't disclose this fact; it's not a requirement under the law.

References

1. Business Law for Management by Balchandani
2. Business Law by Henry R. Cheeseman
3. Business Law by B. B. Dam