Sale of Goods Act, 1930

• Buyer s.2(1); delivery s.2(2): voluntary transfer of possession from one person to another; deliverable state s.2(3); document of title s.2(4); fault s.2(5); future goods s.2(6): goods to be manufactured, produced or acquired by the seller after making the contract.

• Goods s.2(7): every kind of movable property other than actionable claims and money; 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 s.2(8); mercantile agent s.2(9); price s.2(10): money consideration for a sale of goods; property s.2(11): the general property (ownership) in goods, not merely a special property; quality of goods s.2(12); seller s.2(13); specific goods s.2(14): goods identified and agreed upon at the time the contract of sale is made.

• Classification of goods (s.6): existing (owned or possessed by the seller) or future; specific, ascertained, unascertained; and contingent goods (future goods the acquisition of which depends on a contingency).

s.4(1): a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. It may be absolute or conditional. s.4(3): sale is when property in goods is transferred at the time of the contract (an executed contract); s.4(4): agreement to sell is when the transfer takes place at a future time or subject to a condition later to be fulfilled (an executory contract). An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled.

Essentials: two parties (buyer and seller, different persons); goods; a price in money; transfer of property; and the usual elements of a valid contract. s.5: no particular form required, and the contract may be oral or written, or implied from conduct. s.7: if the contract is for specific goods which, without the knowledge of the seller, have perished at the time of the agreement, the agreement is void. s.8: where specific goods perish after the agreement to sell but before the risk passes to the buyer, without fault of either party, the agreement is avoided.

Sale vs agreement to sell:

Sale vs other transactions: vs bailment (no transfer of ownership); vs barter/exchange (no price in money); vs gift (no price); vs hire-purchase (the hirer has only an option to buy; see K.L. Johar & Co. v Deputy Commercial Tax Officer, 1965); vs pledge (security, not transfer of ownership); vs contract for work and labour (the substance is skill and labour, not sale of goods).

Price (ss.9–10): fixed by the contract, or left to be fixed in a manner agreed, or determined by the course of dealing; otherwise the buyer must pay a reasonable price (s.9(2)). s.10: where the price is to be fixed by a third-party valuer who fails, the agreement is void, but the buyer who has taken goods must pay a reasonable price. s.11: unless otherwise agreed, stipulations as to time of payment are not the essence of the contract.

• Condition (s.12(2)): a stipulation essential to the main purpose of the contract, the breach of which gives the buyer the right to repudiate the contract (and claim damages).

• Warranty (s.12(3)): a stipulation collateral to the main purpose, the breach of which gives a right to damages only, not to reject the goods.

• s.12(4): whether a stipulation is a condition or warranty depends on the construction of the contract. A stipulation may be a condition though called a warranty.

• s.13: a condition may be treated as a warranty where the buyer waives the condition, elects to treat the breach as a breach of warranty, or accepts the goods (in a non-severable contract, where specific goods are involved).

Implied conditions and warranties:

• s.14(a): Condition as to title. The seller has a right to sell the goods (or will have a right at the time property is to pass). Case: Rowland v Divall (the buyer recovers the full price although he used the car, because there was a total failure of consideration).

• s.14(b): Warranty of quiet possession.

• s.14(c): Warranty that goods are free from any charge or encumbrance in favour of a third party not declared or known to the buyer.

• s.15: Sale by description. The goods must correspond with the description (Varley v Whipp; Beale v Taylor). If the sale is by sample as well as description, the bulk must correspond with both (s.17).

• s.16(1): Fitness for purpose. Where the buyer expressly or by implication makes known to the seller the particular purpose and relies on the seller’s skill or judgment, there is an implied condition that the goods are reasonably fit for that purpose (Priest v Last; Grant v Australian Knitting Mills). The proviso: in the case of a specified article under its patent or trade name, there is no implied condition of fitness.

• s.16(2): Merchantable quality. Where goods are bought by description from a seller who deals in goods of that description, there is an implied condition that goods are of merchantable quality. If the buyer has examined the goods, there is no implied condition regarding defects which such examination ought to have revealed (Wallis v Pratt). The doctrine of caveat emptor (let the buyer beware) is the general rule, subject to these exceptions.

• s.16(3): implied conditions annexed by usage of trade. s.16(4): an express warranty does not negate an implied condition unless inconsistent.

• s.17: Sale by sample: the bulk must correspond with the sample in quality; the buyer must have a reasonable opportunity to compare; the goods must be free from defect not apparent on reasonable examination of the sample.

• s.18: where there is a contract for the sale of unascertained goods, no property in the goods is transferred until the goods are ascertained. (Specific goods: s.19.)

• s.19(1)–(2): in specific or ascertained goods, property passes at the time the parties intend it to pass, judged by the terms of the contract, the conduct of the parties and the circumstances.

• Rules for ascertaining intention (ss.20–24):

  • s.20: specific goods in a deliverable state: property passes at the time of the contract, even if payment or delivery is postponed.

  • s.21: specific goods to be put into a deliverable state by the seller: property passes when the seller does so and the buyer has notice.

  • s.22: specific goods in a deliverable state, but the seller has to weigh, measure or test them to ascertain the price: property passes when the act is done and the buyer has notice.

  • s.23: unascertained or future goods by description: property passes when goods of that description and in a deliverable state are unconditionally appropriated to the contract, with the assent (express or implied) of the other party.

  • s.24: Goods sent on approval or ‘on sale or return’: property passes (a) when the buyer signifies approval or acceptance, (b) when he does any act adopting the transaction (for example pledging or selling the goods), or (c) when he retains the goods beyond the time fixed (or a reasonable time) without giving notice of rejection.

• s.25: Reservation of the right of disposal (until conditions are fulfilled). Where goods are shipped and the bill of lading makes the goods deliverable to the seller or his agent, the seller is prima facie reserving the right of disposal.

• s.26: Risk prima facie follows property (res perit domino), whether delivery has been made or not. If delivery is delayed by the fault of either party, the goods are at the risk of the party in fault as regards any loss that might not have occurred but for such fault.

General rule: nemo dat quod non habet: no one can give a better title than he himself has. Exceptions:

1. s.27 (Estoppel): where the owner, by conduct or words, leads the buyer to believe that the seller is the owner or has authority to sell, the owner is estopped from denying the seller’s authority. Also sale by a mercantile agent in possession of goods or documents of title with the owner’s consent, in the ordinary course of business, and where the buyer acts in good faith without notice.

2. s.28 (Joint owners): sale by one of several joint owners in sole possession with the consent of the others.

3. s.29 (Voidable title): a person in possession under a contract voidable on grounds such as fraud sells before the contract is rescinded, and the buyer acts in good faith without notice.

4. s.30(1) (Seller in possession after sale): the seller, continuing in possession, delivers or transfers the goods to a person who takes in good faith without notice.

5. s.30(2) (Buyer in possession): the buyer, having obtained possession with the seller’s consent, delivers or transfers the goods to a person who takes in good faith without notice.

6. Other exceptions: a sale by a finder of lost goods (s.169 ICA), by a pawnee (s.176 ICA), by an unpaid seller exercising his right of resale (s.54), under an order of court or an execution sale, and sale by an official assignee or insolvency official. Cases: Eastern Distributors v Goldring; Lickbarrow v Mason (documents of title).

• s.31: the duty of the seller is to deliver the goods and of the buyer to accept and pay for them. s.32: delivery and payment are concurrent conditions unless otherwise agreed.

• Modes of delivery (s.33): actual (physical handing over), constructive (the person in possession acknowledges that he holds on behalf of the buyer), and symbolic (the means of control, such as the keys of a warehouse or a bill of lading).

• s.34: part delivery is a delivery of the whole if made with the intent to deliver the whole. s.35: the seller is not bound to deliver unless the buyer applies for delivery. s.36: place of delivery; the cost of putting goods in a deliverable state is borne by the seller; the buyer must pay for the cost of taking delivery. s.37: delivery of the wrong quantity (less: the buyer may reject; more: the buyer may accept the contracted quantity and reject the excess, or reject the whole). s.38: instalment deliveries (no obligation to accept in instalments unless agreed). s.39: delivery to a carrier is prima facie delivery to the buyer. s.40: deterioration in transit. s.41: the buyer’s right to examine the goods. s.42: acceptance occurs when the buyer intimates acceptance, does an act inconsistent with the seller’s ownership, or retains the goods beyond a reasonable time. s.43: a buyer who rightfully refuses is not bound to return the goods. s.44: liability of the buyer for neglecting or refusing delivery.

Who is an unpaid seller (s.45): one to whom the whole of the price has not been paid or tendered, or who has received a bill of exchange or negotiable instrument as conditional payment that is dishonoured.

Rights (s.46):

1. Rights against the goods (even where property has passed):

   • Lien (ss.47–49): to retain possession until payment or tender, where the goods were sold without any stipulation as to credit, or the credit term has expired, or the buyer has become insolvent. s.49: the lien is lost by delivery to a carrier without reserving the right of disposal, by the buyer lawfully obtaining possession, or by waiver. A part delivery does not by itself lose the lien (s.48).

   • Stoppage in transit (ss.50–52): the right to resume possession of goods in transit when the buyer becomes insolvent. Transit begins when the goods are delivered to a carrier and ends when the buyer or his agent takes delivery (s.51). The stoppage is effected by taking actual possession or by giving notice to the carrier (s.52).

   • Resale (s.54): by an unpaid seller who has exercised a right of lien or stoppage, where the goods are perishable, or where he gives notice to the buyer of his intention to resell and the buyer does not pay within a reasonable time. If there is a loss on resale, the seller may recover it from the buyer; the surplus belongs to the seller where there was no condition about resale and the buyer was in default.

2. Rights against the buyer personally: s.55 suit for the price (where property has passed and the buyer wrongfully neglects to pay, or where the price is payable on a certain day irrespective of delivery); s.56 damages for non-acceptance; s.61 interest and special damages.

• s.57: damages for non-delivery.

• s.58: specific performance (for specific or ascertained goods), now to be read with the Specific Relief Act, 1963, as amended in 2018.

• s.59: remedy for breach of warranty: set off the loss against the price or sue for damages.

• s.60: repudiation of the contract before the date of delivery (anticipatory breach).

• s.61: interest and special damages. s.62: exclusion of implied terms by express agreement or custom. s.63: reasonable time is a question of fact.

• The sale is divided into lots; each lot is a separate contract unless otherwise agreed.

• The sale is complete on the fall of the hammer (or other customary announcement); until then, a bidder may withdraw his bid.

• The right to bid may be reserved expressly; if not, the seller or any person on his behalf may not bid, and any sale in contravention is voidable at the buyer’s option. A reserve price may be stipulated.

• Pretended bidding to raise the price makes the sale voidable (s.64(6)).