UNIT- 3

SALES OF GOOD ACT:

SOGA : Sales of good act 1930 states that a contract where the seller transfers or agrees to transfer
the property in goods to the buyer for the price.

Essential elements of contract:

 There must be at least two parties

 The subject Matter of the contract must be goods
 The transfer of property in goods from seller to the buyer must take place
 A good must have a consideration of price.
 A contract of sale must be absolute or conditional
 A contract must be Valid contract.

Difference between:

SALE AGREEMENT TO SALE

Ownership passes to the buyer Ownership remains with the seller
It is a executed contract It is an executory contract
Risk of loss falls on the buyer Risk of floss falls on the seller
Sellers cannot resell the goods Sellers can sell goods to 3rd party
It can be in case of existing and specific goods. It can be in case of future and unascertained
goods.

Goods: Any physical or tangible product that we can see and touch

a. Consume goods are goods for personal use not for producing other goods.
b. Capital goods bought for producing other goods
c. Specific goods are goods let us specifically prearranged between the vendor and the buyer at
the time of construction the contact of the sale.
d. Future goods to be manufactured or produce or acquired by the seller after the making of
the contract of the sale.
e. Contingent goods are the subset of future goods in the sense that in contingent goods the
actual sale is be done in the future.
f. Unascertained goods These are the goods that have not been specifically identified but have
rather been left to be selected from a larger group.
g. Ascertained goods This term is used for specific goods which have been selected from a
larger set of goods.

Stipulation: while making a contract of sales of goods the buyer and seller enters into some terms
and facts of the contact, which is known as stipulation. (stipulation means to demand something)

The stipulation may be two types:

I. Condition.

ii. warranty.
Condition

Certain terms, obligations, and provisions are imposed by the buyer and seller while entering into a
contract of sale, which needs to be satisfied, which are commonly known as Conditions.

Warranty:

A warranty is a guarantee given by the seller to the buyer about the quality and performance of the
product. It is an assurance provided by the manufacturer to the customer that the said facts about
the goods are true and at its best.

If the warranty was proved false, and the product does not function as described by the seller then
remedies as a return or exchange are also available to the buyer i.e. as stated in the contract.

Condition warranty
A requirement or event that should be A warranty is an assurance given by the seller to
performed before the completion of another the buyer about the sate of the product, that
action, is known as condition. the prescribed facts are genuine.
Violation of condition can be regarded as a Violation of warranty does not affect the
violation of the warranty condition.
Condition is fundamental Warranty is collateral
Condition applies immediately Warranty applies later

Types of condition:

a. Express condition
b. Implied condition

Expressed condition: The conditions which are clearly defined and agreed upon by the parties while
entering into the contract.
Implied condition: The conditions which are not expressly provided, but as per law, some conditions
are supposed to be present at the time making the contract.

Some examples of implied conditions are:

• Condition -the title of goods – (Endorsement / Possession)

• Condition -the quality of the goods.

• Sale by sample

• Sale by description of the goods.

Passing of property:

Passive property implies passing of ownership. if the property has passed to the buyer the risk in the
good sold is that of buyer not of seller though, the goods may still be in the sellers possession.

• Goods sent on approval or sale – the goods can be transferred from buyer to the seller on
‘approval’ or ‘sale or return’ basis.

• ‘Passing of property in goods means ‘transfer of ownership’ of the goods. When the goods
are sold, it is the property in the goods that are transferred to the buyer.

Passing of property:

a. Specific goods
b. Unascertained goods
c. Goods sent on approval

Specialty goods: Goods that consumer select by brand or company which required a special sales
effort. Usually expensive.

Performance of contract of sale:

The performance of a Contract of Sale defines it as - a transaction where the seller delivers the
goods in exchange for a payment made by the buyer.

Rights of an unpaid seller

Unpaid seller:

 A seller is deemed to be an unpaid seller if:

 When the whole of the price is not paid to him.
 A part of a price yet to be paid
 When a bill of exchange or other negotiated instrument has been received as conditional
payment and therefore the condition on which it had been received has not been fulfilled
instrument or otherwise.
i) Unpaid Sellers’- Right to Lien

Lien: a right to keep possession of property belonging to another person until a debt owed by that
person is discharged

The right of Lien is one of the unpaid sellers right against the good, which is transferred to the buyer.

It is the unpaid sellers right to retain the goods until the whole of the price is paid or tendered.

ii) Unpaid Sellers’ - Right to Stoppage in Transit

This right arises when the goods are in transit, i.e., they have been dispatched by the seller but not
yet delivered to the buyer and the buyer has become insolvent.

In such a situation, the seller can stop the goods in transit and resume possession of the goods. This
right allows the seller to prevent the goods from being delivered to the insolvent buyer and gives
them the opportunity to recover their dues.

iii) Rights of Unpaid Seller - to Resell the Goods:

If the seller has exercised their right of lien or has stopped the goods in transit and the buyer does
not pay the price within a reasonable time, the seller can sell the goods to recover their dues.

The seller can sell the goods either by public auction or by private sale. However, the seller must
notify the buyer of their intention to resell the goods and if the buyer pays the price before the
resale, the seller is bound to deliver the goods to the buyer.

iv) Right to Receive Payment:

o The seller has the right to receive payment for the goods they have sold. If the buyer doesn’t pay,
the seller can take legal action.

o Example: If Raj sells a television to Sita, he has the right to receive the agreed amount for the TV.

v) Unpaid Sellers’ Rights to Claim Damages:

Apart from the right to sue for the price, an unpaid seller’s rights include the right to claim damages
for any loss suffered due to the buyer’s default.

If the buyer wrongfully neglects or refuses to accept the goods, The seller can also claim damages for
any additional expenses incurred as a result of the buyer’s default, such as storage costs or
transportation charges.

vi) Rights of Unpaid Seller to Retain the Goods:

In certain situations, an unpaid seller also has the right to retain the goods until their dues are paid.

According to the Sales of Goods Act, 1930, an unpaid seller who is in possession of the goods has the
right to retain the goods until the price is paid or until other obligations of the buyer are fulfilled

Rights of the Buyer

1. Right to Receive Goods as Per Contract:

o The buyer has the right to receive the goods as described in the contract. If the
goods are different or defective, the buyer can reject them.

o Example: Sita ordered a 40-inch television, but Raj delivered a 32-inch TV. Sita has
the right to reject it.

2. Right to Examine the Goods:

o The buyer has the right to inspect the goods to ensure they match the contract
before accepting them.

o Example: Sita can check the TV to ensure it’s working properly before making the
final payment.

3. Right to Reject Goods:

o If the goods do not match the contract terms, the buyer can refuse to accept them.

o Example: If the TV is damaged, Sita can refuse to accept it.

4. Right to Receive Goods in Good Condition:

o The buyer has the right to receive goods that are not damaged and are fit for the
purpose they were bought.
o Example: Sita has the right to receive the TV in perfect working condition
5. Right to Sue for Damages:

o If the seller breaches the contract, the buyer can sue for damages.
o Example: If Raj fails to deliver the TV on time and Sita suffers a loss because of it, she
can sue Raj for compensation

Doctrine of Caveat Emptor:

 Caveat Emptor is a Fundamental principle of the law of sale of goods
 Caveat means beware and emptor means buyer
 It means caution buyer that is at the buyer be aware
  It is the duty of the buyer to be careful while purchasing goods of his requirement And in the
absence of the inquiry from the buyer that seller is not bonded to the close every defect in
the goods of which he may be cognizant
 In other words, It is not the duty of the sellers to point out defects of his own goods, The bar
must inspect the good find out if they will suit his purpose.

Exceptions to Doctrine of Caveat Emptor

1. Sale by Sample

If the buyer buys his goods after examining a sample then the rule of Doctrine of Caveat Emptor will
not apply. If the rest of the goods do not resemble the sample, the buyer cannot be held responsible.
In this case, the seller will be the one responsible.

For example, A places an order for 50 toy cars with B. He checks one sample where the car is red.
The rest of the cars turn out orange. Here the doctrine will not apply and B will be responsible.

2. Fraud or Misrepresentation by the Seller

If the seller obtains the consent of the buyer by fraud then caveat emptor will not apply. Also if the
seller conceals any material defects of the goods which are later discovered on closer examination
then again the buyer will not be responsible.

3. Goods sold by Description

When the buyer buys the goods based only on the description there will be an exception. If the
goods do not match the description then in such a case the seller will be responsible for the goods.

4. Goods Purchased under Brand Name

When the buyer buys a product under a trade name /a branded product the seller cannot be held
responsible for the usefulness or quality of the product. So there is no implied condition that the
goods will be fit for the purpose the buyer intended.

5. Buyer relies on the sellers judgement regarding the quality.

6. Goods must be free from adulteration Otherwise seller will be responsible in case adulterated
goods are supplied to the buyer

7. Goods must be of merchantable quality (there should be no defects or goods should be fit for the
purpose they are bought for)

Example: Cold drinks or chocolates- If seal of the cold drink selling in the market is opened or
wrapper of the chocolate is damaged. Then these goods will not be called as goods of merchantable
quality.