Sale of Goods Act 1930 — Price, Title, Transfer & Remedies
Here are the key concepts of Price, Conditions and Warranties, Transfer of Ownership, and Performance under the Sale of Goods Act, 1930.
Price (Sections 2(10), 9, 10)
The price is the monetary consideration for a contract of sale of goods. It is an essential element, since a transfer of goods for anything other than money is treated as barter, not a sale under the Act.
Ascertainment of Price (Section 9)
The price in a contract of sale may be fixed in any of the following ways:
| Mode of Fixing Price | Description |
|---|---|
| Fixed by the Contract | The contract itself specifies the exact price. |
| Fixed in an Agreed Manner | The contract lays down a procedure for determining the price (for example, based on the market rate on a future date). |
| Determined by Course of Dealing | The price is inferred from the past business relationship between the buyer and seller. |
| Reasonable Price | If the price cannot be determined by any of the above means, the buyer is liable to pay a reasonable price. What constitutes a reasonable price is a question of fact depending on the circumstances of each case. |
Agreement to Sell at Valuation (Section 10)
If the parties agree that the price is to be fixed by a third party who then fails to make the valuation, the contract is generally void. However, if the buyer has already received and appropriated the goods, they must pay a reasonable price.
Conditions and Warranties (Sections 12-17)
Stipulations (terms) in a contract of sale are classified based on their importance to the main purpose of the contract.
Condition (Section 12(2))
Condition is a stipulation essential to the main purpose of the contract.
- Breach: The breach of a condition gives the aggrieved party the right to repudiate the contract (treat it as cancelled), reject the goods, and claim damages.
Warranty (Section 12(3))
Warranty is a stipulation collateral to the main purpose of the contract.
- Breach: The breach of a warranty gives the aggrieved party the right to claim damages only, but not the right to reject the goods or repudiate the contract.
Implied Conditions and Warranties
These are terms that the law presumes to exist in every contract of sale unless the contract explicitly excludes them.
| Implied Term | Description | Nature |
|---|---|---|
| Title (Sec. 14(a)) | The seller has a right to sell the goods (in a sale) or will have a right to sell the goods (in an agreement to sell). | Condition |
| Sale by Description (Sec. 15) | The goods must correspond with the description given by the seller. | Condition |
| Fitness for a Purpose (Sec. 16(1)) | The goods must be reasonably fit for the particular purpose communicated by the buyer to the seller. | Condition |
| Merchantable Quality (Sec. 16(2)) | Goods must be of a standard quality that a person would reasonably accept, and fit for the purpose for which they are normally used. | Condition |
| Quiet Possession (Sec. 14(b)) | The buyer shall have and enjoy quiet possession of the goods. | Warranty |
| Freedom from Encumbrance (Sec. 14(c)) | The goods are free from any charge or encumbrance in favour of any third party, not declared or known to the buyer. | Warranty |
Transfer of Ownership in Goods (Sections 18-25)
The transfer of property (ownership/legal title) is the essential difference between a ‘sale’ (immediate transfer) and an ‘agreement to sell’ (future transfer). The risk of loss generally passes with ownership (risk follows property).
General Rule (Section 19)
The property in specific or ascertained goods is transferred to the buyer at such time as the parties to the contract intend it to be transferred. Intention is gathered from the terms of the contract, the conduct of the parties, and the circumstances of the case.
Rules for Specific Goods (Sections 20-22)
When the parties’ intention cannot be determined, the Act provides rules:
| Condition of Goods | Rule for Passing Property |
|---|---|
| In a Deliverable State (Sec. 20) | Property passes at the time the contract is made, even if the time of payment or delivery is postponed. |
| Not in a Deliverable State (Sec. 21) | Property passes only when the seller has done the necessary act to put the goods into a deliverable state and the buyer has notice of it. |
| Price yet to be ascertained (Sec. 22) | Property passes only when the seller has weighed, measured, tested, or done any act to ascertain the price and the buyer has notice of it. |
Rules for Unascertained Goods (Sections 18 & 23)
Goods must be ascertained (Sec. 18): Where there is a contract for unascertained goods, the property cannot pass to the buyer until the goods are ascertained.
Appropriation (Sec. 23): Once goods are ascertained, property passes only when they are unconditionally appropriated (set aside and identified) to the contract, either by the seller with the buyer’s consent or by the buyer with the seller’s consent. Delivering the goods to a carrier without reserving the right of disposal is deemed unconditional appropriation.
Performance of the Contract of Sale (Sections 31-40)
Performance means the fulfillment of the duties agreed upon by the parties.
Duties of Seller and Buyer (Section 31)
- Seller’s duty: To deliver the goods.
- Buyer’s duty: To accept the goods and pay the price.
Payment and Delivery Are Concurrent Conditions (Section 32)
Unless otherwise agreed, the seller must be ready and willing to give possession of the goods to the buyer in exchange for the price, and the buyer must be ready and willing to pay the price in exchange for possession.
Modes of Delivery (Section 33)
Delivery is the voluntary transfer of possession from one person to another. It may be:
- Actual: Physical transfer of the goods.
- Symbolic: Transfer of the means of controlling the goods (for example, handing over the key to a warehouse or documents of title).
- Constructive: Acknowledgment by a third party that they hold the goods on the buyer’s behalf.
Rules Regarding Delivery
- Buyer to Apply (Sec. 35): The seller is not bound to deliver the goods until the buyer applies for delivery (unless the contract specifies otherwise).
- Place of Delivery (Sec. 36(1)): The place of delivery is that which is agreed upon. If no place is agreed, it is the place where the goods are at the time of sale or agreement to sell.
- Time of Delivery (Sec. 36(2)): If no time is fixed, the seller must deliver within a reasonable time.
- Expenses (Sec. 36(5)): The expense of putting the goods into a deliverable state must be borne by the seller.
- Delivery of Wrong Quantity (Sec. 37): If the seller delivers a quantity less or more than contracted for, or mixes them with goods of a different description, the buyer may reject the whole, accept the contracted quantity, or accept the entire lot (in the case of excess delivery).
Remedies for Breach of Contract of Sale
The Sale of Goods Act, 1930, provides specific remedies for both the seller and the buyer in case of breach of the contract.
Unpaid Seller and His Rights (Sections 45-54)
An unpaid seller is defined by Section 45 as a seller (or any person in the position of a seller) to whom:
- The whole of the price has not been paid or tendered.
- A bill of exchange or other negotiable instrument was received as conditional payment, and the condition has not been fulfilled (for example, the instrument has been dishonoured).
The unpaid seller has powerful rights against both the goods and the buyer personally.
Rights Against the Goods (Even if Property Has Passed)
These rights are protective in nature and are exercised to secure the price of the goods.
- Right of Lien (Sections 47-49): The right to retain possession of the goods until the full price is paid. This right can be exercised only when the seller is in possession of the goods and:
- The goods have been sold without any stipulation as to credit.
- The goods have been sold on credit, but the term of credit has expired.
- The buyer becomes insolvent.
- Right of Stoppage in Transit (Sections 50-52): The right to stop the goods while they are in the course of transit (that is, after the seller has parted with possession but before the buyer has taken delivery) and resume possession. This right is available only if the buyer becomes insolvent.
- Right of Re-sale (Section 54): The unpaid seller can re-sell the goods under specific circumstances, mainly to recover the price and damages. This right can be exercised:
- If the goods are of a perishable nature.
- If the seller exercises the right of lien or stoppage and gives notice to the buyer of the intention to re-sell, and the buyer fails to pay within a reasonable time.
- If the contract expressly reserves the right of re-sale.
Rights Against the Buyer Personally
These are common law remedies to recover the price and losses.
- Suit for Price (Section 55): The seller can sue the buyer for the price of the goods if:
- The property in the goods has passed to the buyer, and the buyer wrongfully neglects or refuses to pay.
- The contract provides that the price shall be paid on a certain day, irrespective of delivery, and the buyer fails to pay.
- Damages for Non-Acceptance (Section 56): If the buyer wrongfully refuses to accept and pay for the goods, the seller may sue for damages for non-acceptance. The measure of damages is the estimated loss directly and naturally resulting from the breach.
- Repudiation of Contract (Section 60): If the buyer repudiates the contract before the date of delivery (anticipatory breach), the seller may either treat the contract as rescinded immediately and sue for damages, or wait until the due date.
- Interest (Section 61): The seller can claim interest on the price from the date payment became due.
Buyer Remedies (Sections 57-61)
When the seller breaches the contract, the buyer has several remedies:
- Damages for Non-Delivery (Section 57): If the seller wrongfully neglects or refuses to deliver the goods, the buyer may sue the seller for damages for non-delivery. The damages are calculated based on the difference between the contract price and the market price on the date of breach.
- Suit for Specific Performance (Section 58): In the case of specific or ascertained goods, if the court is of the opinion that damages would not be an adequate remedy (for example, the goods are unique, like a rare painting or antique), it may direct the seller to perform the contract specifically by delivering the agreed goods.
- Remedy for Breach of Warranty (Section 59): If there is a breach of warranty by the seller (or the buyer treats a breach of condition as a breach of warranty):
- The buyer cannot reject the goods.
- The buyer may set up the breach in reduction or extinction of the price.
- The buyer may sue the seller for damages for the breach of warranty.
- Suit for Recovery of Price: If the buyer has already paid the price (or part of it) and the seller fails to deliver the goods, the buyer is entitled to recover the amount paid.
- Repudiation of Contract (Section 60): Similar to the seller, the buyer can sue for damages immediately upon the seller’s anticipatory breach.