What is the Sale of Goods Act, 1930?
Almost every kind of business involves the sale and purchase of goods as part of its transaction. People in business are often entering into a contract of sale to sell their commodities. All these sales are governed by the Sale of Goods Act, 1930 which is one of the most important types of contracts under the law of India.
Every individual, whether a legal professional or a common man, who deals in the transaction of goods regularly, must understand the important terms of this contract. This article will acquaint you with some of the important terminology used in the Sale of Goods Act, 1930.
This act defines a contract wherein the seller of particular goods transfers or agrees to transfer the goods to the buyer for some price. This mercantile law was formed on the 1st of July 1930 when India was under the British Raj. This law had been borrowed mostly from the Sale of Goods Act, 1893 of Great Britain. The law is applicable all over India except for Jammu and Kashmir. As per section 2 of this act, a contract of sale is a generic term which refers to both sale and agreement to sell and is characterized by:
An offer to buy goods for a price or an offer to sell goods for a price and
Acceptance of the offer.
Important Terms in the Sale of Goods Act, 1930
Buyer - This is mentioned in section 2(1) and defined as a person who either purchases or agrees to purchase certain products. The buyer appears as one of the parties in the contract of sale.
Seller - This is defined in section 2(13) and defined as a person who either sells or agrees to sell certain products. The seller appears as one of the parties in the contract of sale.
By combining the definitions of a buyer and seller, we can conclude that it is not mandatory to transfer goods to be deemed as a buyer or a seller. Just by agreeing or promising to sell and buy goods, you become buyer and seller as per the contract of sale.
Goods - Goods are any merchandise or possession. An important clause in the contract for sale goods is described in Section 2(7) as:
It is a moveable property (except for money and actionable claims)
Stocks and shares
Growing crops, grass, standing timber
The things that are attached to the land but are agreed to be severed before the sale. For example, if a resort is offering complimentary food along with lodging and customers do not want to take the food. Then the rebate on food is not applicable as the food was not part of the sale.
Thus, we conclude here that goods are moveable property barring money and actionable claims. Goods are classified into many categories, as explained in the next section.
Types of Goods Under Sale of Goods Act 1930
Section 6 of the act explains in detail all types of goods in the Sale of Goods Act. There are mainly three categories of goods:
Existing Goods – If the goods exist physically at the time of contract and the seller is in legal possession of the goods, then it is termed as existing goods. They are further divided into three types:
Specific Goods – They are defined under section 2(14) and refer to goods that are identified and agreed to be transferred, at the time of making the contract. For example, A wants to sell a Bike of a certain model and year of manufacture, and B agrees to buy the bike. Here the bike is a specific good.
Ascertained Goods – These types of goods are identified by judicial interpretation and not by law. Any good where the whole or part of the good is identified and marked for sale at the time of the contract comes under ascertained goods. These goods are earmarked for sale.
Unsanctioned or Unascertained Goods – Those goods that are not specifically identified for sale, at the time of the contract, fall under the category of unsanctioned goods. For example, there is a bulk of 1000 quinols of wheat out of which 500 quinols are agreed to be sold. Here the seller can choose the goods from the bulk and is not specified.
Future Goods – The definition of future goods appears in section 2(6). The goods which do not exist at the time of contract but are supposed to be produced, acquired, or manufactured by the seller are called future goods. For example, A sells chairs and B wants 300 chairs of a specific design which A agrees to manufacture at a future date. Here chairs are future goods.
Contingent Goods – You can find the answer to what is contingent goods in section 6(2) of the Sale of Goods Act. A contingent good is a kind of future good, but it is dependent on the happening (or the absence of) certain conditions. As an example, X has agreed to sell 100 mangoes from his farm to Y at a future date. But this sale depends on the fact whether the trees in X’s farm give a yield of 100 mangoes by the date of the contract.
Delivery
Delivery of goods appears in section 2(2) and describes the process of transferring the possession of goods from one person to another. The person receiving the goods could either be the buyer or another person authorized by the buyer to receive the goods. There are different types of delivery of goods as described below:
Actual Delivery – If the commodity is handed over directly to the buyer or the person authorized by the buyer then that’s called an actual delivery.
Constructive Delivery – When the transfer of goods is done without any change in possession, then it is a constructive delivery. It could mean that the seller, even after selling the goods, holds them as bailee for the buyer.
Symbolic Delivery – In this case, the goods are not delivered, but a symbolic means of obtaining possession is involved. For example, handing over the keys of a warehouse where the goods are stored is a symbolic delivery. Such delivery is usually done when the goods are bulky or heavy.
FAQs on The Sale of Goods Act, 1930: Key Provisions
1. What are the key points of the Sale of Goods Act 1930?
The Sale of Goods Act 1930 lays out the rules for the sale and purchase of goods in India. It defines the rights and duties of buyers and sellers and specifies how property in goods is transferred. The Act covers areas such as contracts of sale, conditions and warranties, and the transfer of ownership.
- Contract of Sale: Agreement between buyer and seller for the sale of goods.
- Definition of goods: Movable property excluding actionable claims and money.
- Transfer of ownership: Rules explaining when and how property passes from seller to buyer.
- Rights and duties of both buyer and seller.
- Remedies for breach of contract.
2. What are the features of Sale of Goods Act 1930?
The Sale of Goods Act 1930 has several key features that define how sales contracts operate in India. It focuses on contracts involving "goods" as defined under the Act and identifies the roles and responsibilities of buyers and sellers.
- Legal Recognition: All contracts must be valid and follow the principles of contract law.
- Clear Definitions: Important terms like 'goods', 'buyer', 'seller', etc. are clearly defined.
- Transfer of Ownership: Specifies how and when property in goods passes to the buyer.
- Conditions and Warranties: Distinguishes between vital terms and secondary assurances in a contract.
- Remedies: Provides solutions for breach, like damages or rejection of goods.
3. What is the importance of the Sale of Goods Act?
The Sale of Goods Act 1930 is important because it creates clear legal rules for buying and selling goods in India. It protects both buyers and sellers by defining their rights, duties, and remedies in case of disputes. The Act reduces uncertainty and risk in business by specifying how ownership of goods is transferred and what happens if either party breaks the contract. By providing consistent standards, the Act supports fair trade and fosters trust in commercial relationships. Overall, its importance lies in ensuring smooth and reliable transactions in the sale of goods.
4. What are 'goods' as defined in the Sale of Goods Act 1930?
Under the Sale of Goods Act 1930, 'goods' are defined as every kind of movable property except for actionable claims and money. This definition includes stocks, shares, crops, and things attached to land that can be severed before sale. Goods are categorized for clarity:
- Existing goods: Physically present and owned by the seller at the time of contract.
- Future goods: To be produced or acquired by the seller after the contract.
- Contingent goods: Existence depends on a specific event.
5. What is a 'contract of sale' under the Sale of Goods Act 1930?
A contract of sale, according to the Sale of Goods Act 1930, is an agreement where the seller transfers or agrees to transfer ownership of goods to the buyer for a price. It includes both a sale (immediate transfer) and an agreement to sell (future transfer). The contract must involve at least two parties: the seller and the buyer. The essential elements are an offer, an acceptance, determination of price, and the subject being legally recognized 'goods.' By clearly defining a contract of sale, the Act helps ensure both parties are aware of their rights and obligations in the transaction.
6. Who are 'buyer' and 'seller' as per the Sale of Goods Act 1930?
The terms 'buyer' and 'seller' are crucial in the Sale of Goods Act 1930. A 'buyer' is a person who buys or agrees to buy goods, while a 'seller' is a person who sells or agrees to sell goods. These definitions apply to both individuals and legal entities such as companies or firms. Their roles are foundational, as they form the basis of every sale contract. The Act clarifies that both the buyer and seller must be competent to contract and must exchange goods for a monetary price or agreed payment, making transactions valid and enforceable under the law.
7. What do 'conditions' and 'warranties' mean in the Sale of Goods Act 1930?
In the Sale of Goods Act 1930, 'conditions' and 'warranties' are important terms in a sales contract. A condition is a vital term, the breach of which allows the aggrieved party to reject the goods and end the contract. A warranty is a lesser term, where a breach lets the party claim damages but not treat the contract as void. Recognizing this difference helps parties understand their legal remedies. These terms ensure both buyers and sellers are clear about which aspects of the agreement are essential and which are secondary. Thus, the distinction supports fair resolution of disputes.
8. What is meant by 'ownership' and 'possession' under the Sale of Goods Act 1930?
The Sale of Goods Act 1930 distinguishes between 'ownership' and 'possession.' Ownership means having the legal right to the property, including the power to transfer it to someone else. Possession is the physical control or custody of goods, but not necessarily the legal ownership. A person may possess goods without owning them, such as a bailee, or own goods without having possession, like goods stored elsewhere. The Act specifies when ownership passes from seller to buyer and how this impacts rights and liabilities. Understanding these terms is key to resolving goods disputes in trade.
9. What is the difference between 'sale' and 'agreement to sell' under the Sale of Goods Act?
The Sale of Goods Act 1930 clearly distinguishes between a 'sale' and an 'agreement to sell.' In a sale, the ownership of goods is immediately transferred from seller to buyer. In an agreement to sell, the transfer of ownership happens at a future date or on the fulfillment of certain conditions. This difference affects the rights and obligations of the parties:
- Sale: Immediate transfer of ownership; buyer can sue for goods if not delivered.
- Agreement to Sell: Ownership shifts later; seller remains owner until conditions are met.
10. What are conditions for transfer of property in the Sale of Goods Act 1930?
The Sale of Goods Act 1930 specifies the conditions under which property in goods passes from the seller to the buyer. Primarily, this occurs when both parties intend for the ownership to transfer, based on the terms of the contract.
- Unconditional contract for specific goods: Property passes at the time contract is made.
- When goods need to be weighed or measured: Ownership passes after that is done.
- Goods delivered on approval: Property passes when the buyer approves or keeps the goods beyond an agreed time.
11. What are 'unpaid seller' rights under the Sale of Goods Act 1930?
An unpaid seller, under the Sale of Goods Act 1930, is a seller who has not received full payment for the goods sold. The Act grants several rights to protect unpaid sellers:
- Right of lien: Hold goods until payment is made.
- Right of stoppage in transit: Stop goods from reaching buyer if buyer becomes insolvent.
- Right of resale: Sell goods again if payment is not made within the agreed time.
12. Explain 'delivery of goods' in the context of the Sale of Goods Act 1930.
Delivery of goods, as defined by the Sale of Goods Act 1930, refers to the voluntary transfer of possession from seller to buyer or their authorized agent. Delivery can be actual (physical handover), symbolic (keys or documents), or constructive (acknowledging the buyer as owner without physical transfer). The method depends on the agreement between parties. Delivery marks the start of the buyer’s responsibilities and may affect when ownership passes, based on contract terms. Proper understanding of delivery helps reduce misunderstandings and ensures a smooth transfer in trade transactions.
