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 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.
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.
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 good 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 them 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.
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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.
Q1 - What are the Essentials of the Contract of Sale?
Ans: The contract of sale has key features as mentioned below:
The contract must involve at least two parties.
The subject matter of the contract has to be goods.
Price is involved in a contract of sale.
There is a transfer of property of goods involved.
It must be absolute and unconditional.
It must have all other essential elements of a valid contract.
Q2 – What Rules Apply to the Delivery of Goods as Per the Sale Act?
Ans: The rules that apply to the delivery of goods are:
Delivery should effectively give the possession of goods to the buyer.
The seller abides by the rules of the contract for the delivery of the goods.
It is the responsibility of the buyer to claim delivery, and the seller must deliver the goods when the buyer applies for it.
If the goods are with a third person other than the buyer, then delivery is ascertained only when the person holding the goods sends an acknowledgement to the buyer that he is keeping the goods on the buyer’s behalf.
The place of delivery is usually mentioned in the contract, and goods must be delivered at that place during working hours.
The seller must bear the cost of delivery unless stated otherwise in the contract.
If the goods are delivered to a place other than where they are, then the deterioration in the quality of goods is to be borne by the buyer.
The buyer is not bound to accept delivery in instalments unless stated otherwise in the agreement.
Q3 – What is meant by Price in a Contract for Sale?
Ans: Section 2(10) of the act defines the consideration for the sale of goods as the price of the goods. Price is the money that has been promised to be paid by the buyer (or any authorized person by the buyer) to the seller. Price can be determined by different modes like:
Price can be mutually decided by the parties in the contract of sale.
The price could be left to be fixed in the future.
The price could be determined during the course parties are dealing with it.