INTRODUCTION
The Indian Sale of Goods Act, 1930, is a Mercantile Law that came into existence on July 1, 1930, during the British Raj, borrowing heavily from the Sale of Goods Act of 1893. Till 1930, the transactions relating to the sale and purchase of goods were regulated by the Indian Contract Act, 1872 (sec. 76-123) and were repealed and made a separate act called the Indian Sale of Goods Act 1930. The act was amended on September 23, 1963, and was renamed the Sale of Goods Act, 1930. It is still in force in India. The Sale of Goods Act, 1930, herein referred to as the Act, is the law that governs the sale of goods in all parts of India. Originally, transactions related to the sale and purchase of goods were regulated by Chapter VII (Sections 76 to 123) of the Indian Contract Act, 1872, which was broadly based on English common law. A need was felt to overhaul the law due to the rapid growth of mercantile transactions and various progressive English judgments being passed to meet the needs of the community. Thus, the provisions of Chapter VII were repealed and suitably amended, keeping in mind the English Sales of Goods Act of 1893 and recent judicial decisions of the time. A separate act, the Sale of Goods Act, came into force on July 1, 1930. It does not affect rights, interests, obligations, or titles acquired before the commencement of the Act. The Act deals with the sale but not with the mortgage or pledge of the goods. The contacts for the sale of goods are subject to the general principles of the law relating to contracts, i.e., the Indian Contact Act. A contract for sale of goods has, however, certain peculiar features such as the transfer of ownership of the goods, delivery of goods, the rights and duties of the buyer and seller, remedies for breach of contract, conditions and warranties implied under a contract for sale of goods, etc
Definition of sale:
Section 4 of the Sales of Goods Act, 1930, defines a sale of goods as a âcontract sale whereby the seller transfers or agrees to transfer the property in goods to the buyer for price.â. The term âcontract of saleâ includes both a sale and an agreement to sell.
A contract of sale is made by an offer to buy or sell goods for a price and the acceptance of such an offer by the other party. The contract may be oral or in writing. A contract of sale may be absolute or conditional.
Formalities of a contract of sale: Section 5 of the Act specifically provides for the following three steps or formalities in a contract of sale:
1) Offer and Acceptance: A contract of sale is made by an offer to buy or sell the goods for a price and acceptance of such offer.
2) Delivery and Payment: It is not necessary that the payment for the goods to the seller and the delivery of the goods to the buyer be simultaneous. They can be made at different times or in installments, as per the contract.
3) Express or Implied: The contract can be in writing, oral, or implied. It can also be partly oral and partly written.
Essential features
The five essential features of a contract of sale are discussed below:
1) Two parties (It is a contract between two parties, one known as the seller and the other as the buyer.).
2) Subject matter to be goods
3) Transfer of ownership of goods (the seller should transfer or agree to transfer the property (ownership) in the goods to the buyer).
4) Consideration is price (The transfer of property (ownership) in the goods from the seller to the buyer is for consideration known as ‘price’.)
5) Essential elements of a valid contract: Agreement between the competent parties
1) Two parties: there must be 2 distinct parties i.e. a buyer and a seller, to affect a contract of sale and they must be competent to contract. âBuyerâ means a person who buys or agrees to buy goods [Sec. 2(1)]. âSellerâ means a person who sells or agrees to sell goods [Sec. (13)]. A sale has to be bilateral because the goods have to pass from one person to another. The seller and the buyer must be different persons. A part owner can sell to another part owner. A partner may, therefore, sell to his firm or a firm may sell to a partner. But if joint owners distribute property among themselves as per mutual agreement, it is not âsaleâ. A person cannot be the seller of his own goods as well as the buyers of them. However, when a bankrupt personâs goods are sold under an execution of decree, the person may buy back his own goods from his trustee.
2) Subject matter to be goods: Goods: there must be some goods the property in which is or is to be transferred from the seller to the buyer. The goods which form the subject-matter of the contract of sale must be movable. Transfer of immovable property is not regulated by the Sale of Goods Act.
The term âgoodsâ is defined in Section 2(7). It states that âgoodsâ âmeans every kind of movable property other than actionable claims and money; and 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
saleâ. Money cannot be sold because money means legal tender and not the old coins which can be sold and purchased as goods. Actionable claims are things that a person cannot make use of, but which can be claimed by him by means of legal
action such as a debt. Sale of immovable property is not covered under this Act. As per Section 3 of the Transfer of Property Act, 1882, âimmovable propertyâ does not include standing timber, growing crops or grass. They are considered movable property and thus goods. Standing timber is taken as movable property while trees are immovable property. Things like goodwill, copyright, trademark, patents, water, gas, electricity are all goods.
In the case of Commissioner of Sales Tax vs. Madhya Pradesh Electricity Board [AIR 1970 SC 732], the Supreme Court observed â
ââŚelectricityâŚcan be transmitted, transferred, delivered, stored, possessed, etc., in the same way as any other movable propertyâŚIf there can be sale and purchase of electric energy like any other movable object, we see no difficulty in holding that electric energy was intended to be covered by the definition of âgoodsâ. In the case of H. Anraj vs. Government of Tamil Nadu [AIR 1986 SC 63], it was held that lottery tickets are goods and not actionable claims. Thus, sale of lottery tickets is sale of goods. Sugarcane supplied to a sugar factory is goods within the meaning of Section 2(7) of the Act as held in the case of UP
Cooperative Cane Unions Federation vs. West UP Sugar Mills Assn. [AIR 2004 SC 3697]
3) Transfer of ownership of Goods: There must be transfer of ownership or an agreement to transfer the ownership of goods from the seller to the buyer â not the transfer of mere possession or limited interest as in the case of pledge, lease or hire purchase agreement). If goods remain in possession of seller after sale transaction is over, the âpossessionâ is with seller, but âownershipâ is with buyer. The Act uses the term âgeneral propertyâ implying that sale involves total ownership and not a specific right limited by conditions. Delivery of goods refers to a voluntary transfer of possession of goods from one person to another. Delivery may be constructive or actual depending upon the circumstances of each case. A contract may provide for the immediate delivery of the goods or immediate payment of the price or both. Alternatively, the delivery or payment may be made by installments or be postponed.
4) Consideration is Price: Price is an essential ingredient for all transactions of sale and in the absence of the price or the consideration, the transfer is not regarded as a sale. The transfer by way of sale must be in exchange for a price.
It has been held that price normally means money considerations for a sale of goods sec 2 (10). The price can be paid fully in cash or it can be partly paid and partly promised to be paid in future. The price can be fixed by the agreement between the parties before the conveyance of the property. When goods are exchanged for goods, it is a contract of barter or exchange-(Commissioner of Income Tax v Motar and General Store ltd. AIR, 1968.S.C.200). When there is no consideration for the contract and the transfer is gratuitous, the transaction will be by way of gift.
The consideration in a contract of sale has to be price i.e., money. If goods are offered as the consideration for goods, it will not amount to sale. It will be barter. If there is no consideration, it will be called gift. But where the goods are sold for definite sum and the price is paid partly in kind and partly in cash, the transaction is a sale. Consideration is an essential for a valid contract as per the Indian Contract Act, 1872 It is the duty of a buyer who has received and appropriated the goods to pay a reasonable price.
According to Section 2(10) âpriceâ means the money consideration for the sale of goods. If the price is not fixed, the contract is void ab initio.
Section 9 lays down how the price may be fixed in a contract of sale:
a) It can be fixed by the contract itself; or
b) It can be fixed in a manner provided by the contract, such as appointment of a valuer; or
c) It can be determined by the course of dealings between the parties; or
d) If the price is not capable of being fixed in any of the ways mentioned ways,
the buyer is bound to pay reasonable price. What is a reasonable price is a question of fact dependent on the circumstances of each particular case. It is not necessary that reasonable price should be equal to the market price. Section 10 makes it clear that if the third party appointed under the agreement to fix the price cannot or does not make such valuation, then the agreement to sell goods will become void. If the third party is prevented in his valuation due to the buyer or the seller, the party not at fault can file a suit for damages against the party in fault.
5) Essential elements of a valid contract: All essential elements of a valid contract must be present in the contract of sale. viz., competent parties, free consent, legal object and so on. The transfer of possession and ownership under the Act has to be voluntary and not be tainted with fraud or duress. Time: Any stipulation with respect to time is not deemed to be of essence to a
contract of sale unless a different intention appears from the terms of the contract.
Unless all these ingredients of sale are duly proved, mere entry or endorsement made by the registering authority under sec 31 of the motor vehicles act showing transfer of ownership of the vehicle. Thus, to constitute a transaction of sale of goods the essential ingredients of sale under the sale of goods act have to be proved.
Contract under statutory compulsion- sometimes a contract may not be entered into by the normal process of negotiation, but under a statutory compulsion. When the goods are supplied under a statutory compulsion. When the goods are supplied under a statutory compulsion whether that results in sale or not, is the question which has arisen in a number of cases.
Coffee Board Karnataka v Commissioner of Commercial Taxes, it has been held that the compulsory delivery of coffee by the coffee growers to the coffee board constitutes a sale and not compulsory acquisition, and the state can impose purchase tax on the same.
Performance â they may provide that the delivery of the goods will be made either immediately or by installments or on some future date. Similarly, regarding the payment of price too the contract may require either immediate payment, or payment by installments or the payment on some future date. Compliance of the provisions of the sale of goods act The transfer of title in any goods, e.g., a car depends on fulfillment of the provisions of the sale of goods act, rather than the provisions of the Motar
vehicles act, 1939.
Transfer of general property: There must be a transfer of general property as distinguishes from special property in goods from the seller to the buyer. For e.g. if A owns certain goods he has general property in the goods. If he pledges them with B, B has special property in the goods.
Valuation by a third party-: It has noted that one of the modes of determinations of the price may be by the valuation being made by a third party. Sec 10(1) provides that if a third party who is supposed to make valuation cannot or does not make such valuation, the agreement is thereby avoided.