Sale of Goods *

Definition of Contract of Sale of Goods

A contract where the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration called the price.

Sale vs. Agreement to Sell (Ownership)

In a Sale, property/ownership passes immediately to the buyer. In an Agreement to Sell, transfer of ownership is deferred to a future time or subject to conditions.

Sale vs. Agreement to Sell (Risk of Loss)

In a Sale, loss falls on the buyer because ownership has passed. In an Agreement to Sell, loss falls on the seller as ownership remains with them.

Sale vs. Agreement to Sell (Breach Remedies)

In a Sale, the seller can sue for the price if the buyer defaults. In an Agreement to Sell, the seller can only sue for unliquidated damages.

Capacity of Minors and Unsound Mind

Minors and persons of unsound mind must pay a reasonable price for necessaries delivered to them, not necessarily the agreed contract price.

Definition of Goods under Sale of Goods Act

All personal chattels (other than things in action and money), emblements, industrial growing crops, and things attached to land agreed to be severed before sale.

Classification: Unascertained Goods

Goods that are not separately identified or earmarked at the time the contract of sale is made (e.g., generic goods, goods to be manufactured).

Rules for Ascertainment of Price

Price may be fixed by contract, left to be fixed in an agreed manner, determined by course of dealing, or set as a reasonable price if unspecified.

Price Fixed by Third Party Valuation

If a third party cannot or does not make the valuation, the contract becomes voidable. If goods were already delivered/appropriated, the buyer pays a reasonable price.

Condition vs. Warranty

A Condition is an essential term going to the root of the contract (breach allows termination & damages). A Warranty is a collateral term (breach allows damages only).

Implied Condition as to Title (S. 14a)

An implied condition that the seller has the right to sell the goods (or will have the right at the time when property is to pass).

Implied Condition in Sale by Description (S. 15)

An implied condition that the bulk of the goods supplied shall strictly correspond with the description provided.

Implied Conditions in Sale by Sample (S. 17)

1. Bulk corresponds with sample in quality. 2. Buyer gets reasonable opportunity to compare. 3. Goods free from latent defects rendering them unmerchantable.

Implied Condition as to Merchantable Quality (S. 16b)

Goods bought by description from a dealer must be fit for the ordinary purpose for which such goods are used, free from unexamineable/latent defects.

Implied Condition as to Fitness for Purpose

If the buyer expressly or impliedly makes known the particular purpose for goods, relying on the seller's skill, goods must be reasonably fit for that purpose.

Implied Warranties under Sale of Goods Act

1. Warranty of quiet possession (undisturbed enjoyment). 2. Warranty that goods are free from undeclared third-party charges or encumbrances.

Meaning of Caveat Emptor

"Let the buyer beware." The buyer is responsible for inspecting goods to ensure suitability, and the seller isn't liable for open defects unless an exception applies.

Exceptions to Caveat Emptor

Seller misrepresentation/fraud, implied condition of fitness for purpose, sale by description (merchantable quality), and sale by sample (hidden latent defects).

General Rule for Passing of Property (Specific Goods)

Property in specific or ascertained goods passes to the buyer at such time as the parties to the contract intend it to pass.

Passing of Property: Goods in Deliverable State

When there is an unconditional contract for specific goods in a deliverable state, property passes to the buyer when the contract is made.

Passing of Property: Goods Needing Work/Measurement

If the seller must do something to put goods in a deliverable state, or weigh/measure to fix price, property passes only after it's done and buyer has notice.

Passing of Property: Sale or Return (Approval)

Property passes when buyer signifies approval/does an adopting act (e.g., resells), or retains goods without notice of rejection beyond agreed/reasonable time.

Passing of Property: Unascertained & Future Goods

Property does not pass until the goods become ascertained or unconditionally appropriated to the contract in a deliverable state.

Auction Sales: Fall of the Hammer Rule

A sale by auction is complete when the auctioneer announces completion by the fall of the hammer or in another customary manner; bids can be withdrawn before this.

Auction Sales: Reserve Price & Right to Bid

An auction may be subject to a reserve (minimum) price. The seller cannot bid or employ anyone to bid unless the right to bid is expressly reserved.

Nemo Dat Quod Non Habet Rule

"No one can give what he does not have." A buyer cannot acquire a better title to goods than the seller had, unless an exception applies.

Exceptions to Nemo Dat Rule

1. Sale by Mercantile Agent. 2. Title by Estoppel. 3. Sale by seller/buyer in possession after sale. 4. Sale under statutory/common law power. 5. Market Overt.

Primary Duties of the Seller

1. Put goods in deliverable state. 2. Pass good title. 3. Deliver goods as agreed. 4. Supply right quality and right quantity.

Rules on Delivery of Goods (Place & Expense)

Expenses of putting goods in deliverable state fall on seller. Delivery place is seller's business/residence unless goods are known to be elsewhere.

Delivery of Wrong Quantity (Less / More)

If less is delivered, buyer may reject all or accept & pay at contract rate. If more, buyer may accept contract amount, reject all, or accept all.

Acts Constituting Buyer's Acceptance

1. Intimating acceptance to seller. 2. Doing an act inconsistent with seller's ownership after delivery. 3. Retaining goods past reasonable time without rejection.

Definition of an Unpaid Seller

A seller to whom the full price has not been paid/tendered, or who received a conditional payment instrument (e.g., cheque) that was dishonoured.

Unpaid Seller's Right of Lien

Right to retain physical possession of goods until payment. Exercisable if sold without credit terms, credit term expired, or buyer becomes insolvent.

Termination of Unpaid Seller's Lien

Lien is lost when: 1. Goods delivered to a carrier for transmission without reserving disposal rights. 2. Buyer lawfully obtains possession. 3. Lien is waived.

Unpaid Seller's Right of Stoppage in Transit

Right to resume possession of goods while in transit to a carrier and retain them until paid. Requires buyer insolvency, property passed, and goods in transit.

Termination of Stoppage in Transit

Transit ends when buyer/agent takes delivery, carrier acknowledges holding goods for buyer at destination, or carrier wrongfully refuses delivery.

Unpaid Seller's Right of Resale

Exercisable if: 1. Goods are perishable. 2. Right to resell was expressly reserved on default. 3. Seller gives notice of intention to resell and buyer fails to pay within reasonable time.

Personal Remedies of Unpaid Seller against Buyer

1. Action/Suit for price (where property passed or price payable on a fixed day). 2. Action for damages for non-acceptance.

Remedies of the Buyer against the Seller

1. Action for damages for non-delivery. 2. Suit for specific performance. 3. Action for breach of warranty/condition. 4. Action for recovery of price paid.

Key Incoterms / International Sale Contracts

FAS (Free Alongside Ship), FOB (Free On Board), CIF (Cost, Insurance & Freight) — terms allocating costs, transit risks, and delivery points between buyer and seller.