CA Foundation · Business Laws

The Sale of Goods Act, 1930: formula sheet

Full chapter guide

Key formulas

Definition of contract of sale: Contract of sale = seller transfers or agrees to transfer property in goods to buyer for a price; Section 4(1). Property means ownership.
Sale: Property in goods passes to buyer under the contract = Sale; Section 4(3). Textbooks call it an executed contract. That label is a textbook classification, not wording from Section 4.
Agreement to sell: Property to pass at a future time or on a condition = Agreement to sell; Section 4(3). Textbooks call it an executory contract. That label is a textbook classification, not wording from Section 4.
Conversion: Agreement to sell + time elapses or conditions fulfilled = Sale; Section 4(4).
Present sale of future goods: Purported present sale of future goods = Agreement to sell; Section 6(3).
Mode of making the contract: Offer + acceptance; in writing, by word of mouth, partly both, or implied by conduct; Section 5.
Essentials checklist: Two parties + goods + price + transfer of property + contract elements; Derived from Sections 4 and 5. Add valid-contract elements like free consent and lawful object.
Price rule (Section 9): Price = fixed by contract / agreed manner / course of dealing; otherwise a reasonable price; Reasonable price is a question of fact in each case.
Condition (Section 12(2)): Essential to main purpose → breach = right to repudiate; Buyer may reject goods and treat the contract as repudiated.
Warranty (Section 12(3)): Collateral to main purpose → breach = damages only; No right to reject the goods.
Construction test (Section 12(4)): Nature of term decided by construction, not by name; A term called a warranty may be a condition.
Condition treated as warranty (Section 13): Buyer waives / elects, or (non-severable contract + goods accepted) → warranty only; Section 13(2) applies unless the contract has an express or implied term to the contrary.
Implied terms as to title (Section 14): (a) condition: right to sell; (b) warranty: quiet possession; (c) warranty: free from undeclared encumbrance; Applies unless circumstances show a different intention.
Implied condition of fitness (Section 16(1)): Purpose made known + reliance on seller's skill/judgment + goods in seller's business → reasonably fit; No implied condition where a specified article is sold under its patent or trade name.
Implied condition of merchantable quality (Section 16(2)): Sale by description + seller deals in such goods → merchantable quality; No condition for defects an examination by the buyer ought to have revealed.
Sale by sample (Section 17(2)): Bulk matches sample; reasonable chance to compare; no hidden unmerchantable defect; All three are implied conditions.
Remedy for breach of warranty (Section 59): Reduce or extinguish price, or sue for damages; Buyer cannot reject the goods only for breach of warranty.
Intention rule: Property passes when the parties intend it to pass (Section 19); Check terms, conduct and circumstances. Sections 20 to 24 apply unless a different intention appears.
Specific goods, deliverable state, unconditional contract: Property passes when the contract is made (Section 20); Postponing payment or delivery, or both, does not matter.
Seller must put goods in deliverable state: Property does not pass until the thing is done AND the buyer has notice (Section 21); Both conditions are needed.
Seller must weigh, measure or test to find price: Property does not pass until the act is done AND the buyer has notice (Section 22); Applies to specific goods already in a deliverable state.
Goods on approval or sale or return: Property passes on (a) approval or an act adopting the transaction, or (b) retention without notice of rejection after the fixed time, or a reasonable time if none is fixed (Section 24); Silence plus retention can transfer property.
Risk: Risk follows property unless otherwise agreed (Section 26); Fault in delaying delivery shifts the loss to the party at fault.
Nemo dat: Buyer from a non-owner gets no better title than the seller had (Section 27); Unless the owner is precluded by conduct from denying the seller's authority, or an exception applies.
Exception: mercantile agent: Valid if agent has owner's consent to possession, acts in ordinary course of business, and buyer is in good faith without notice (Section 27 proviso); All conditions must be met.
Exception: joint owner: Buyer gets title if the joint owner has sole possession by permission of co-owners and buyer is in good faith without notice (Section 28); Possession must be with the co-owners' permission.
Exception: seller in possession after sale: Further sale or disposition to a good-faith buyer without notice of the earlier sale is as if authorised by the owner (Section 30(1)); Seller must continue in possession of goods or documents of title.
Exception: buyer in possession: Buyer who obtained possession with the seller's consent can pass good title to a good-faith transferee without notice of the seller's lien or right (Section 30(2)); Seller's consent to possession is essential.
Duties of seller and buyer (Section 31): Seller: deliver the goods. Buyer: accept and pay. Both as per the contract.; Start every answer with this when the question is general.
Concurrent conditions (Section 32): Delivery ⇄ Payment, unless otherwise agreed; Each party must be ready and willing to perform at the same time.
Less quantity delivered (Section 37(1)): Buyer may reject; if he accepts, he pays at the contract rate; The rule is subject to usage of trade, special agreement or course of dealing (Section 37(4)).
More quantity delivered (Section 37(2)): Buyer may (a) accept the contract quantity and reject the rest, or (b) reject the whole; if he accepts the whole, he pays at the contract rate; Buyer chooses; he is not forced to take the excess.
Mixed goods (Section 37(3)): Buyer may accept the goods that match the contract and reject the rest, or reject the whole; Applies when goods of a different description are mixed in.
Instalment deliveries (Section 38(1)): Unless otherwise agreed, buyer is not bound to accept delivery by instalments; The seller cannot force part delivery on the buyer.
Stated instalments separately paid (Section 38(2)): Breach in one or more instalments: repudiation of the whole OR severable breach (compensation only); It depends in each case on the contract terms and circumstances.
Buyer neglects delivery (Section 44): Seller ready and willing + requests delivery + buyer does not take it within a reasonable time → buyer liable for loss caused and a reasonable charge for care and custody; The seller's rights are not affected if the refusal amounts to repudiation.
Delivery rules (Section 36): Place: where goods are at time of sale/agreement. Time: reasonable time if none fixed. Third-party holder: acknowledgement needed. Tender: reasonable hour. Cost of making goods deliverable: seller.; Each sub-rule is subject to contrary agreement where the section says so, such as the seller's expenses.
Unpaid seller (Section 45): Whole price not paid or tendered, OR negotiable instrument received as conditional payment and dishonoured; Includes an agent of the seller to whom the bill of lading is endorsed, or a consignor or agent who has paid or is directly responsible for the price.
Rights against the goods (Section 46): Lien + Stoppage in transit + Resale (as limited by the Act); Available even if the property has passed to the buyer. If property has not passed, a right of withholding delivery exists, similar to and co-extensive with these rights.
When lien can be exercised (Section 47): Seller in possession AND (no credit stipulated OR credit term expired OR buyer insolvent); The seller may retain the goods until payment or tender of the price. He can do so even if he holds the goods as agent or bailee for the buyer.
Termination of lien (Section 49): Delivery to carrier without reserving right of disposal; buyer or agent lawfully obtains possession; waiver; A decree for the price alone does not end the lien.
Part delivery (Section 48): Lien on the remainder unless part delivery shows an agreement to waive the lien; Part delivery does not by itself end the lien on the rest.
Stoppage in transit (Section 50): Buyer insolvent + seller has parted with possession + goods in course of transit; The seller may resume possession and retain the goods until payment or tender of the price.
How stoppage is effected (Section 52): Take actual possession OR give notice of claim to the carrier or bailee (or his principal); If notice goes to the principal, it must allow time, by reasonable diligence, to reach the servant or agent before delivery. The seller bears the re-delivery expenses.
Sub-sale or pledge by buyer (Section 53): Seller's rights are not affected unless the seller assented; exception for a document of title transferred in good faith for consideration; If the document is transferred by sale, the seller's lien or stoppage is defeated. If by pledge, the right is exercisable only subject to the transferee's rights.
Resale (Section 54): Goods perishable OR notice of intention to resell given, buyer fails to pay within a reasonable time, then seller may resell and claim damages; Without notice, the seller cannot recover damages and the buyer gets any profit. With notice, the buyer gets no profit. A resale gives the new buyer good title against the original buyer.
Suit for price: Property passed + buyer wrongfully refuses to pay → seller may sue for price (S.55(1)). Price payable on a day certain → may sue even if property not passed (S.55(2)); If property has not passed and no day-certain price, the seller's remedy is damages for non-acceptance, not price.
Damages for non-acceptance: Buyer wrongfully neglects or refuses to accept and pay → seller sues for damages (S.56); Section 44 adds liability for loss from not taking delivery within a reasonable time and for reasonable care and custody charges.
Damages for non-delivery: Seller wrongfully neglects or refuses to deliver → buyer sues for damages (S.57); The word 'wrongfully' matters. Lawful excuse removes the remedy.
Specific performance: Contract to deliver specific or ascertained goods → court may, if it thinks fit, order performance without option of paying damages (S.58); Discretionary. Only for specific or ascertained goods. Buyer may apply any time before the decree.
Breach of warranty: Buyer cannot reject for breach of warranty alone; may (a) set up against price or (b) sue for damages (S.59(1)); further damage can still be claimed (S.59(2)); Also applies where the buyer elects or is compelled to treat breach of condition as breach of warranty.
Interest and special damages: Interest/special damages preserved where law allows; money paid on failed consideration recoverable (S.61(1)); court may award interest on price absent contrary contract (S.61(2)); Seller: from tender or due date. Buyer: from date of payment.
Auction sale rules: Lots = separate contracts; complete on fall of hammer, bid retractable before; seller's bid only if right reserved; reserve price allowed; pretended bidding makes sale voidable by buyer (S.64); Sale without notified right to bid for seller: seller or his agent bidding is unlawful and buyer may treat the sale as fraudulent.

Quick revision

A contract of sale is for movable goods, with a seller, a buyer and a price in money.
In a sale, property passes to the buyer at once. In an agreement to sell, it passes at a future time or on a condition.
Goods are existing, future or contingent. Contingent goods depend on an event that may not happen.
A condition is essential to the contract. Breach lets the buyer repudiate the contract and claim damages.
A warranty is a collateral term. Breach gives a right to damages only, not to reject the goods.
A breach of condition can be treated as a breach of warranty if the buyer chooses to, or accepts the goods.
Property passes when the parties intend it to pass, judged by the contract terms, conduct and circumstances.
Risk generally follows ownership, unless the contract says otherwise.
The general rule is that a buyer gets no better title than the seller had, subject to the statutory exceptions.
Delivery and payment are concurrent conditions unless agreed otherwise.
An unpaid seller's rights against the goods are lien, stoppage in transit and resale. Where property has not passed, the seller also has a right to withhold delivery. Suing for the price is a right against the buyer personally, not against the goods.
Remedies include a suit for price, damages for non-delivery or non-acceptance, and damages for breach of warranty.

Common mistakes

Treating contract of sale and sale as the same thing. Fix: Remember: contract of sale is the wide term. Sale and agreement to sell are its two forms (Section 4).
Writing that sale needs possession to pass, not ownership. Fix: Section 4(1) speaks of transfer of property in goods. Possession may or may not move with it.
Deciding that a term is a warranty because the contract calls it one. Fix: Apply Section 12(4): look at how essential the term is to the main purpose of the contract.
Saying the buyer can always reject goods for breach of condition. Fix: Check for waiver, election, or acceptance in a non-severable contract. Then only damages are available, unless the contract says otherwise.
Treating possession as ownership. Fix: Always ask who has property and who has possession. Only the exceptions allow a non-owner in possession to pass title.
Saying property does not pass under Section 20 because payment or delivery is postponed. Fix: Section 20 says postponement of payment, delivery or both is immaterial. Property passes when the contract is made.
Saying the buyer must accept delivery in instalments. Fix: Remember Section 38(1): unless otherwise agreed, the buyer is not bound to accept instalment delivery.
Saying any breach in one instalment cancels the whole contract. Fix: Under Section 38(2) the breach may be repudiation or a severable breach giving only compensation. Say it depends on the contract terms and circumstances, then decide using the facts.
Saying stoppage in transit is available whenever the buyer does not pay. Fix: Stoppage in transit under Section 50 needs the buyer to become insolvent. Mere default is not enough.
Thinking the seller loses lien once the property passes to the buyer. Fix: Section 46 gives the rights even though the property has passed. Lien depends on possession and non-payment, not ownership.

Exam tips

Always quote the Section 4(1) definition first. Examiners give marks for the core words: transfer of property, goods, price.
For a difference question, write in two columns and give at least five points. Include the effect of breach and the nature of the contract. Executed and executory are textbook labels for sale and agreement to sell.
In case-study questions, decide when ownership passes before you write sale or agreement to sell.
Cite only section numbers you are sure of. Wrong numbers can cost marks. If unsure, state the rule in plain words. Section 4 (definition), Section 5 (formation) and Section 6 (existing and future goods) are safe if you know them well.
Since there is no negative marking in this paper, always attempt the question and write a clear conclusion line.
Write section numbers only for the provisions you are sure of, such as 9, 12, 13, 14, 16, 17, 59 and 62. A correct section number adds credibility.
In difference-style questions, give points on nature, effect of breach, remedy and example. Four crisp points usually read better than a long paragraph.
For caveat emptor questions, state the general rule first, then list the exceptions from Sections 14, 16 and 17 in order.