CMA Foundation · Fundamentals of Business Laws and Business Communication

Sale of Goods Act, 1930: formula sheet

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Key formulas

Meaning of goods: Goods = every kind of movable property − actionable claims − money; Includes stock and shares, growing crops, grass and things attached to land to be severed before sale or under the contract.
Existing goods: Owned or possessed by the seller at the time of contract; Can be specific or unascertained.
Future goods: Goods to be manufactured, produced or acquired by the seller after making the contract; A purported present sale of future goods operates as an agreement to sell (Section 6(3)).
Contingent goods: Goods whose acquisition by the seller depends on a contingency (Section 6(2)); Treated as future goods. The contract is subject to the contingency.
Specific goods: Identified and agreed upon at the time the contract of sale is made; Example: this particular car.
Unascertained goods: Defined by description or sample, or part of a larger bulk, not yet identified; Become ascertained when identified after the contract.
Perishing of goods (Sections 7 and 8): Section 7: specific goods perished before contract, seller unaware: contract void. Section 8: specific goods perish or become so damaged after agreement to sell, before the risk passes to the buyer, no fault of seller or buyer: agreement void; Both apply to specific goods only.
Price rule: Price = fixed by contract, OR by agreed method, OR by course of dealing; else a reasonable price; Reasonable price is a question of fact. Price must be money for it to be a sale.
Condition: Condition = essential stipulation; breach → repudiate + damages; The buyer may also choose to treat the breach as breach of warranty.
Warranty: Warranty = collateral stipulation; breach → damages or price reduction; The buyer cannot reject the goods merely for breach of warranty.
Sale by description (Section 15): Goods sold by description must correspond with the description; If sale is by sample as well as description, the goods must match both.
Condition treated as warranty: Waiver by buyer OR election to treat breach as warranty OR acceptance of the goods or any part of them (contract not severable) → damages only; Applies unless the contract has a term, express or implied, to the contrary.
Implied conditions: Right to sell (S.14(a)); description (S.15); fitness and merchantable quality (S.16); sample (S.17); Implied warranties: quiet possession (S.14(b)); freedom from encumbrances (S.14(c)); disclosure of dangerous goods. Separately, an implied condition or warranty as to quality or fitness may be annexed by usage of trade (S.16(3)).
Basic rule on risk: Risk prima facie passes with property (res perit domino); Parties can agree otherwise. If delivery is delayed by the fault of buyer or seller, the party at fault bears loss that the fault caused.
Specific goods, deliverable state: Property passes when the parties intend it to pass; Intention is judged from the terms of the contract, conduct of the parties and the circumstances.
Unascertained goods: No property passes until goods are ascertained; Ascertainment comes first, then appropriation.
Section 23: appropriation: Unascertained goods + deliverable state + unconditional appropriation with assent = property passes; Assent may be express or implied, and may be given before or after appropriation.
Section 24: approval or sale or return: Property passes on (a) approval or adoption, or (b) retention beyond the fixed or a reasonable time without notice of rejection; Until then, property remains with the seller.
General rule (nemo dat): Buyer's title = seller's title; A non-owner who has no authority or consent of the owner passes no title, even to an honest buyer.
Mercantile agent sale: Possession with owner's consent + ordinary course of business + buyer in good faith without notice = good title; All conditions must be met. Possession must be as a mercantile agent.
Joint owner sale: Sole possession with co-owners' consent + buyer in good faith without notice = good title; Only sole possession by consent of the other joint owners works.
Voidable title: Contract not rescinded at time of sale + buyer in good faith without notice = good title; If the true owner has already rescinded, the buyer gets no title.
Estoppel: Owner's words or conduct led buyer to believe seller was owner = owner cannot deny seller's authority; The buyer must have relied on that representation.
Seller in possession: Seller in continued possession of goods or documents after sale + delivers or transfers them (by sale, pledge or other disposition) to a person in good faith without notice of the earlier sale = good title; The second buyer gets title, so the first buyer loses title to the goods. The first buyer may have remedies against the seller, such as damages for breach.
Buyer in possession: Buyer has bought or agreed to buy + got possession with seller's consent + delivers or transfers by sale, pledge or other disposition to a person in good faith without notice of the original seller's lien or other right = good title; Possession must be with the seller's consent. The transferee must be honest and unaware of the original seller's lien or right.
Duty of seller and buyer: Seller: deliver goods | Buyer: accept goods and pay price; Section 31. This is subject to the terms of the contract.
Payment and delivery: Delivery and payment = concurrent conditions; Unless otherwise agreed, the seller must be ready to deliver against payment, and the buyer must be ready to pay against delivery.
Place of delivery: Goods are delivered where they are at the time of sale; If the goods are to be made later, the place is where they are made. Applies when no other place is agreed.
Time of delivery: No time fixed and seller must send goods → reasonable time; What is reasonable is a question of fact. Demand or tender must be made at a reasonable hour.
Goods held by a third party: No delivery until the third party acknowledges that he holds the goods for the buyer; This is how constructive delivery is completed.
Delivery of less quantity: Buyer may reject, or accept and pay at the contract rate; Subject to trade usage, special agreement or course of dealing.
Delivery of more quantity: Accept the contracted quantity and reject the rest | reject all | accept all and pay at the contract rate; The buyer has three choices.
Mixed goods of a different description: Accept the goods that match and reject the rest | reject all; Applies when the goods contracted for are mixed with goods not covered by the contract.
Instalment delivery: Buyer is not bound to accept delivery by instalments; This holds unless otherwise agreed.
Delivery to a carrier: Delivery to a carrier for transmission to the buyer = prima facie delivery to the buyer; The seller must make a reasonable contract with the carrier.
Acceptance by the buyer: Intimation of acceptance | act inconsistent with the seller's ownership | keeping goods beyond a reasonable time without intimating rejection; Any one of the three is acceptance.
Buyer rightly rejects: No duty to return the goods; telling the seller of refusal is enough; This applies when the buyer is entitled to reject.
Who is an unpaid seller: Unpaid seller = price not fully paid or tendered, or bill/cheque received as conditional payment dishonoured; Possession of the goods is not a condition. Includes an agent of the seller, such as a consignor or agent who has paid the price himself.
Right of lien: Lien = seller keeps possession until price is paid; Available when goods were sold without credit, when credit term has expired, or when the buyer becomes insolvent. Needs possession.
Loss of lien: Lien ends on: delivery to a carrier or other bailee for transmission to the buyer without reserving right of disposal, buyer or his agent lawfully obtaining possession, or waiver; Part delivery does not end lien on the rest, unless it shows an agreement to waive it.
Stoppage in transit: Conditions: seller unpaid + goods in transit + buyer insolvent; Seller resumes possession and keeps goods until the price is paid. Transit ends when the buyer or his agent takes delivery.
Right of resale: Resale (Section 54) by an unpaid seller, allowed if: goods perishable, or seller gives notice and buyer does not pay in reasonable time, or right of resale was expressly reserved; Prior exercise of lien or stoppage is not a precondition. On resale after notice, or where the goods are perishable, the seller can recover any loss from the original buyer. On resale of non-perishable goods without notice, the seller cannot claim loss from the buyer and the buyer takes any profit.
Rights against buyer personally: Suit for price (property passed, or price payable on a fixed day) | Suit for damages for non-acceptance; Damages are the estimated loss arising naturally from the buyer's breach.

Quick revision

A contract of sale transfers or agrees to transfer property in goods for a price.
Sale is an executed contract where property passes now. Agreement to sell is executory, with property passing later or on a condition.
Goods mean every kind of movable property other than actionable claims and money. They include 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 sale.
Specific goods are defined in Section 2(14) as goods identified and agreed upon at the time a contract of sale is made. The Act does not define unascertained goods. They are goods described only by description or sample and not identified at the time of contract.
A condition goes to the root of the contract. Breach gives the buyer the right to repudiate the contract and claim damages. The buyer may instead waive the condition or treat the breach as a breach of warranty. Once the buyer has accepted the goods, a breach of condition can only be treated as a breach of warranty.
A warranty is collateral to the main purpose. Breach gives a right to damages only, not a right to reject the goods.
Property in unascertained goods passes only when the goods are ascertained and appropriated to the contract.
Risk generally follows ownership unless the parties agree otherwise.
A non-owner generally cannot pass a better title than he has, subject to exceptions such as sale by a mercantile agent or a person with a voidable title.
The unpaid seller can exercise lien, stoppage in transit and resale, within the conditions the Act sets out.
A buyer may sue for non-delivery, and a seller may sue for the price or for non-acceptance.
In an auction, the sale is complete when the auctioneer announces it, usually by the fall of the hammer.

Common mistakes

Treating money, debts or land as goods. Fix: Remember the definition: only movable property, excluding actionable claims and money. Land is immovable.
Thinking future goods can be sold outright. Fix: A purported present sale of future goods operates as an agreement to sell (Section 6(3)). Property passes later, when the goods are acquired and appropriated to the contract.
Treating any term as a condition because the contract uses the word 'condition'. Fix: Judge by how essential the term is to the main purpose of the contract, not the label.
Saying breach of warranty allows the buyer to reject the goods. Fix: Remember: warranty means damages only; condition means repudiation plus damages.
Treating delivery of possession as passing of ownership. Fix: Remember that property is ownership. In approval cases, the buyer has possession but not ownership until Section 24 is met.
Saying property passes in unascertained goods at the time of the contract. Fix: For unascertained goods, first ascertainment, then unconditional appropriation. Until then, no property passes.
Giving good title to an honest buyer from a thief. Fix: A thief has no title and no owner's consent. Nemo dat applies, and only the listed exceptions override it.
Ignoring the ordinary course of business for a mercantile agent. Fix: A sale at an odd time or in an unusual place may fail the test. Check all conditions. Whether the price takes the sale outside the ordinary course depends on the facts, and a price far below the owner's limit can be a sign that it is outside. A restriction on the agent's authority that the buyer did not know of does not by itself defeat the buyer's title.
Saying the buyer must return rejected goods to the seller. Fix: The buyer who rightly refuses need not return them. Intimating the refusal to the seller is enough.
Thinking that on excess delivery the buyer must accept or reject everything. Fix: For excess goods there are three options: take the contract quantity and reject the rest, reject all, or accept all and pay at the contract rate.

Exam tips

Look for the keyword in the question: 'description', 'bulk' or 'sample' points to unascertained goods; 'this particular' points to specific goods.
Pay attention to timing words such as 'will be manufactured', 'at the time of contract' and 'after the agreement'. They decide existing or future goods.
Learn two sentence versions of Sections 7 and 8, then pick the option that matches the timing and the specific goods condition.
A purported present sale of future goods operates as an agreement to sell (Section 6(3)). Mark a statement that treats it as a completed sale of those goods as false.
Eliminate options that call land, shares or money wrongly. Shares are goods, while money and actionable claims are not.
Questions often ask for the buyer's remedy: link condition to repudiation and warranty to damages.
Learn the list of implied conditions and implied warranties in two separate groups.
Watch for words like 'accepted' or 'waived' in the facts; they signal a condition treated as a warranty.