Sale of Goods Act, 1930: formula sheet

Key formulas

Definition of contract of sale (Section 4(1))

Contract of sale = seller transfers or agrees to transfer property in goods to buyer for a price

Learn the four elements: parties, goods, price, transfer of property.

Sale (Section 4(3))

Sale = property in goods passes from seller to buyer under the contract

It is an executed contract. It creates rights in the goods themselves (in rem).

Agreement to sell (Sections 4(3), 4(4))

Agreement to sell = transfer of property at a future time or subject to a condition; becomes a sale when the time elapses or the condition is fulfilled

It is an executory contract. The buyer's usual remedy against a defaulting seller is a suit for damages. Rights in the goods themselves arise only after property passes.

Present sale of future goods (Section 6(3))

Present sale of future goods = agreement to sell

Seller cannot pass property in goods he does not yet own or have.

Perishing of specific goods (Section 8)

Specific goods perish without fault of either party before risk passes to buyer, after agreement to sell → agreement avoided

Applies to an agreement to sell, not to a completed sale. It is a separate rule, not a result of the damages remedy.

Goods

Goods = every kind of moveable property, other than actionable claims and money

Includes stock, shares, growing crops, grass, and things attached to land agreed to be severed (Section 2(7)).

Existing vs future goods

Existing = owned or possessed by seller; Future = manufactured, produced or acquired after the contract

Sections 6(1) and 2(6).

Contingent acquisition

Seller's acquisition of goods depends on a contingency that may or may not happen

A valid contract is possible (Section 6(2)).

Sale of future goods

Present sale of future goods = agreement to sell

Section 6(3).

Goods perished before contract

Specific goods perished, seller unaware, at time of contract → contract void

Section 7.

Goods perished after agreement

Specific goods perish without fault of either party before risk passes → agreement avoided

Section 8.

Price

Price = money consideration for a sale of goods

Section 2(10).

Agreement at valuation

Third party fails to value → agreement avoided; goods delivered and appropriated → reasonable price

Section 10.

Condition (Section 12(2))

Essential to main purpose → breach = right to repudiate

The buyer may reject the goods and treat the contract as repudiated.

Warranty (Section 12(3))

Collateral to main purpose → breach = damages only

No right to reject the goods and repudiate.

Test of nature (Section 12(4))

Decided by construction of the contract, not by the label

A term called a warranty may still be a condition.

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.

Sale by description (Section 15)

Goods must correspond with the description (implied condition)

In a sale by sample and description, matching the sample is not enough if the description is not met.

Fitness for purpose (Section 16(1))

Purpose made known + buyer relies on seller's skill or judgment + seller deals in such goods → goods reasonably fit

No implied condition if a specified article is sold under its patent or other trade name.

Merchantable quality (Section 16(2))

Bought by description from a seller who deals in such goods → merchantable quality

No implied condition for defects which the buyer's examination ought to have revealed.

Sale by sample (Section 17(2))

Bulk matches sample in quality; reasonable opportunity to compare; no hidden defect making goods unmerchantable

The sale must be by sample by an express or implied term.

Condition treated as warranty (Section 13)

Buyer waives, or elects, or accepts goods in a non-severable contract

Remedy then falls to damages or price reduction under Section 59.

Usage and express terms

Section 16(3): usage can annex terms; Section 16(4): express terms do not cancel implied terms unless inconsistent; Section 62: implied terms can be negatived by agreement, course of dealing or binding usage

Useful for the exceptions to caveat emptor and contracting out.

Intention rule (Section 19)

Specific or ascertained goods: property passes when the parties intend it to pass

Intention is read from the contract terms, conduct and circumstances. Sections 20 to 24 apply unless a different intention appears.

Unascertained goods (Section 18)

No ascertainment = no transfer of property

The goods must be identified before any property can pass.

Appropriation (Section 23)

Unascertained or future goods by description + deliverable state + unconditional appropriation + assent = property passes

Assent may be express or implied, before or after appropriation. Delivery to a carrier without reserving the right of disposal is deemed unconditional appropriation.

Specific goods in deliverable state (Section 20)

Unconditional contract + specific goods + deliverable state = property passes when the contract is made

Postponed payment or delivery does not matter.

Seller must do something (Sections 21 and 22)

Property passes only when the act is done and the buyer has notice

Section 21: putting goods in a deliverable state. Section 22: weighing, measuring or testing to fix the price.

Sale or return (Section 24)

Property passes on (a) approval, acceptance or adopting act, or (b) retention without notice of rejection beyond the fixed or reasonable time

Use the fixed time if one is given, otherwise a reasonable time.

Risk (Section 26)

Risk follows property unless otherwise agreed

If delivery is delayed by the fault of a party, that party bears loss that would not have occurred but for the fault.

Perishing before risk passes (Section 8)

Specific goods perish without fault, before risk passes = agreement avoided

Applies to an agreement to sell specific goods.

General rule (nemo dat)

Buyer's title = Seller's title (Section 27)

Applies where the seller is not the owner and sells without the owner's authority or consent. Unless an exception applies, the buyer gets no better title.

Estoppel exception

Owner's conduct precludes denial of seller's authority → buyer gets good title (Section 27)

The owner's own conduct must have led the buyer to believe the seller had authority.

Mercantile agent

Consent of owner + possession of goods or document of title + ordinary course of business + good faith + no notice → sale valid (proviso to Section 27)

All five conditions must be met. Section 2(9) defines a mercantile agent as one with customary authority to sell, consign for sale, buy, or raise money on goods.

Joint owner

Sole possession by permission of co-owners + good faith + no notice → property passes (Section 28)

Without co-owners' permission for sole possession, this exception fails.

Voidable contract

Seller's contract voidable under Section 19 or 19A of the Contract Act + not rescinded at time of sale + good faith + no notice → good title (Section 29)

If the original owner has already rescinded, the buyer gets no good title.

Seller in possession after sale

Seller keeps goods or documents + re-sells or pledges + buyer in good faith without notice of earlier sale → effect as if authorised by owner (Section 30(1))

Covers delivery or transfer by the seller or his mercantile agent.

Buyer in possession before payment

Buyer obtains possession with seller's consent + transfers to good-faith person without notice of seller's lien or right → lien treated as non-existent (Section 30(2))

Possession must be with the original seller's consent.

Duties of seller and buyer

Seller: deliver the goods. Buyer: accept and pay. Both as per the contract of sale.

Section 31. The contract terms prevail over default rules.

Concurrent conditions

Delivery of goods ⇄ payment of price (unless otherwise agreed)

Section 32. Each party must be ready and willing to perform their own part.

Place of delivery

Sold goods: where they are at the time of sale. Agreed to be sold: where they are at the time of agreement, or, if not then in existence, where made or produced.

Section 36(1). Applies apart from any contract to the contrary.

Time of sending

No time fixed and seller bound to send: within a reasonable time

Section 36(2).

Goods with a third person

No delivery until the third person acknowledges to the buyer that he holds the goods on the buyer's behalf

Section 36(3). Issue or transfer of a document of title is not affected.

Reasonable hour

Demand or tender may be ineffectual unless made at a reasonable hour; it is a question of fact

Section 36(4).

Cost of making goods deliverable

Borne by the seller, unless otherwise agreed

Section 36(5). Cost of putting goods into a deliverable state, not transport.

Instalment deliveries

Buyer not bound to accept instalments unless otherwise agreed. Breach in a separately paid instalment: repudiation or severable breach, depending on the contract and circumstances

Section 38(1) and (2).

Buyer neglecting delivery

Seller ready and willing, requests delivery, buyer does not take it within a reasonable time → buyer liable for loss and reasonable charge for care and custody

Section 44. Repudiation rights of the seller are not affected.

Effect of part delivery

Part delivery in progress of delivering the whole = delivery of the whole for passing of property. Part delivery to sever it from the whole ≠ delivery of the remainder

Section 34. Unpaid seller's lien on the remainder continues unless waiver is shown (Section 48).

Unpaid seller's rights against the goods (S.46(1))

Lien + Stoppage in transit + Resale (as limited by the Act)

These arise by implication of law, even if property has passed to the buyer.

Lien: when it can be used (S.47(1))

Seller in possession AND (no credit stipulated OR credit term expired OR buyer insolvent)

The seller retains possession until payment or tender of the price. It can be exercised even if he holds the goods as agent or bailee for the buyer (S.47(2)).

Termination of lien (S.49(1))

Lost by: (a) delivery to carrier without reserving right of disposal; (b) buyer or his agent lawfully obtains possession; (c) waiver

A decree for the price does not by itself end the lien (S.49(2)).

Part delivery (S.48)

Lien continues on the remainder

Unless the part delivery shows an agreement to waive the lien.

Stoppage in transit (S.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 (S.52)

Take actual possession OR give notice of claim to carrier/bailee

The carrier must re-deliver as the seller directs, and the seller bears the expenses of re-delivery.

Effect of sub-sale or pledge by buyer (S.53)

Seller's rights not affected unless seller assented

Exception: a document of title transferred in good faith and for consideration. If by sale, the seller's right is defeated. If by pledge, it is exercisable only subject to the transferee's rights.

Resale (S.54)

Lien or stoppage does not rescind the contract. Resale is permitted if goods are perishable, OR if the seller gave notice of intention to resell and the buyer did not pay or tender the price within a reasonable time

If notice was given and the buyer did not pay within a reasonable time, the seller may resell within a reasonable time and recover any loss from the buyer, and the buyer gets no profit. If notice was not given, the seller cannot recover damages and the buyer gets any profit on the resale (S.54(2)).

Express reservation of resale (S.54(4))

Right reserved in contract + buyer defaults + seller resells = original contract rescinded

The seller's claim for damages is not affected.

Buyer's remedy for breach of warranty (S.59)

No right to reject goods; may set up breach against price or sue for damages

Setting up breach against the price does not stop a later suit for further damage.

Short title, extent, commencement (Section 1)

Sale of Goods Act, 1930 | whole of India | in force from 1 July 1930

The word "Indian" was omitted in 1963. The exception for Jammu and Kashmir was omitted w.e.f. 31-10-2019.

Lots (Section 64(1))

Each lot = prima facie a separate contract of sale

"Prima facie" means the rule can be displaced by the terms of the auction.

Completion and retraction (Section 64(2))

Sale complete on fall of hammer or other customary manner; until then any bidder may retract

Retraction is possible only before the announcement of completion.

Right to bid (Section 64(3))

Seller or one person on his behalf may bid only if the right is expressly reserved

Express reservation is essential. It cannot be implied.

No reservation (Section 64(4))

No reserved right to bid: seller cannot bid or employ a bidder; sale may be treated as fraudulent by the buyer

The auctioneer also may not knowingly take a bid from the seller or such person.

Reserved price (Section 64(5))

Sale may be notified to be subject to a reserved or upset price

Notification is needed for the sale to be subject to the price.

Pretended bidding (Section 64(6))

Pretended bidding to raise price: sale voidable at the buyer's option

The option lies with the buyer, not the seller.

Quick revision

• A contract of sale is a transfer of property in goods for a price; it may be absolute or conditional.
• If property passes now, it is a sale; if later or on a condition, it is an agreement to sell.
• An agreement to sell becomes a sale when the time elapses or the condition is fulfilled.
• Section 8: an agreement to sell specific goods is avoided if the goods perish without fault before risk passes.
• Section 26: unless otherwise agreed, goods are at the seller's risk until property passes, and at the buyer's risk after.
• If delivery is delayed by one party's fault, that party bears loss that would not otherwise have occurred.
• Section 14 implies a condition that the seller has a right to sell, and warranties of quiet possession and freedom from encumbrance.
• Section 46: an unpaid seller has lien, stoppage in transit on buyer's insolvency, and a limited right of re-sale.
• Lien or stoppage does not by itself rescind the contract; re-sale rules depend on perishable goods or notice to the buyer.
• Section 58: the court may order specific performance for specific or ascertained goods.
• Auction: each lot is a separate contract, and the sale is complete on the fall of the hammer.
• Auction: the seller may bid only if the right is expressly reserved; pretended bidding makes the sale voidable by the buyer.

Common mistakes

• Treating every contract to buy goods as a sale. Fix: Always ask when property passes. Future or conditional transfer means an agreement to sell under Section 4(3).
• Calling a present sale of future goods a sale. Fix: Remember Section 6(3): it operates as an agreement to sell.
• Treating land or a debt as goods. Fix: Goods are moveable property only. Money and actionable claims are excluded; things attached to land count only if agreed to be severed.
• Saying a present sale of future goods is a valid sale. Fix: Apply Section 6(3): it operates only as an agreement to sell.
• Deciding a term is a warranty because the contract uses the word warranty. Fix: Quote Section 12(4): the nature depends on construction of the contract, and a warranty-labelled term can be a condition.
• Saying a buyer can always reject goods for breach of a condition. Fix: Add that the buyer may waive the condition or treat it as warranty, and that acceptance in a non-severable contract limits the right to reject.
• Treating delivery of possession as the same as passing of property. Fix: Remember that property is ownership. Section 26 says risk follows property whether delivery has been made or not.
• Saying property passes in unascertained goods when the contract is signed. Fix: For unascertained goods, first ask whether the goods are ascertained (Section 18) and unconditionally appropriated (Section 23).
• Saying a buyer always gets good title if he paid and acted honestly. Fix: Start from Section 27: no better title. Good faith helps only when one of the exceptions also applies.
• Treating a thief as someone who can pass title. Fix: In the listed exceptions, the owner gave possession or consent. A thief has neither, so the buyer gets no title.

Exam tips

• Distinction questions are common. Write four or five points in two columns, each with a section reference where you can.
• In MCQs, look for timing words such as 'will pass on' or 'subject to payment'. They signal an agreement to sell.
• For hire purchase versus sale, stress that the hirer is not bound to buy and that, as a general position, property passes when the option is exercised under the agreement.
• Quote Section 4(3) and 4(4) exactly in meaning. Keep your own words short and precise to earn step marks.
• In case-based answers, give a clear verdict first, then the reasoning, then the section.
• Write the section number with each rule; examiners reward it, so cite Sections 2(7), 6, 7, 8 and 10 correctly.
• In case studies, underline the dates. The timing decides between Section 7 and Section 8.
• For MCQs, remember the words: Section 7 'void', Section 8 'avoided'.