The Sale of Goods Act, 1930 is an important mercantile law in India. It came into force on 1 July 1930 during the British rule and is largely based on the U.K. Sale of Goods Act, 1893. The Act governs contracts in which a seller transfers or agrees to transfer ownership (title) of goods to a buyer for a price.
It applies across India and requires that goods must be sold for a definite price and within a specified period. It was amended in 1963 and continues to be in force in India and Bangladesh.
Key Definitions (Section 2)
1. Contract of Sale
A contract of sale is formed when:
- There is an offer to buy goods for a price, or
- An offer to sell goods for a price, and
- The other party accepts the offer.
A contract of sale may include:
- Immediate delivery
- Immediate payment
- Both delivery and payment at the same time
- Delivery or payment in installments
- Postponement of delivery or payment
According to Section 5(2), a contract of sale may be:
- In writing
- By word of mouth
- Partly written and partly oral
- Implied from conduct
2. Goods
Goods include all kinds of movable property except:
- Actionable claims
- Money
Goods also include:
- Shares and stocks
- Growing crops
- Grass
- Items attached to land that are agreed to be severed before sale
Future Goods
These are goods that the seller will:
- Manufacture
- Produce
- Acquire in the future
If a seller claims to sell future goods, it only creates an agreement to sell, not an actual sale.
Events and Participants
1. Sale of Goods
A sale occurs when the seller transfers ownership of goods to the buyer for a price. Even a part-owner can sell to another part-owner.
2. Mercantile Agent
A mercantile agent is a person who has authority to:
- Sell goods
- Send goods for sale
- Buy goods
- Raise money using goods as security
(Section 9)
3. Buyer
A buyer is a person who buys or agrees to buy goods.
Price
Price refers to the monetary consideration for goods. It may be:
- Fixed by the contract
- Left to be fixed later by an agreed method
- Determined by previous dealings
- A reasonable price (if not otherwise fixed)
If price is to be determined by a third party and the third party fails to give valuation, the agreement becomes void. However, if the goods have already been delivered, the buyer must pay a reasonable price.
If a dispute arises, the party not at fault may claim damages.
Delivery
Delivery means voluntary transfer of possession from seller to buyer.
Delivered State
Goods are in a “delivered state” when the buyer is bound to accept them as per the contract.
Documents of Title to Goods
These are documents that prove possession or control over goods, such as:
- Bill of lading
- Dock warrant
- Warehouse keeper’s certificate
- Wharfinger’s certificate
- Railway receipt
- RC book of a vehicle
- Multimodal transport document
- Delivery order
- Any other document used in ordinary business to transfer goods
Damage or Perishing of Goods
Goods are considered perished or damaged when:
- They are destroyed or damaged at the time of the contract
- Neither party is aware of the destruction or damage
Section 8
If specific goods perish without fault of either party before ownership passes to the buyer, the agreement becomes void.
Violation (Fault and Insolvency)
Fault
A fault is a wrongful act or default by either party.
Insolvent
A person is insolvent when:
- He has stopped paying debts in the ordinary course of business, or
- He cannot pay debts when due
Other Key Definitions
- Price: Money paid for the sale of goods
- Property: Ownership in goods, not just special interest
- Quality of Goods: State or condition of goods
- Seller: A person who sells or agrees to sell goods
- Specific Goods: Goods identified at the time the contract is made
Words not defined in this Act take the meaning given in the Indian Contract Act, 1872.
Requirements of a Valid Sale (Section 4)
A valid contract of sale must include:
- A contract between the parties
- The seller transfers or agrees to transfer the property in goods
- The transfer must be for a price
- Sale may occur even between co-owners
- Sale may be absolute or conditional
Sale vs. Agreement to Sell
| Basis | Sale | Agreement to Sell |
|---|---|---|
| Transfer of property | Immediate | Future date or after conditions |
| Risk | Passes to buyer immediately | Remains with seller until sale completes |
| Nature | Executed contract | Executory contract |
| Right | Buyer gets ownership | Buyer gets future right |
A contract involving existing goods is a sale, while one involving future goods is an agreement to sell.