What is the Sale of Goods Act, 1930?
Almost every kind of business involves the sale and purchase of goods as part of its transaction. People in business are often entering into a contract of sale to sell their commodities. All these sales are governed by the Sale of Goods Act, 1930 which is one of the most important types of contracts under the law of India.
Every individual, whether a legal professional or a common man, who deals in the transaction of goods regularly, must understand the important terms of this contract. This article will acquaint you with some of the important terminology used in the Sale of Goods Act, 1930.
This act defines a contract wherein the seller of particular goods transfers or agrees to transfer the goods to the buyer for some price. This mercantile law was formed on the 1st of July 1930 when India was under the British Raj. This law had been borrowed mostly from the Sale of Goods Act, 1893 of Great Britain. The law is applicable all over India except for Jammu and Kashmir. As per section 2 of this act, a contract of sale is a generic term which refers to both sale and agreement to sell and is characterized by:
An offer to buy goods for a price or an offer to sell goods for a price and
Acceptance of the offer.
Important Terms in the Sale of Goods Act, 1930
Buyer - This is mentioned in section 2(1) and defined as a person who either purchases or agrees to purchase certain products. The buyer appears as one of the parties in the contract of sale.
Seller - This is defined in section 2(13) and defined as a person who either sells or agrees to sell certain products. The seller appears as one of the parties in the contract of sale.
By combining the definitions of a buyer and seller, we can conclude that it is not mandatory to transfer goods to be deemed as a buyer or a seller. Just by agreeing or promising to sell and buy goods, you become buyer and seller as per the contract of sale.
Goods - Goods are any merchandise or possession. An important clause in the contract for sale goods is described in Section 2(7) as:
It is a moveable property (except for money and actionable claims)
Stocks and shares
Growing crops, grass, standing timber
The things that are attached to the land but are agreed to be severed before the sale. For example, if a resort is offering complimentary food along with lodging and customers do not want to take the food. Then the rebate on food is not applicable as the food was not part of the sale.
Thus, we conclude here that goods are moveable property barring money and actionable claims. Goods are classified into many categories, as explained in the next section.
Types of Goods Under Sale of Goods Act 1930
Section 6 of the act explains in detail all types of goods in the Sale of Goods Act. There are mainly three categories of goods:
Existing Goods – If the goods exist physically at the time of contract and the seller is in legal possession of the goods, then it is termed as existing goods. They are further divided into three types:
Specific Goods – They are defined under section 2(14) and refer to goods that are identified and agreed to be transferred, at the time of making the contract. For example, A wants to sell a Bike of a certain model and year of manufacture, and B agrees to buy the bike. Here the bike is a specific good.
Ascertained Goods – These types of goods are identified by judicial interpretation and not by law. Any good where the whole or part of the good is identified and marked for sale at the time of the contract comes under ascertained goods. These goods are earmarked for sale.
Unsanctioned or Unascertained Goods – Those goods that are not specifically identified for sale, at the time of the contract, fall under the category of unsanctioned goods. For example, there is a bulk of 1000 quinols of wheat out of which 500 quinols are agreed to be sold. Here the seller can choose the goods from the bulk and is not specified.
Future Goods – The definition of future goods appears in section 2(6). The goods which do not exist at the time of contract but are supposed to be produced, acquired, or manufactured by the seller are called future goods. For example, A sells chairs and B wants 300 chairs of a specific design which A agrees to manufacture at a future date. Here chairs are future goods.
Contingent Goods – You can find the answer to what is contingent goods in section 6(2) of the Sale of Goods Act. A contingent good is a kind of future good, but it is dependent on the happening (or the absence of) certain conditions. As an example, X has agreed to sell 100 mangoes from his farm to Y at a future date. But this sale depends on the fact whether the trees in X’s farm give a yield of 100 mangoes by the date of the contract.
Delivery
Delivery of goods appears in section 2(2) and describes the process of transferring the possession of goods from one person to another. The person receiving the goods could either be the buyer or another person authorized by the buyer to receive the goods. There are different types of delivery of goods as described below:
Actual Delivery – If the commodity is handed over directly to the buyer or the person authorized by the buyer then that’s called an actual delivery.
Constructive Delivery – When the transfer of goods is done without any change in possession, then it is a constructive delivery. It could mean that the seller, even after selling the goods, holds them as bailee for the buyer.
Symbolic Delivery – In this case, the goods are not delivered, but a symbolic means of obtaining possession is involved. For example, handing over the keys of a warehouse where the goods are stored is a symbolic delivery. Such delivery is usually done when the goods are bulky or heavy.
FAQs on The Sale of Goods Act, 1930: Key Provisions
1. What is the Sale of Goods Act, 1930, and what is its main purpose?
The Sale of Goods Act, 1930 is a mercantile law that governs contracts related to the sale of goods throughout India. Its main purpose is to define the rights and obligations of the buyer and the seller in a contract of sale, providing a legal framework for transactions involving moveable property and ensuring fairness and clarity for both parties.
2. What are the essential elements of a valid contract of sale?
As per the Sale of Goods Act, 1930, a valid contract of sale must have the following essentials:
- Two Parties: A distinct buyer and a seller are required.
- Goods: The subject matter must be 'goods', which means moveable property (excluding actionable claims and money).
- Price: The consideration must be money, known as the price.
- Transfer of Property: The contract must involve the transfer of general property (ownership) in the goods.
- Valid Contract: It must fulfill all the requirements of a standard contract, like free consent, capacity of parties, and a lawful object.
3. How does a 'sale' differ from an 'agreement to sell'?
A 'sale' is an executed contract where the ownership of goods transfers immediately from the seller to the buyer. In contrast, an 'agreement to sell' is an executory contract where the transfer of ownership is set to happen at a future time or upon the fulfillment of certain conditions. The key difference lies in the timing of the transfer of ownership and the associated risks.
4. What are the different types of goods as defined by the Act?
The Act categorises goods into three main types:
- Existing Goods: Goods that are owned or possessed by the seller at the time of the contract. They can be specific, ascertained, or unascertained.
- Future Goods: Goods that are to be manufactured, produced, or acquired by the seller after the contract of sale is made. For example, a contract to sell next season's crop.
- Contingent Goods: A type of future good where the acquisition by the seller depends on a contingency or event that may or may not happen.
5. What is the practical importance of distinguishing between 'specific', 'ascertained', and 'unascertained' goods?
The distinction is crucial for determining the exact moment when the ownership (property) of goods passes from the seller to the buyer. For specific or ascertained goods, ownership typically passes when the contract is made. For unascertained goods, ownership does not pass until the goods are identified and set apart for the contract. This directly impacts who bears the risk of loss or damage to the goods.
6. How does the Act differentiate between a 'condition' and a 'warranty' in a contract?
A condition is a stipulation that is fundamental to the main purpose of the contract. If a condition is breached, the aggrieved party has the right to cancel the contract and reject the goods. A warranty is a stipulation that is collateral or secondary to the main purpose. If a warranty is breached, the aggrieved party can only claim damages and cannot cancel the entire contract.
7. What are the different modes of delivery recognised under the Sale of Goods Act, 1930?
The Act recognises three primary modes of delivering goods:
- Actual Delivery: The physical handing over of the goods from the seller to the buyer or their authorised agent.
- Constructive Delivery: A transfer of goods without any change in their actual possession. This happens through acknowledgement, for instance, when a seller agrees to hold the goods as a bailee for the buyer after the sale.
- Symbolic Delivery: When the goods are bulky or not easily portable, delivery is done by handing over a symbol that represents control, such as the keys to a warehouse or documents of title.
8. Who is an 'unpaid seller', and what are their primary rights under the Act?
An 'unpaid seller' is a seller who has not received the full price for the goods sold. As per the CBSE 2025-26 syllabus, their key rights against the goods include:
- Right of Lien: The right to retain possession of the goods until the payment is made.
- Right of Stoppage in Transit: The right to stop the goods in transit if the buyer becomes insolvent.
- Right of Resale: The right to resell the goods under specific circumstances, such as if the goods are perishable or if the buyer fails to pay within a reasonable time.
9. Why was a separate Sale of Goods Act, 1930 needed when the Indian Contract Act, 1872 already existed?
While the Indian Contract Act, 1872, laid down the general principles of contracts, business transactions involving the sale of goods grew more complex, requiring specific rules. The Sale of Goods Act, 1930, was created to provide a dedicated legal framework for these transactions. It addresses unique issues like conditions and warranties, transfer of ownership and risk, and the rights of an unpaid seller, which are not covered in detail by the general Contract Act.
10. What does the principle "Nemo dat quod non habet" mean in this context, and what are its main exceptions?
The principle "Nemo dat quod non habet" means "no one can give what they do not have." In the context of the Sale of Goods Act, it means that a seller cannot transfer a better title to the goods than they themselves possess. However, to protect bona fide buyers, the Act provides several exceptions, including:
- Sale by a mercantile agent.
- Sale by one of the joint owners.
- Sale by a person in possession under a voidable contract.
- Sale by a seller or buyer in possession after the sale.
