What is the Sale of Goods Act 1930?
Contracts of sale are those contracts that act as proof of the transfer of ownership of any object from one person to another in exchange for a price. The Sale of Goods Act India came up amidst the British Raj. The Sale of Goods Act 1930 was a law enacted in colonial, pre-Independence India for the benefit of merchants in India. The act relates to contracts for the sale of goods for all the states of India except for Jammu & Kashmir. Contracts of sale include the agreement on the part of the buyer as well as that of the seller.
Elements of the Sales of Goods Act India 1930
While trying to understand the Sale of Goods Act, it is imperative to understand the key terms used in the Act. These include the two parties (i.e., the buyer and the seller), the mercantile agent, goods, price, and the transfer of general property.
Let’s discuss these various elements to understand better.
Two Parties
As mentioned before, the two parties in the Sale of Goods Act 1930 are the buyers and the sellers.
A buyer is a person who is willing to or has agreed to buy a good.
A seller is a person who is willing to or has agreed to sell a good.
There has to be an agreement between these two parties for there to be a sale as per the Sale of Goods Act 1930. You can note here that a sale need not have gone through for the contract to designate a buyer as a buyer, and a seller as a seller; the contract is enough to assign these roles to the parties.
Mercantile Agent
Rather than the buyer and supplier negotiating between themselves, a third-party agent can be used to coordinate the specifics of the contract on behalf of these parties. This third-party agent is called the mercantile agent, and they come in the form of brokers, auctioneers, and others.
Goods
The primary purpose of establishing a buyer and a seller is so that there is an agreement about the good which is supposed to be for sale. These goods need to be clearly defined in the sale contract as per the Sales of Good Act.
In differing words, the contract states that any movable property which is listed within a contract, which is to go through the transfer of ownership as per the contract (except for money and actionable claims), is considered a good.
The Act only recognises movable property like growing crops, stocks, shares, vehicles, among others. Immovable property such as land is not under the jurisdiction of this particular Act.
The goods for sale may be either existing, future goods, or contingent goods. Existing goods are those which are already in existence when the contract is formed. Future goods refer to goods that will be produced after the creation of the contract. Contingent goods are an extension of future goods, but they have contingency clauses within the contract of sale.
Price
The price must most certainly be included in the contract; otherwise, the contract is deemed redundant. A sale is defined by the exchange of ownership of a good between two parties at a specific price, and thus it is a critical element of the Sale of Goods Act India. A transfer of ownership of goods can only be done with the payment or promise of fulfilment of the price mentioned in the contract.
There are two ways in which the price can be paid by the sales contract. The Sale of Goods Act 1930 says that the payment must be made either in the form of full cash, or part of it with the promise to pay the rest of it later.
The price mentioned in the contract should be pre-decided by the parties at hand.
Transfer of General Property
The transfer of general property is differentiated from the transfer of specific property. General property refers to any property owned by a seller, whereas specific property refers to the property the seller is transferring the ownership of to someone else through a sales contract. The Sale of Goods Act 1930 looks only at the transfer of general property.
Important Topics covered Under the Sales of Goods Act 1930
The Sale of Goods Act of 1930 governs contracts or agreements relating to the sale of goods. Except for the state of Jammu & Kashmir, this act took effect on July 1, 1930, throughout India. Vedantu provides you with complete guidance to study. The Sale of Goods Act 1930 – Elements and Transfer of General Property. Let's go through some of the act's key terminology and sections.
Important Term Definitions
Sale and Purchase Agreement
Calculation of the Price
Condition and Warranty Concept
Conditions (Express and Implied)
Warranties, both express and implied
The Caveat Emptor Doctrine
Part 1 of the property transfer process
Part 2 of Property Transfers
Risk passing
Transfer of Ownership
Performance of a Sales Contract
Unpaid Seller's Rights Against Goods
Unpaid Seller's Rights Against Buyer
Auctioneering
FAQs on The Sale of Goods Act, 1930: Overview and Provisions
1. What is the primary objective and scope of The Sale of Goods Act, 1930?
The primary objective of The Sale of Goods Act, 1930, is to legally define and regulate contracts involving the sale of goods in India. It establishes a framework for the transfer of ownership of movable property from a seller to a buyer for a price. The Act governs the rights and duties of both parties, outlining rules for forming the contract, defining conditions and warranties, and specifying remedies for breach of contract. It applies to all of India and exclusively deals with movable property, not services or immovable assets like land.
2. What are the essential elements of a valid contract of sale under this Act?
For a contract to be considered a valid contract of sale under the Act, it must contain the following essential elements:
- Two Parties: There must be a distinct buyer and a seller.
- Goods: The subject matter must be 'goods', which are defined as every kind of movable property other than actionable claims and money.
- Price: The consideration for the transfer must be money, referred to as the price.
- Transfer of Property: The contract must involve the transfer of general property (ownership) in the goods from the seller to the buyer.
- Valid Contract Essentials: It must also satisfy all the requirements of a valid contract as per the Indian Contract Act, 1872, such as free consent and competency of parties.
3. How does a 'sale' differ from an 'agreement to sell' in the context of the Act?
A 'sale' and an 'agreement to sell' are two distinct concepts under the Act. A sale is an executed contract where the ownership and property in the goods pass from the seller to the buyer immediately. In contrast, an agreement to sell is an executory contract where the transfer of ownership is set to happen at a future date or is subject to the fulfilment of certain conditions. A key difference lies in the transfer of risk; in a sale, risk passes to the buyer, whereas in an agreement to sell, risk remains with the seller until the ownership is transferred.
4. What are the different types of goods defined by The Sale of Goods Act, 1930?
The Act classifies goods into three main categories based on their existence at the time of the contract:
- Existing Goods: These are goods that are physically in existence and are owned or possessed by the seller at the time the contract of sale is made. They can be further classified as specific, ascertained, or unascertained.
- Future Goods: These are goods that the seller will manufacture, produce, or acquire after the contract of sale is made. A contract for future goods always operates as an agreement to sell.
- Contingent Goods: These are a type of future goods where the seller's acquisition depends on an uncertain event or contingency. The sale is conditional upon this event occurring.
5. Why are services and immovable properties like land excluded from The Sale of Goods Act, 1930?
The Sale of Goods Act, 1930, exclusively governs transactions involving 'goods', which are statutorily defined as movable property. Immovable properties, such as land and buildings, are specifically excluded because their transfer is governed by a separate, more complex legislation, namely the Transfer of Property Act, 1882. Services are excluded because a contract for service does not involve the transfer of ownership of a tangible, movable object; it involves the provision of work or skill, which falls outside the Act's scope.
6. What is the legal difference between a 'condition' and a 'warranty' in a contract of sale?
The distinction between a condition and a warranty is crucial as it determines the remedies available upon a breach. A condition is a stipulation that is essential to the main purpose of the contract. If a condition is breached, the aggrieved party has the right to treat the entire contract as repudiated (cancelled). A warranty is a stipulation that is collateral or secondary to the main purpose of the contract. If a warranty is breached, the aggrieved party can only claim damages and cannot reject the goods or cancel the contract.
7. What is the doctrine of 'Caveat Emptor' and what are its main exceptions under the Act?
The doctrine of 'Caveat Emptor' means 'let the buyer beware'. It implies that the buyer is responsible for checking the quality and suitability of goods before purchasing them. However, the Act provides several important exceptions to protect the buyer:
- Fitness for Buyer's Purpose: When the buyer informs the seller of the particular purpose for the goods and relies on the seller's skill, there is an implied condition that the goods will be fit for that purpose.
- Sale by Description: When goods are sold by description, there is an implied condition that the goods must correspond with the description.
- Merchantable Quality: For goods bought by description from a seller who deals in such goods, there is an implied condition that they are of merchantable quality.
- Consent by Fraud: The rule does not apply if the seller actively conceals a defect or commits fraud.
