B.Com 1st Year Sale Of Goods Act 1930 Notes
B.Com 1st Year Sale Of Goods Act 1930 Notes :- In this post is very useful for BCOM Students you will get full information related to Formation of contracts of Sale; Goods and their classification, price; Conditions, and warranties; Transfer of property in goods; Performance of the contract of sales; Unpaid seller and his rights, sale by auction; Hire purchase agreement. Notes Study Material Unit Wise Chapter Wise All the Content available in over site parultech.com.
Short Answer Questions
Q.1. What do you mean by Sale of Goods Act, 1930?
Ans. Sale of Goods Act, 1930 was enacted to enable the parties to know about their mutual rights and obligations in transactions that involve sale or the purchase of goods. This act helps to understand the validity of transactions and the remedies available to the aggrieved party. It deals with sale but not with mortgage.
Sale of Goods Act, 1930 is a law to govern the sale of movable property, i.e. goods and lays down:
1. The rights and duties of buyer and seller.
2. Conditions of a valid sale in the eyes of law.
3. Express and implied conditions and warranties under a contract of sale.
This act provides the basic definitions as:
1. Buyer: A person who buys or agrees to buy goods.
2. Delivery: Voluntary transfer of possession from one person to another.
3. Deliverable State: Buyer under contract is bound to take the delivery of goods.
4. Document of Title to Goods: Bill of lading, dock warrant, warehouse keeper’s certificate,
railway receipt, etc. used in the ordinary course of business.
5. Fault: Wrongful act or default.
6. Insolvent: Person ceased to pay his debts in the ordinary course of business.
7. Mercantile Agent: Agent authority either to sell goods or to consign goods for the purpose of sale.
8. Price: Money consideration for a sale of goods.
9. Property: General property in goods and not merely a special property,
10. Seller: A person who sells or agrees to sell goods.
Q.2. What do you mean by ‘Contract of sale‘? How is it formed?
Or Define contract of sale.(2016)
Ans. Contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. When one person transfers the ownership of goods to another for the consideration of a price, a sale is said to have been made. A contract of sale may be absolute or conditional.
As according to Section 5(1) of the Sale of Goods Act, 1930, ‘A contract of sale is made by an offer to buy or sell goods for a price and acceptance of such offer.
According to Section 5(2) of the Sale of Goods Act, 1930, A contract of sale may be made in writing or by word of mouth or partly in writing and partly by word of mouth.’
A contract of sale may be affected in any of the following ways:
1. There may be immediate delivery of the goods.
2. There may be immediate payment of price but it is agreed that delivery is to be made at some future date.
3. There may be immediate delivery of the goods and also the immediate payment of price.
4. It is agreed that the delivery or payment or both are to be made in instalments.
5. It is also agreed that the delivery or payment or both are to be made at some future date. So, the contract may providefor the immediate delivery of goods or immediate payment of price or both.
Q.3. Discuss the essential characteristics of a contract of sale of goods.
Ans. The essential characteristics of a contract of sale of goods include:
1. Two Parties: The first essential is that there must be two distinct parties to a contract of sale, i.e. a buyer and a seller.
(a) A buyer: Buyer means a person who buys or agrees to buy goods.
(b) A Seller: Seller means a person who sells or agrees to sell goods,
2. Transfer of Property: ‘Property’ here means ‘ownership’. Transfer of property in the goods is another essential for a contract of sale of goods. A mere transfer of possession of the goods cannot be termed as sale. To constitute a contract of sale the seller must either transfer or agree to danc property in the goods to the buyer.
3. Goods: The subject-matter of the contract of sale must be goods. Goods means every kind of movable property other than actionable claims and money and includes stock and shares, growing crops, grass and things attached to or farming part of the land which are agreed to be served before sale or under the contract of sale.
4. Price: The consideration for a contract of sale must be money consideration called the price if goods are sold or exchanged for other goods.
5. Includes Both a ‘Sale’ and ‘an Agreement to Sell’: The term contract of sale is a generic term and includes both a ‘sale’ and ‘an agreement to sell.
(a) Sale: Where under a contract of sale, the property in the goods is immediately transferred at the time of making the contract from the seller to the buyer, then a contract is called a sale.
(b) An Agreement to Sell: Where under a contract of sale, the transfer of property in the goods is to take place at a future time or subject to some conditions thereafter to be fulfilled, the contract is called an agreement to sell.
6. No Formalities to be Observed: The sale of goods act does not prescribe any particular form to constitute a valid contract of sale. A contract of sale of goods can be made by mere offer and acceptance. The offer may be made either by the seller or the buyer and some must be accepted by the other.
Q.4. What is the difference between sale and agreement to sell?
Ans. In sale, the transfer of ownership of goods is immediate but it takes place at a later date in an ‘agreement to sell. The differences are:
1. The execution is complete in a sale but execution is yet to take place, i.e. the contract is executory.
2. In sale, the ownership of goods is transferred to the buyer at the time the contract is made but the ownership of goods is not transferred at the time of contract in agreement to sell.
3. The buyer has the right to use the goods he buys in sale but in agreement to sell, it is only a contract between the buyer and the seller. 4. The seller is required to deliver the goods to official receiver of the buyer in case of latter’s insolvency in sale but if the buyer is declared insolvent for making the payment for goods the seller has the right to refuse to deliver the goods in agreement to sell.
5. Unless there is a contract to the contrary, any loss or damage to the goods is the buyer’s but this damage or loss to goods is the seller’s in agreement to sell.
Q.5. What are the different types of goods?
Ans. Types of Goods: ‘Goods’ form the subject into the following types:
1. Existing goods, 2. Future goods, 3. Contingent goods.
1. Existing Goods: Goods which are physically in existence and which are in seller’s ownership and/ or possession, at the time of entering the contract of sale are called ‘existing goods’ where seller is the owner, he has the general property in them. Where seller is in possession say, as an agent or a pledgee, he has a right to sell them. There are two types of existing goods:
(a) Specific Goods: Goods identified and agreed upon at the time of making of the contract of sale are called specific goods’. It may be noted that in actual practice the term ‘ascertained goods is used in the same sense as ‘specific goods.
For example: A agrees to sell to B a particular radio bearing a distinctive number, there is a
contract of sale of specific or ascertained goods.
(b) Unascertained Goods: The goods which are not separately identified or ascertained at the time of the making of a contract are known as unascertained goods. They are indicated or defined only by description.
2. Future Goods: Goods to be manufactured, produced or acquired by the seller after the making of the contract of sale are called ‘future goods’.
For example; A agrees to sell to B all the milk that his cow may yield during the coming year then, this is a contract for the sale of future goods.
3. Contingent Goods: Goods, the acquisition of which by the seller depends upon an uncertain contingency are called ‘contingent goods’. Obviously they are the types of future goods and therefore a contract for the sale of contingent goods also operates as an agreement to sell and not a ‘sale’ so far as the question of passing of property to the buyer is concerned.
For example; A agrees to sell to B a specific rare painting provided he is able to purchase it from its present owner. This is a contract for the sale of contingent goods.
Q.6. What is the meaning of ‘perishing’ of goods under the ‘Sale of Goods Act’? What is the effect of perishing of goods on a contract of sale?
Ans. Perishing or Destruction: The word perishing means not only physical destruction of the goods but it also covers:
1. Damage to goods so that the goods have ceased to exist in the commercial sense.
2. Loss of goods by theft.
3. Where the goods have been lawfully requisitioned by the government.
Effect of Destruction of Goods: The effect of destruction of goods may be discussed under the following heads:
1. Destruction of Specific Goods at or Before Making of the Contract: This may again be divided into the following sub-heads:
(a) In Case of Destruction of the whole of the Goods: Where specific goods from the subject-matter of a contract of sale and they, without the knowledge of the seller, are destroyed at or before the time of the contract, then the agreement is void.
(b) In Case of Destruction of only ‘a Part of the Goods: Where in a contract for the sale of specific goods, only part of the goods are destroyed or damaged, the effect of destruction will depend upon whether the contract is entire or divisible.
2. Destruction of Specific Goods before Sale but after Agreement to Sell: This situation amounts to a supervening impossibility as a result of which the promisor seller is in no position to perform the contract. The Contract, therefore, becomes void.
3. Destruction of Future Goods: If the future goods specific, the destruction of such goods will amount to supervening impossibility and the contract shall become void.
Q.7. State the difference between “Conditions’ and ‘Warranties
Ans. The points of distinction between a condition and a warranty may be summed up as under:
1. As to value: A condition is a stipulation which is essential to the main purpose of the contract whereas a warranty is a stipulation which is collateral to the main purpose of the contract.
2. AS TO Breach: The breach of a condition gives the aggrieved party contract and also a claim damages, whereas the breach of warranty gives the aggrieved party the right to repudiate the contract and also a claim damages, whereas the breach of warranty gives the aggrieved party a right to claim damages only.
3. As to Treatment: A breach of condition may be treated as a breach of warranty. But a breach of warranty cannot be treated as a breach of condition.
Q.8. Under what circumstances a breach of condition is to be treated as a breach of warranty?
Ans. As stipulated under Sec. 13 of the Sale of Goods Act, 1930 in the following cases, a contract is not avoided even on account of a breach of a condition. These are:
1. voluntary Waiver of Condition: Where a contract of sale is subject to any condition to fulfilled by the seller, the buyer may:
(a) Waive the condition.
(b) Elect to treat the breach of the condition as a breach of warranty.
If the buyer once decides to waive the condition, he cannot afterwards insist on its fulfilment.
2. Acceptance of Goods by Buyer: Where a contract of sale is not severable and the buyer has accepted the goods or part thereof the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty and not as a ground for rejecting the goods and treating the contract as repudiated, unless there is a term of the contract, express or implied, to the contrary.
3. Conversion of Condition into Warranty: As was stated above, the buyer may choose to treat the condition in the contract as a warranty only and demand damages for the loss suffered on account of violation of condition while continuing with the contract.
Q.9. Discuss in detail the implied warranties.
Or Explain the implied warranties in a ‘Contract of sale.'(2015)
Ans. Unless otherwise agreed, the law also incorporates into a contract of sale of goods the following implied warranties:
1. Warranty of Quiet Possession: In every contract of sale, the first implied warranty on the part of the seller is that ‘the buyer shall have and enjoy quiet possession of the goods’. If the quiet possession of the buyer is in any way disturbed by a person having a superior right than that of the seller, the buyer can claim damages from the seller,
2. Warranty of Freedom from Encumbrances: The second implied warranty on the part of the seller is that ‘the goods shall be free from any charge or encumbrance in favour of any third party not declared or known to the buyer before or at the time when the contract is made’. If the goods are afterwards found to be subject to a charge and the buyer has to discharge the same, there is breach of warranty and the buyer is entitled to damages.
3. Warranty of Disclosing the Dangerous Nature of Goods to the Ignorant Buyer: The third implied warranty on the part of the seller is that in case the goods sold are of dangerous nature he will warn the ignorant buyer about the probable danger. If there is breach of this warranty the buyer is entitled to claim compensation for injury caused to him.
Q.10. Neme Det Quod Non Habet (No one can give who possess not). Comment giving exception if any to this rule with suitable examples.
Or What are the exceptions to the transfer of title by non-owners?
Ans. Neme Det Quod Non Habet means No one can give a better title than what he himself has if the seller has not title or he has defective title the buyer’s title will be equally defective though he has purchased in good faith and for value.
To this rule, there are exceptions under which a non-owner may confer a good title on the transferee. These exceptions are as follows:
1. Sale by a Mercantile Agent: If a mercantile agent with the consent of owner sells the goods in the ordinary course of business, the buyer gets a good title to the goods provided he buys them in good faith.
2. Sale by a Joint Owner: Any purchases from the joint owners for value without notice at that time of the seller’s want of authority to sell acquires a good title against other joint owners.
3. Sale by a Person in Possession Under a Voidable Contract: A person who has obtained possession of goods can convey a good title provided the sale takes place before the voidable contract is avoided.
4. Sale by a Seller in Possession of Goods After Sale: Such a person will pass a good title to the transferee if such latter person is a bonafide purchaser for value and without notice of the previous sale.
5. Sale by An Unpaid Seller: An unpaid seller resell the goods and convey a valid title to another buyer though no notice of resale has been given to the original buyer.
6. Sale by a Buyer in Possession of Goods: Sale by such a person is valid and effective if the person receiving the same acted bonafide and without notice of the seller’s lier, if any.
Q.11. What do you mean by performance of contract of sales? Explain delivery of goods.
Ans. Performance of contract of sales implies the delivery of goods by the seller and acceptance of the delivery of goods and payment for them by the buyer in accordance with the contract.
According to Section 2(2) of the Sale of Goods Act, 1930, delivery means voluntary transfer of possession of goods from one person to another. It is the voluntary transfer of the possession of goods from seller to buyer and there is no delivery if the transfer of possession of goods is not voluntary.
Delivery has the effect of putting the buyer in possession of the goods so that he acquire the position of exercising degree of control over the goods either directly or through the representatives. Such a delivery may be made by doing anything that the parties agree shall be treated as delivery and by doing anything that has affect of putting goods into the buyer’s or the authorised agent’s possession. This delivery may occur in any of these modes:
1. Actual Delivery: Here, the goods are handed over by the seller to the buyer or his duly authorised agent. Such a delivery may also be made by doing anything that has effect of putting the goods in the possession of the buyer.
2. Symbolic Delivery: Delivery is symbolic where some symbol of the real possession is handed over to the buyer.
3. Constructive Delivery: Here, a person who is in possession of the goods acknowledges holding of the goods on behalf of the buyer.
Q.12. What are the unpaid seller’s rights against the buyer? Ans. Right of Unpaid Seller Against the Buyer: These are the rights that and unpaid seller enforce against the buyer personally. Such rights of the seller against the buyer are called rights in personam as against the against the rights in rem, i.e. right against the goods.
These rights are:
1. Suit for the Price: Here, the property in the go neglected or refused to pay for the goods according to the terms of the contract that the seller may sue for the price of goods.
So, according to Section 55, if the ownership of goods has been transferred to the buyer and he refuses to make the payment for the goods the seller has the right that he can fill a suit against the buyer.
2. Suit for Damages: According to Section 56. if the buyer refuses to accept the good in making the payment for them with a malafide intention or refuses to accept the goods or to pay for the same, the seller has got the right to file a suit against the buyer for such damages, i.e damages for non-acceptance.
3. Repudiation of Contract before Due Date: According to Section 60, if the buyer repudiates the contract before the due date for the delivery of goods and the seller does not accept the repudiation and waits for the due date to make the delivery, he reserves the right to sue the buyer for repudiating the contract
4. Suit for Interest: According to Section 61(2)(a) Where there is specific agreement between the buyer as to interest on the price of the goods from the date on which payment becomes
Due, the seller may recover interest from the buyer. If there is no specific agreement, the seller may charge interest on the price when it becomes due from such day as he may notify to the buyer.
Q.13. What is the difference between ‘Right of lien’ and ‘Right of stoppage-in-transit”?
Ans. Difference between ‘Right of Lien’ and ‘Right of Stoppage-in-transit’
|S.No.||Basis of difference||Right of lien||Right of stoppage-in-transit|
|1.||Possession of goods||The goods must be in actual possession of the seller.||The goods must be in the possession of a carrier or other bailee who is acting as an independent person.|
|2.||Solvency||The right can be exercised even when the buyer is solvent but refuses to pay the price.||The right can be exercised only when the buyer has become insolvent.|
|3.||End commencement delivery to carrier||The right comes to an end when the seller delivers the goods to a carrier.||This right commences only when the seller delivers the goods to a carrier.|
|4.||Purpose||The purpose of this right is to retain possession of the goods.||The purpose of thisright is to regain the possession of the goods.|
|5.||Mode of exercising the right||This right can be exercised by the seller himself.||This right can be exercised by the seller throught the carrier or the other bailee.|
Q.14. What do you understand by sale by auction?
Or Explain sale by auction.(2016)
Ans. Sale by Auction: It is a public sale where the goods are offered to be sold to the buyer who offers the highest price for the goods or makes the highest bid. The person inviting the bid is called the auctioneer who acts as an agent of the seller.
Sale by auction is a public proceeding in which the auctioneer invites the prospective buyers to compete for the purchase of goods that is being auctioned by giving successive offers of the price they are willing and are ready to pay for the goods. Salient features of an auction are:
1. The auctioneer invites the prospective buyers to make a bid for the goods being auctioned.
2. Invitation to bid is made in a public gathering.
3. Description of goods being auctioned is announced prior to the auction,
4. Offers made by the prospective buyers are done by bidding.
5. Auctioneer makes contract of sale with highest bidder
Rules regulating the sales by auction are as under:
(a) In Section 64(1), if the goods offered for sale are in lots, each lot is deemed to be the subject- matter of a contract of sale.
(b) According to section 64(2), the sale is deemed to be complete when the auctioneer announces its completion by the fall of a hammer.
(c) According to section 64(3), the right to bid may be reserved expressly by or on behalf of seller.
(d) According to section 64(4), Where the sale is not notified to be subject to a right to bid by the seller, it will be deemed to be a fraudulent act.
(e) According to Section 64(5), an announcement may be made before the auction about the reserved or upset price of the goods.
(f) According to Section 64(6), if the seller makes use of pretended biding, the buyer reserves the right to repudiate the sale.
Q.15 Write a note on knock out agreement. (2015)
Ans. Knock Out Agreement: It refers to the agreement that is made between the auctioneer and the bidder which becomes operative when the auctioneer ‘knocks down’ the hammer so as to signify the bid of the buyer for the goods. Such an agreement unless it is done to defraud or misguide a party or third party is referred to as a valid agreement. The seller has the right to claim for the agreed price or goods under such an agreement. It is also included in Section 64(2) that the sale is said to be complete when the auctioneer announces its completion in any manner that is in practice and till the auctioneer makes such an announcement, the bidders for the goods have the right to make their bids.