INTRODUCTION AND BACKGROUND:
By the "Sale of Products Act, of 1930," a contract for the sale of goods is one in which the seller agrees to transfer or offers to do so in exchange for payment. The phrase "contract of sale" refers to both a sale and an agreement to sell. Almost all types of commercial transactions include the sale and purchase of items. To sell their goods, entrepreneurs frequently enter into contracts of sale.
When India was still ruled by the British Raj, this mercantile statute was established on July 1st, 1930. The Sale of Goods Act of 1893 from Great Britain served as the primary model for this legislation.
The Sale of Goods Act governs every one of these sales. The Sale of Goods Act, which was passed in 1893 and codified the English law of sales, adopted the fundamental Common Law principles while changing them to fit the demands of a developing society.
DEFINITION CLAUSE AND ESSENTIAL ELEMENTS OF THE SALE OF GOODS ACT:
The following are the important terms for the sale of goods act,
- Buyer and Seller:
- This is referred to in section 2(1) and is described as a person who either agrees to buy particular products or makes a purchase. Anyone who buys or promises to acquire products is referred to as a "buyer." section 2 of the Act. It describes a buyer as someone who either purchases particular goods outright or commits to doing so. The Buyer is one of the contracting parties in the sale agreement.
- A person who sells or agrees to sell products is referred to as a seller. We can get the conclusion that it is not necessary to transfer products to be considered a buyer or a seller by combining the definitions of a buyer and a seller. The contract's second party is now the Seller. A contract of sale can only be entered into if both the buyer and the seller are present. The aforementioned two clauses lead us to the conclusion that the actual transfer of the products is not necessary to qualify as a Buyer or Seller under the Act.
Section 2(7) of the act defines goods; goods are any merchandise or possession. The same includes the following:
- It is a moveable property (except for money and actionable claims)
- Stocks and shares
- Growing crops, grass, and standing timber
- Things that are attached to the land but are agreed to be severed before the sale. Then the rebate on food is not applicable as the food was not part of the sale.
- Transfer of property:
Section 2(11), Property refers to a good's overall qualities, not just a particular one. Ownership of the products is referred to as general property in goods. Possession of things is a special property.
FORMATION OF A CONTRACT:
A contract sale has to be distinguished from a contract involving the exercise of skill or labor. Section 3 and 4 of the act explains,
- SALE AND AGREEMENT TO SELL: two need to be distinguished, a sale produces a jus in rem or transfers general ownership of the goods to the buyer. An agreement to sell does not transfer property; rather, it establishes a jus in personam that enables either party to sue the other's person and general estate if the other doesn't keep his half of the bargain. A sale has the immediate effect of transferring a property whereas in an agreement to sell the property is to pass at some future time to some condition.
- Section 4 explains about essential features of a sale. The contract must be bilateral as the property in goods has to pass from one person to another. The contract of sale must take place with the consent of both parties and should be commutative.
- The consideration of goods must be by money called the price. Where the property is transferred for any consideration other than the money it’ll not be a sale.
- Agreement to sell and hire purchase: In a hire-purchase arrangement, the owner of the items agrees to let the hirer rent the products in exchange for a fixed monthly payment. This agreement contains a plan for purchasing pricey consumer goods like automobiles, televisions, heavy equipment, etc. The hire-purchaser can buy products by making a down payment up front and the remaining balance over time in installments.
FORMALITIES OF THE CONTRACT:
Section 5 of the act states the formalities of the contract, A contract is formed by an offer to buy or sell goods. The acceptance of such an offer commences the contract of sale. As provided by the law for the time being forced contract of sale can be made in writing or by word-of-mouth call partly in writing and word of mouth the same may be implied from the conduct of the parties.
The following must be met for a contract to be formed: -
1. Acceptance of the offer
2. Arrangement for delivery of goods
3. Price to be paid or the fees to be paid immediately or in installments
THE SUBJECT MATTER OF THE CONTRACT:
- According to Section 6, the following categories of present or future products comprise the contract's subject matter. The commodities might already be in possession or they might do so in the future. the goods that require a contingency before they can be purchased.
- when future items are sold in the present. goods going bad before a deal is made
- Under Section 7, only particular commodities are protected. It specifies that if the products have expired at the time of the contract without the seller's knowledge, the contract is void. This Section is founded on the idea that if both parties are wrong about a fact that is important to the contract, it is void.
WHAT ARE THE CONDITIONS AND THE WARRANTIES?
Every contract of sale contains several terms in stipulations about the good the quality it has and its nature every such term is not likely to be of equal importance few of them constitute the hard core of the contract and their non-fulfillment may seem to upset the very basis of the contract such terms are known as conditions of the contract the breach of these terms entitles the innocent party to repudiate the contract. Sections 14 to 17 of the sale of goods act of 1930 deal with implied conditions and warranties
Implied conditions: -
- Parties can include any number of express conditions and warranties in their contract section 14 of the act talks about the condition as to title.
- The following are the fundamental implicit clauses on the seller's end of any sale contract:
- It’s a legal right to sell commodities. If a selling agreement exists, he will be entitled to sell the goods after the terms of the agreement are met. Therefore, if the seller does not have the authority to sell the goods, the buyer has the option to refuse them. He is entitled to the whole amount of his purchase payment refunded.
- Section 15 states sale by description, A default implied condition that applies when there is a contract for the sale of goods by description is that the goods must match the description. The buyer is not required to accept and pay for products that do not match the item description.
- The implied requirement is that the majority of the delivered items must match both the sample and the description when the goods are sold based on both a sample and a description. The buyer has the right to renounce the contract if the items match the sample but not the description or vice versa.
- Regarding Quality or Fitness, In general, there is no implied warranty on the quality or suitability of the goods sold for a particular use. However, the seller may be seen to have impliedly fit the items for the intended purpose if they are being purchased for that purpose. The following prerequisites must be met: If the buyer had disclosed to the seller the reason for the purchase and relied on the seller's expertise, good judgment, and ability to offer such items through the seller's business.
- A warranty is a stipulation collateral to the main purpose of the contract the breach of which gives rise to a right to treat the contract as repudiated.
- Implied warranty that the items are unencumbered. As per Section 14(b), unless the terms of the contract specifically state otherwise, every contract of sale contains the implied promise that the buyer will get and be entitled to tranquil possession of the goods
- According to Section 14(c), the seller has an implied promise that the items are free of any charges or encumbrances. If it is later discovered that the items are subject to a charge in the favour of a third party, the seller is liable for making up for the buyer's losses.
PASSING OF THE PROPERTY:
No one can offer what they do not have, according to the Latin proverb "Nemo dit quod non-habet." This is the fundamental tenet of the transfer of title. The essence of sale begins the transfer of property in goods from the seller to the buyer section 19 states property passes when intended to pass here contract for the sale of specific goods is transferred to the buyer at such time the parties to the contract intend it to be transferred 2) the purpose of ascertaining the intention of the parties in terms with the contract.
Section 20-22, about the sale or specific goals here the general rule is that the property passes as soon as the contract is made section 20 talks about specific goods and deliverable states where an unconditional contract for the sale of specific goods in a deliverable state the property in the goods passes to the buyer when the contract is made.
Secondly, the goods should be in a deliverable state lastly the contract must be unconditional a contract of sale is said to be conditional when it is the common intention of the parties that property should not pass unless certain conditions are fulfilled. Section 22 states goods are to be weighed or measured. Section 24 lays down the rule as to the passing of property when the goods are deliverable on approval or sale or return
The exception to the general rule of transfer of title:
(a) Sale by a mercantile agent: If a buyer purchases in good faith from a mercantile agent who has the goods or the documents of title to the goods with the owner's permission, the buyer will receive a good title.
(b) Sale by a co-owner: With the consent of his co-owners, a buyer who purchases in good faith from one of the many joint owners who is in exclusive possession of the goods will acquire a valid title to the goods.
(c) Sale by a person in possession under a voidable contract: A buyer purchases goods from a person in possession under a voidable contract that has not yet been revoked in good faith.
(d) Sale by the seller in possession after sale: If a seller sells goods in good faith to a buyer who purchases them without being aware of a prior sale while still in possession of the goods, the buyer is granted good title to the commodities.
(e) Sale by the buyer in possession: If a person brought the products or promised to buy them, any sale made by him to a buyer who purchases the goods in good faith will grant the buyer a good title.
(f) Estoppel: If the true owner remains silent while an innocent purchaser pays money to a third party who claims to have the authority to sell an item, the true owner will be prevented from disputing the transaction.
RIGHTS OF AN UNPAID SELLER:
Three vital rights of a seller who has not been compensated against the products
1. The lien right
2. The right to halt the shipment of goods
3. The right to resell
- Any property in the transfer of files, designate that the supplied items should remain in the seller's actual ownership and that they are not impacting these rights. The best way to maintain goods once ownership has transferred to the consumer is formally termed a "lien." A "lien" is the legal right to retain ownership of goods and to withhold them from a buyer until they have been paid for.
- According to the right of stoppage in transit method, the customer has the right to resume ownership of the products and hold possession until the items have been paid for, even if the goods maybe with a carrier for the objective of transmission to the buyer.
- A completely valuable right granted to an underpaid seller is the right of resale. Without this right, the unpaid seller would not have been able to invoke additional rights against the goods, such as "lien" and "stoppage" in transit, because those rights only apply to the unpaid dealer. If a seller loses money on a resale, he can recover it from the defaulting purchaser. However, if there is an excess at the resale, the seller may keep it with him as the buyer cannot utilize his identity for personal gain.
One of the significant categories of contracts under Indian law is the sale of goods. India is a major country with one of the greatest economies, thus it has the necessary safeguards in place to guarantee the security and prosperity of its business and commercial community. A formal or verbal agreement that is legally binding is referred to as a contract. Although every agreement must have a contract, not every agreement is a contract.