The Sale of Goods Act, 1930 is one of the most important laws governing business and trade in India. Whenever we buy or sell goods—whether it’s groceries at a shop, furniture from a store, or machinery for a factory—this Act lays down the rules that protect both buyers and sellers. It explains what constitutes a valid contract of sale, the difference between conditions and warranties, how ownership of goods passes from seller to buyer, and the rights of an unpaid seller.
Download UNIT 3 – Sale of Goods Act, 1930 – Contracts of Sale and Seller Rights Notes
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Contracts of Sale – The Foundation
A contract of sale is an agreement where the seller transfers or agrees to transfer the ownership of goods to the buyer for a price. This can be:
Sale – When the ownership of goods passes immediately from seller to buyer.
Agreement to Sell – When the transfer of ownership is to take place at a future date or after certain conditions are fulfilled.
Example: If a shopkeeper sells a laptop to a customer and ownership passes instantly after payment, it is a sale. But if the customer books the laptop by paying an advance and the transfer will happen later, it is an agreement to sell.
Conditions and Warranties
The Act distinguishes between conditions (important terms) and warranties (secondary terms) in a contract:
Condition – A fundamental term of the contract. If it is breached, the buyer can reject the goods.
Example: Buying a phone that is advertised as 256 GB but delivered as 128 GB.
Warranty – A minor term of the contract. If breached, the buyer can claim damages but cannot reject the goods.
Example: Getting a phone without the promised free cover or accessories.
This distinction protects the buyer’s rights while ensuring fairness in trade.
Transfer of Ownership
Ownership of goods is crucial because it decides who bears the risk if goods are lost or damaged. The general rule is: “Risk follows ownership.”
Ownership may transfer:
When goods are in a deliverable state and the contract is unconditional.
When specific conditions in the agreement are met.
When delivery is made with the intention of passing ownership.
Example: If you buy a bike but leave it at the showroom, the risk (such as theft or damage) may already pass to you once ownership transfers, even if you haven’t taken physical possession.
Delivery of Goods
Delivery means the voluntary transfer of possession from seller to buyer. It can be:
Actual delivery – Physical handover of goods.
Symbolic delivery – Handing over documents or keys representing goods.
Constructive delivery – A third party acknowledges holding goods on behalf of the buyer.
Delivery ensures that the buyer not only owns but also controls the goods.
Rights of an Unpaid Seller
One of the most significant parts of this Act is the protection given to the unpaid seller. A seller is considered “unpaid” when the full price is not received. The law gives such sellers strong rights, including:
Right of Lien – To retain goods until payment is made.
Right of Stoppage in Transit – To stop goods in transit if the buyer becomes insolvent.
Right of Resale – To resell goods if the buyer defaults after due notice.
Right to Sue – To file a legal case for the price or damages.
Example: If a wholesaler delivers goods to a retailer who later becomes insolvent without paying, the wholesaler can stop the goods mid-transit and prevent further loss.
Why This Act Matters in Business
The Sale of Goods Act, 1930 ensures fairness and balance between buyers and sellers. It protects consumers from defective goods while also safeguarding sellers against non-payment. In modern business, where goods move across states and sometimes internationally, this Act plays a vital role in maintaining trust and smooth trade practices.
Conclusion
Unit 3 introduces us to the key principles of the Sale of Goods Act, 1930, covering contracts of sale, conditions and warranties, transfer of ownership, delivery, and seller’s rights. For students of business and law, mastering these concepts is essential, as they form the legal backbone of trade and commerce. Whether you’re an entrepreneur, manager, or consumer, knowing these rules helps in making better decisions and avoiding disputes.