Sale

A sale of goods is the contract by which property in goods is transferred from the seller to the buyer for a price. Section 4 of the Sale of Goods Act, 1930 defines a contract of sale as a contract by which the seller transfers or agrees to transfer the property in goods to the buyer for a price. Where the property in goods is transferred immediately at the time of the contract, the contract is called a 'sale'; where the transfer of property is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an 'agreement to sell.' An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in goods is to be transferred.

The essential elements of a sale: (1) There must be at least two parties — buyer and seller; (2) The subject matter must be 'goods' — every kind of movable property except actionable claims and money; (3) There must be a price — money consideration; if the price is partly in goods and partly in money, it is still a sale (barter, where goods are exchanged only for other goods, is not a sale); (4) There must be a transfer of property (ownership) from seller to buyer; and (5) The seller must be, or be able to become, the owner of the goods. These elements distinguish a sale from a hire purchase (where ownership passes only on payment of final instalment), a pledge (no transfer of ownership), and a license (no transfer of property).

The passing of property (risk) in the goods is the central concept in sale of goods law. Section 26 SGA provides that unless the contract otherwise provides, the goods remain at the seller's risk until property (ownership) passes to the buyer — after that, they are at the buyer's risk. So if goods are damaged in transit after property has passed to the buyer, the buyer bears the loss; if damaged before property has passed, the seller bears the loss. The detailed rules on when property passes (Sections 18-25 SGA) distinguish specific goods (ascertained, identified goods) from unascertained goods, and deal with delivery, approval, etc.

Conditions and warranties in a sale are important implied terms. Section 16 SGA provides an implied condition of fitness for purpose when the buyer relies on the seller's skill and judgment. Section 15 provides an implied condition of correspondence with description. Section 17 provides an implied condition of merchantable quality. A breach of condition entitles the buyer to reject the goods and claim damages; a breach of warranty gives only a damages claim, not the right of rejection. In India, the Sale of Goods Act rights of buyers are important in consumer disputes — though the Consumer Protection Act 2019 now provides an overlapping and often more effective consumer remedy.

For advocates, sale of goods disputes involve: (1) passing of property — who bears the loss if goods are damaged or destroyed; (2) implied conditions — the seller's liability for goods that do not correspond to description, are not merchantable, or are not fit for purpose; (3) unpaid seller's rights — lien, stoppage in transit, re-sale rights under Sections 47-54 SGA; and (4) the distinction between sale and hire purchase — which determines whether title passed to the buyer (who can then give title to a bona fide purchaser) or remained with the seller/finance company.