This article has been written by Neha Mallik, from the Vivekananda Institute of Professional Studies, New Delhi. This article highlights the important terms in the definition clause of the Sale of Goods Act, 1930.
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The sale or purchase of goods is the most recurring transaction in almost every kind of business. Every now and then, businessmen get involved in the sale & purchase of goods and enter into the contract of sale. These contracts are governed by the Sale of Goods Act,1930. It is important for every individual, be it a legal professional or a common man who deals in the transaction of sales on a regular basis, to have an understanding of the important terms in the Sale of Goods Act,1930. In this article, we will discuss some common yet important terms in the Sale of Goods Act,1930. Give a quick reading to this article to have comprehension about the terms related sale of goods.
Important Terms: Sale of Goods Act, 1930
Buyer and Seller
Buyer [Section 2(1)]
The definition of the ‘buyer’ is stated under Section 2(1) of the Act. It defines Buyer as a person who either buys or agrees to buy certain commodities. In the contract of sale, the Buyer is one of the parties to the contract.
Seller [Section 2(13)]
On the contrary, the Act defines ‘seller’ as a person who either sells or agrees to sell particular commodities under Section 2(13). The Seller becomes the other party to the contract. The existence of both the parties i.e. the Buyer and the Seller must be there to enter into a contract of sale.
The conjoint reading of the above two sections give us a conclusion that to be recognized as a Buyer or Seller under the Act, it is not necessary to actually transfer the goods. Even if you agree or promise to buy or sell the goods you would be considered and identified as a Buyer or Seller as per the Act.
Goods [Section 2(7)]
The dictionary meaning of the term goods is merchandise or possession. The term “Goods” is one of the crucial clauses in the Contract of Sale.
According to Section 2(7) of the Act, “goods” include-
- Any movable property except actionable claims and money;
- Stock and shares;
- The growing crops, standing timber, grass;
- The things that are attached or forming part of the land which is agreed to be severed from the land before the sale. It has been held in the State of Maharashtra v. Champalal Kishanlal Mohta that things which are attached to land are the subject matter of the contract of sale if they are severed before the sale.
For eg: A resort was offering stay along with food at a consolidated charge. If customers do not take food, the rebate on food is not allowed as the supply of food does not come under the definition of “goods” as per the Act.
It is concluded from the above definition that the Act deals with the sale of goods i.e. movable property only. On the other hand sale of immovable property is governed by the Transfer of Property Act,1882. It is noted that the actionable claims and money are excluded from the ambit of the definition. Actionable claims are the claim or debt for which legal action can be taken and can be enforced. For eg: recovery of refund is an actionable claim and is not included in the purview of the above definition. Further, the goods can be classified under several categories. Let’s see below.
Types of goods
The classification of goods in terms of business law can be quite ticklish to understand. Section 6 of the Act describes the types of goods. The goods are classified into existing goods, future goods, and contingent goods. Let’s study all three briefly.
If the goods are physically present at the time of contract and are in the legal possession or owned by the seller during the formulation of the contract of sale is referred to as existing goods. The existing goods are further classified into:
- Specific Goods [Section 2(14)]: Referring to Section 2(14) of the Act, the goods that are specifically identified and agreed upon to be transferred at the time of the formation of the contract are called specific goods.
Illustration- ‘A’ wants to sell his HP Laptop of a particular model number and advertises the same. ‘B’ agrees to purchase the laptop. Both entered into the contract of sale. Here the laptop is a specific good.
- Ascertained Goods: The Act does not define the ascertained goods but is conferred by judicial interpretation. The goods are said to be ascertained wherein some or whole part of goods is identified and set aside for the purpose of the contract. Such goods are specifically earmarked for sale.
- Unascertained Goods: The goods that have not been specifically identified to be sold are known as unascertained goods. For example, from 1000 quintals of wheat, the seller agreed to sell 500 quintals. Here the goods are not specified. The seller has the liberty to choose from the bulk.
Future Goods [Section 2(6)]
The goods which are not in existence and to be manufactured or produced or acquired by the seller after entering into the contract of sales are considered as future goods. It must be noted that there can only be an agreement to sell contracts as there can be no actual sale in respect of future goods. This is defined under Section 2(6) of the Sale of Goods Act.
Illustration – Amit is a manufacturer of chairs. Shyam ordered Amit to manufacture 200 units of chairs of specific design and they made an agreement for the same. This is the sale with respect to future goods.
In the case of Union of India v. K.G. Khosla & Co. Ltd, goods were manufactured according to the specification mentioned in the contract. Therefore, the goods are “future goods” within the meaning of Section 2(6) of the Act.
Contingent Goods [Section 6(2)]
According to Section 6(2), the sale of certain goods which depend upon happening or non-happening of certain events is termed as contingent goods. For instance, ‘A’ has agreed to sell ‘B’ certain goods at a particular date if the former receives the goods from the manufacturer before the said date. This agreement is based on contingencies, hence such goods are called contingent goods.
Delivery [Section 2(2)]
By delivery of goods we mean, the voluntary transfer of the possession of goods from one person to the other. The transfer of possession is the end result of the whole delivery process. It is not necessary that the person to whom the goods are delivered is a buyer, he can be any other person authorized by the buyer. The definition of the term delivery is defined under Section 2(2) of the Act.
Kinds of Delivery
There are different forms of delivery of goods according to the Sale of Goods Act, 1930:
Actual delivery takes place when the goods are physically handed over to the buyer or any person authorized by him. Say for example A, the seller of furniture handed over the ordered furniture to B, the case is of actual delivery of the goods.
In the case of constructive delivery, the transfer of goods can be done without a change in the possession or custody of goods. Acknowledgment and attornment can be called constructive delivery.
Constructive delivery can be effected in the following ways:
- Wherein the seller agrees to hold the sold goods as a bailee.
- Wherein the buyer who is in the actual possession of goods as a bailee of the seller holds the goods as his own after the sale.
- Where a third party like transporter or agent, agrees to hold the goods for the buyer.
Symbolic delivery is made wherein the goods are heavy and bulky and it is difficult to hand over the goods to the buyer physically. In this situation, the delivery is made by indicating or giving a symbol that the goods are under the possession of the buyer. For example, the delivery of the keys of the warehouse where the goods are kept is considered to be the symbolic delivery. A document like a bill of lading must be given to the buyer to make him entitled to hold the delivered goods.
The document of the Title to Goods [Section 2(4)]
As per Section 2(4), we can confer that the Document of the title to goods includes a bill of lading, dock-warrant, warehouse keeper’s certificate, railway receipt, multimodal transport document, warrant or order for the delivery of goods. It also includes any other documents that are used in the usual course of business proving the possession or control of goods or which proves the authority of the possessor to transfer or receive the goods. The document is a very imperative document for taking any legal action without which one cannot proceed with the proceeding in the court.
Fault [Section 2(5)]
Any wrongful act or default committed is considered as “fault” under Section 2(5) of the Sale of Goods Act, 1930.
Mercantile Agent [Section 2(9)]
As per the definition given under Section 2(9) of the Act, Mercantile Agent is a person who is having the authority in the customary course of business either to sell or consign the goods under the given contract. The Agent is authorized to act on behalf of the buyer or seller. An agent can also raise money on the security of the goods if authorized. The example includes agents, auctioneers, brokers, dealers, etc.
Price [Section 2(10)]
According to Section 2(10) of the Act, The consideration for the sale of goods is called price. Price is the money that is paid or promised to be paid by the buyer or any person authorized by the buyer to the seller. Below are the different modes by which price can be determined:
- Parties mutually decide the price of the goods in the contract of sale. In Aluminium Industries Ltd. v. Minerals and Metals Trading, it is observed that the price prevailing on the date of delivery will be the price to be paid by the buyer. Subsequently, the seller issued a delivery note for the goods but without any valid reason delayed the delivery. The seller demanded an increased price which occurred due to delayed delivery. It was held that the seller was at fault thus he could not compel the buyer to pay an increased price.
- It may be left to be fixed in the future.
- It may be determined in the course of dealing between the parties.
Property [Section 2(11)]
According to Section 2(11) of the Act, property generally means title or the ownership rights of the goods. In the process of a sale, there is a transfer of ownership or we can say the transfer of property from one party to the other.
Quality of Goods [Section 2(12)]
Section 2(12) of the said Act gives the definition of “quality of goods”. The quality includes the state or condition in which the goods are expected or promised to be delivered. It is one of the important clauses to be included in the Contract of Sale. If the quality of the delivered goods has not complied with the contract then it is considered to be the breach of the Contract.
Insolvent [Section 2(8)]
A person who ceases to pay his debts in the normal course of business, or is unable to pay even his due debts in the eyes of law is declared as insolvent. Section 2(8) states the definition of the term “insolvent”. The law gives certain rights and duties to an insolvent person.
Through the course of the whole article, I have tried to throw light on the important terms of the definition clause of the Sale of Goods Act, 1930. The above discussion would surely help to make you understand the simple yet important terms in the Act. To conclude, it can be observed certain terms in this article lays down a paramount structure that is necessary to be incorporated in the contract of sale like a buyer, seller, mode of delivery, quality of goods, etc.
- Sale of Goods Act, 1930
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