Sale of Goods Act, 1930: Formation, Conditions and Warranties, Transfer of Ownership, Performance and Unpaid Seller
This domain tests how a sale contract is formed, how property and risk pass, and what an unpaid seller can do.
Formation and core rules
- Section 4: a contract of sale is a contract whereby the seller transfers or agrees to transfer property in goods to the buyer for a price. A sale transfers property immediately; an agreement to sell is future or conditional.
- Goods may be existing, future or contingent (s6). Property in future goods passes only when goods are appropriated to the contract.
- Condition vs warranty (s12): a condition is essential to the main purpose; its breach gives a right to repudiate. A warranty is collateral; its breach gives damages only. Under s13, the buyer may waive a condition or treat it as a warranty.
- Implied conditions include title (s14(a)), sale by description (s15), merchantable quality (s16(1)), fitness for purpose (s16(2)) and usage of trade (s16(3)). Implied warranties include quiet possession and freedom from encumbrances.
- Caveat emptor (s16) applies, subject to exceptions such as reliance on the seller's skill and merchantable quality.
- Property in specific goods in a deliverable state passes when the contract is made (s20), unless the parties intend otherwise. Risk prima facie passes with property (s25), not with possession.
- An unpaid seller (s45) has possessory rights: lien (s47), stoppage in transit (s50) and resale (s54); and personal rights against the buyer for price and damages (ss55–61).
Worked example
A sells a specific machine in a deliverable state to B; the price is payable next week and the machine remains with A. Under s20, property passes when the contract is made if the contract is unconditional. If the machine is destroyed by fire, B generally bears the loss because risk follows property (s25).
Traps
Do not treat a breach of condition as automatically terminating the contract; the buyer may instead treat it as a warranty. An unpaid seller's lien is lost if possession is parted with. An agreement to sell is not a sale.