Indian Sale of Goods Act 1930 Essay

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Indian Sale of Goods Act 1930

It is a Mercantile Law. The Sale of Goods Act is a kind of Indian Contract Act. It came into existence on 1 July 1930. It is a contract whereby the seller transfers or agrees to transfer the property in the goods to the buyer for prize. A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. There may be a contract of sale between one part-owner and another.


1. Buyer A person who buys or agrees to buy goods.
2. Seller A person who sells or agrees to sell goods.
3. Goods Every kind of movable property other than actionable things and money. Sale of Goods Act is one of very old mercantile law. Sale of Goods is one of the special types of Contract. Initially, this was part of Indian Contract Act itself in chapter VII (sections 76 to 123). Later these sections in Contract Act were deleted, and separate Sale of Goods Act was passed in 1930. The Sale of Goods Act is complimentary to Contract Act. Basic provisions of Contract Act apply to contract of Sale of Goods also.

Basic requirements of contract i.e. offer and acceptance, legally enforceable agreement, mutual consent, parties competent to contract, free consent, lawful object, consideration etc. apply to contract of Sale of Goods also. Contract of Sale – A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. There may be a contract of sale between one part-owner and another. [section 4(1)]. A contract of sale may be absolute or conditional. [section 4(2)]. The law relating to sale of goods is contained in the Sale of Goods Act, 1930. It has to be read as part of the Indian Contract Act, 1872 [Sections 2(5) and (3)].

Contract of Sale of Goods
According to Section 4, a contract of sale of goods is a contract whereby the seller:
(i) transfers or agrees to transfer the property in goods
(ii) to the buyer,
(iii) for a money consideration called the price.
It shows that the expression “contract of sale” includes both a sale where the seller transfers the ownership of the goods to the buyer, and an agreement to sell where the ownership of goods is to be transferred at a future time or subject to some conditions to be fulfilled later on. The following are thus the essentials of a contract of sale of goods:

(i) Bilateral contract: It is a bilateral contract because the property in good has to pass from one party to another. A person cannot buy the goods himself.

(ii) Transfer of property: The object of a contract of sale must be the transfer of property (meaning ownership) in goods from one person to another.

(iii) Goods: The subject matter must be some goods.

(iv) Price or money consideration: The goods must be sold for some price, where the goods are exchanged for goods it is barter, not sale.

(v) All essential elements of a valid contract must be present in a contract of sale. features
The Act deals with provisions related to the contract of sale of goods The Act deals with provisions of ‘sale’ but not of ‘mortgage’ or ‘pledge’ which come under the purview of Transfer of Property Act, 1882. The Act deals with ‘goods’ but not of all movable goods (ex: actionable claims, money etc.)

SALE:- the exchange of a commodity for money; the action of selling something. In general, a transaction between two parties where the buyer receives goods (tangible or intangible), services and/or assets in exchange for money. 2) An agreement between a buyer and seller on the price of a security. The activity or business of selling products or services

GOODS:- a good is a product that can be used to satisfy some desire or need. , a good is a material that satisfies human wants and provides utility, for example, to a consumer making a purchase.

Condition and warranty.—

(1) A stipulation in a contract of sale with reference to goods which are the subject thereof may be a condition or a warranty.

(2) A condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to a right to treat the contract as repudiated.

(3) A warranty is a stipulation collateral to the main purpose of the contract, the breach of which gives rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated.

(4) Whether a stipulation in a contract of sale is a condition or a warranty depends in each case on the construction of the contract. A stipulation may be a condition, though called a warranty in the contract.

Unpaid seller” defined.—

(1) The seller of goods is deemed to be an “unpaid seller” within the meaning of this Act— (a) when the whole of the price has not been paid or tendered; (b) when a bill of exchange or other negotiable instrument has been received as conditional payment, and the condition on which it was received has not been fulfilled by reason of the dishonour of the instrument or otherwise. (2) In this Chapter, the term “seller” includes any person who is in the position of a seller, as, for instance, an agent of the seller to whom the bill of lading has been endorsed, or a consignor or agent who has himself paid, or is directly responsible for, the price.

Unpaid seller’s rights.—

(1) Subject to the provisions of this Act and of any law for the time being in force, notwithstanding that the property in the goods may have passed to the buyer, the unpaid seller of goods, as such, has by implication of law— (a) a lien on the goods for the price while he is in possession of them; (b) in case of the insolvency of the buyer a right of stopping the goods in transit after he has parted with the possession of them; (c) a right of re-sale as limited by this Act.

(2) Where the property in goods has not passed to the buyer, the unpaid seller has, in addition to his other remedies, a right of withholding delivery similar to and co-extensive with his rights of lien and stoppage in transit where the property has passed to the buyer.

Negotiable Instruments :-

The word “Negotiable” means transferable by delivery and the word instruments means written documents. It entitles a person to a certain sum of money. In simple words we can say it is a written document which is transferable from one person to another by delivery.

According to contract act it is defined as , “A negotiable instrument means a promissory note, bill of exchange or cheque payable by order or bearer.”

Example :- Cheques, Bill of Exchange and Promissory Notes are the important examples of negotiable instruments.

Characteristics Of Negotiable Instruments :-

Following are the important characteristics of negotiable instruments :

1. In Writing :-
It is the basic condition of the negotiable instrument that it is always in writing. It can not be verbal.

2. Unconditional :-
It is an unconditional instrument if any condition is attached then it can not be called negotiable instrument.

3. Transferable :-
It can easily transferable from one person to another. In these instruments right of ownership passes either by delivery or by endorsement.

4. Payable On Demand :-
The amount of the instrument is payable on demand or at any predetermination future time.

5. Payable In Money :-
The amount must be written on the instrument and it is always payable in terms of money.

6. Payable To The Bearer :-
The amount written on it is payable to the bearer or to a specified person.

7. Payment of Debt :-
It can be very easily used for the payment of debt. It is very simple and convenient method of payment.

8. Right of Recovery :-
A cheque or Note gives the right to the creditor to recover the written amount from the debtor. He can recover this amount by himself or he can transfer this right to another.

9. Better Title :-
If there is a defect in the title of the previous holder it does not affect the holder in due course. So it is abetter little than others.

10. Exception of General Law :-
In case of transfer of property the general concept of law is that “No body can transfer a better title than that of his own.”

But in case of instrument this law does not apply. A negotiable instrument even got in good faith from thief is better title.

11. Specified Amount :-
It is also a characteristic of negotiable instrument that specified and definite amount is written on the instrument.

“Holder”.—The “holder” of a promissory note, bill of exchange or cheque means any person entitled in his own name to the possession thereof and to receive or recover the amount due thereon from the parties thereto. Where the note, bill or cheque is lost or destroyed, its holder is the person so entitled at the time of such loss or destruction.

“Holder in due course”.—“Holder in due course” means any person who for consideration became the possessor of a promissory note, bill of exchange or cheque if payable to bearer, or the payee or indorsee thereof, if 1[payable to order], before the amount mentioned in it became payable, and without having sufficient cause to believe that any defect existed in the title of the person from whom he derived his title.

. Negotiation by endorsement
Subject to the provisions of section 58, a promissory note, bill of exchange or cheque 18[payable to order], is negotiable by the holder by endorsement and delivery thereof.

Crossing of cheques
A crossed cheque is a cheque that has been marked to specify an instruction about the way it is to be redeemed. A common instruction is to specify that it must be deposited directly into an account with a bank and not immediately cashed by a bank over the counter.

What is Crossing of Cheque ?
A cheque is a negotiable instrument. During the process of circulation, a cheque may be lost, stolen or the signature of payee may be done by some other person for endorsing it. Under these circumstances the cheque may go into wrong hands.Crossing is a popular device for protecting the drawer and payee of a cheque. Both bearer and order cheques can be crossed. Crossing prevents fraud and wrong payments. Crossing of a cheque means “Drawing Two Parallel Lines” across the face of the cheque. Thus, crossing is necessary in order to have safety. Crossed cheques must de presented through the bank only because they are not paid at the counter.


a cheque which the bank will not pay because there is not enough money in the account to pay it

Companies Act 1956

The Companies Act 1956 is an Act of the Parliament of India, enacted in 1956, which enabled companies to be formed by registration, and set out the responsibilities of companies, their directors and secretaries.[1] The Companies Act 1956 is administered by the Government of India through the Ministry of Corporate Affairs and the Offices of Registrar of Companies, Official Liquidators, Public Trustee, Company Law Board, Director of Inspection, etc. The Registrar of Companies (ROC) handles incorporation of new companies and the administration of running companies.

Companies Act

In India, the Companies Act, 1956, is the most important piece of legislation that empowers the Central Government to regulate the formation, financing, functioning and winding up of companies. The Act contains the mechanism regarding organisational, financial, managerial and all the relevant aspects of a company. It empowers the Central Government to inspect the books of accounts of a company, to direct special audit, to order investigation into the affairs of a company and to launch prosecution for violation of the Act.

These inspections are designed to find out whether the companies conduct their affairs in accordance with the provisions of the Act, whether any unfair practices prejudicial to the public interest are being resorted to by any company or a group of companies and to examine whether there is any mismanagement which may adversely affect any interest of the shareholders, creditors, employees and others.

Following are the main characteristics of a company

1. Legal Entity
A company is an artificial person created by law. So, it has a separate legal entity from its members. It can hold and deal with any type of property of which it is owner in any way like, can enter into contracts, open bank account in its own name, sue and be sued in its name and capacity.

2. Perpetual Succession
Joint stock company is a corporate body. It acquires a separate legal personality difference from its member with a common seal. It does not depend upon the existence of its members. It means company is not at all affected by the death, lunacy or bankruptcy of its members or shareholders. The shareholders may come or go but the company goes on forever. Only law can terminate its existence.

3. Limited Liability
The liabilities of shareholders of the company is limited up to their capital investment only. The liability of the shareholders in the public limited company is limited to the extent of the amount of share, they have subscribed. The shareholders are not liable for the payment of excess claim of the creditors even if capital of the company becomes insufficient.

4. Common Seal
However, a company being artificial person, it can not sign on documents like natural person. Therefore, a common seal is used as a substitute of signature. The common seal affixed on all documents of the company.

5. Transferability Of Share Capital
The shares of a company are freely transferable from one person to another person except in case of private companies.

6. Separation Of Ownership And Management
Every member or shareholder, who is real owner of the company can not take active part in day-to-day management of the company. It is managed and controlled by a board of directors.

7. Maintenance Of Books Of Accounts
A company has to keep and maintain a prescribed set of accounting books and any failure in this regard attracts penalties.

8. Audit Of Account And Publication Of Financial Statements
It is compulsory for each and every company to get its accounts to be audited. A joint stock company has to publish its financial statement at the end of every fiscal year.

Types Of Companies
There are different types of company, which can be classified on the basis of formation, liability, ownership, domicile and control.

1. Types Of Companies On The Basis Of Formation Or Incorporation

a. Chartered Companies
Companies which are incorporated under special charter or proclamation issued by the head of state, are known as chartered companies. The Bank Of England, The East India Company, Chartered Bank etc. are the examples of chartered companies.

b. Statutory Companies
Companies which are formed or incorporated by a special act of parliament, are known as statutory companies. The activities of such companies are governed by their respective acts and are not required to have any Memorandum or Articles Of Association.

c. Registered Companies
Registered companies are those companies which are formed by registration under the Company Act. Registered companies may be divided into two categories.

* Private Company
A company is said to be a private company which by its Memorandum of Association restricts the right of its members to transfer shares, limits the number of its members and does not invite the public to subscribe its shares or debentures. *

Public Company
A company, which is not private, is known as public company. It needs minimum seven persons for its registration and maximum to the limit of its registered capital. There is no restriction on issue or transfer of its shares and this type of company can invite the public to purchase its shares and debentures.

2. Types Of Companies On The Basis Of Liability
Registered companies are divided into two types, namely, companies having limited liability and companies having unlimited liability.

a. Companies Having Limited Liability
This liability can be limited in two ways:
* Liability Limited By Shares
These are those companies in which the capital is divided into shares and liability of members (share holders) is limited to the extent of face value of shares held by them. This is the most popular class of company.

* Liability Limited By Guarantee
These are such companies where shareholders promise to pay a fixed amount to meet the liabilities of the company in the case of liquidation.

b. Companies Having Unlimited Liability
A company not having any limit on the liability of its members as in the case of a partnership or sole trading concern is an unlimited company. If such a company goes into liquidation, the members can be called upon to pay an unlimited amount even from their private properties to meet the claim of the creditors of the company.

3. Types Of Companies On The Basis Of Ownership

a. Government Companies
A government company is a company in which at least 51% of the paid up capital has been subscribed by the government.

b. Non-government Companies
If the government does not subscribe a minimum 51% of the paid up capital, the company will be a non-government company.

4. Types Of Companies On The Basis Of Domicile

a. National Companies
A company, which is registered in a country by restricting its area of operations within the national boundary of such country is known as a national company.

b. Foreign Companies
A foreign company is a company having business in a country, but not registered in that country.

c. Multinational Companies
Multinational companies have their presence and business in two or more countries. In other words, a company, which carries on business activities in more than one country, is known as multinational company.

5. Types Of Companies On The Basis Of Control

a. Holding Companies
A holding company is a company, which holds all, or majority of the share capital in one or more companies so as to have a controlling interest in such companies.

b. Subsidiary Company
A company, which operates its business under the control of another company (i.e holding company), is known as a subsidiary company.

Memorandum of association
The memorandum of association of company, often simply called the memorandum (and then often capitalised as an abbreviation for the official name, which is a proper noun and usually includes other words), is the document that governs the relationship between the company and the outside. It is one of the documents required to incorporate a company in the United Kingdom,[1] Ireland, India, Bangladesh, Pakistan and Sri Lanka, and is also used in many of the common law jurisdictions of the Commonwealth. A Memorandum of Association (MOA) is a legal document prepared in the formation and registration process of a limited liability company to define its relationship with shareholders. The MOA is accessible to the public and describes the company’s name, physical address of registered office, names of shareholders and the distribution of shares.

Articles of association
In corporate governance, a company’s articles of association (called articles of incorporation in some jurisdictions) is a document which, along with the memorandum of association (in cases where the memorandum exists) form the company’s constitution, defines the responsibilities of the directors, the kind of business to be undertaken, and the means by which the shareholders exert control over the board of directors.

DEFINITION of ‘Articles Of Association’
A document that specifies the regulations for a company’s operations. The articles of association define the company’s purpose and lays out how tasks are to be accomplished within the organization, including the process for appointing directors and how financial records will be handled.

Free Indian Sale of Goods Act 1930 Essay Sample


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  • Date: 3 June 2016

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