The Sale of Goods Act, 1930 for CA Foundation

The Sale of Goods Act, 1930: what a contract of sale is, conditions and warranties, when ownership and risk pass, title by non-owners, the unpaid seller's rights and auction sales.

Business LawsPaper 213 MCQs2 lessons2 flashcards3 memory tricks

Practise The Sale of Goods Act, 1930 free

What you'll learn

  1. Contract of sale, conditions and warranties
    Identify a contract of sale and tell a condition from a warranty.
  2. Ownership, risk, title and the unpaid seller
    Decide when property and risk pass, and apply the unpaid seller's rights.

Key formulas

RiskPasses with property (res perit domino, s.26)
TitleNemo dat quod non habet (s.27), with exceptions
Unpaid seller's rightsLien (s.47), stoppage in transit (s.50), resale (s.54)
AuctionComplete on the fall of the hammer (s.64)

Concepts explained

Conditions, warranties and caveat emptor

A condition is essential to the main purpose of the contract (breach: reject the goods); a warranty is collateral (breach: damages only). The buyer must generally take care (caveat emptor).

What it means

  • Implied conditions: title (s.14), description (s.15), quality or fitness when the buyer relies on the seller's skill (s.16(1)), merchantability (s.16(2)), sample (s.17), wholesomeness for food.
  • Implied warranties: quiet possession, freedom from encumbrances, disclosure of dangerous nature.
  • A buyer may treat a breach of condition as a breach of warranty (s.13), and must do so after accepting the goods.
  • Exceptions to caveat emptor: fitness for purpose relied on, merchantable quality, sample, usage of trade, fraud.
Example 1: Hot-water bottle
  • Bought from a chemist for heating; it bursts

Answer: Breach of condition of fitness (buyer relied on seller's skill)

Example 2: Small defect after acceptance
  • Buyer has used the goods for months

Answer: Can only claim damages (treated as warranty)

Related terms

  • Caveat venditor: let the seller beware (exceptions to caveat emptor)
  • Merchantable quality: fit to be sold under that description

Exam tip: Remember the remedy: condition → reject; warranty → damages.

Passing of property, risk and title

When ownership passes decides who bears the loss: risk passes with property. The rules depend on whether the goods are specific or unascertained.

What it means

  • Specific goods in a deliverable state: property passes when the contract is made (s.20).
  • Unascertained goods: no property passes until they are ascertained (s.18), then on appropriation (s.23).
  • Goods on approval: property passes on approval, an act of adoption, or keeping beyond the time allowed (s.24).
  • Nemo dat (s.27): no better title than the seller's; exceptions include a mercantile agent, joint owner in sole possession, voidable contract not yet rescinded, seller or buyer in possession.
Example 1: Destroyed before delivery
  • Specific scooter sold, destroyed before delivery without seller's fault

Answer: Buyer bears the loss (property and risk had passed)

Example 2: Stolen goods
  • Thief sells a phone to an honest buyer

Answer: Buyer gets no title; the owner can recover it

Related terms

  • Res perit domino: the thing perishes for its owner
  • Delivery types: actual, symbolic, constructive

Exam tip: First ask: specific or unascertained? That answers when property (and so risk) passes.

Rights of an unpaid seller

A seller who hasn't been paid in full (or whose cheque has bounced) has rights against the goods as well as against the buyer personally.

What it means

  • Lien (s.47): keep the goods while in possession, until paid.
  • Stoppage in transit (s.50): only when the buyer is insolvent and the goods are with a carrier.
  • Resale (s.54): for perishable goods, or after notice if the buyer still doesn't pay.
  • Against the buyer: suit for price, damages for non-acceptance, interest.
Example 1: Bounced cheque
  • Buyer's cheque is dishonoured; goods still in seller's shop

Answer: Seller is unpaid and can exercise lien

Example 2: Insolvent buyer
  • Goods on a truck; buyer declared insolvent

Answer: Seller can stop them in transit

Related terms

  • Auction sale: complete on the fall of the hammer; reserve price may be set
  • Part payment: seller is still an unpaid seller

Exam tip: Possession → lien. In transit + insolvent buyer → stoppage.

Memory tricks

Condition vs warrantyCondition is the engine of the car; warranty is the music system. Engine fails: return the car. Music fails: ask for money.

Breach of condition: reject goods; breach of warranty: damages only.

Unpaid seller's rights'LSR': Lien while it's in your shop, Stop it on the truck, Resell if still unpaid.

Lien (s.47), stoppage in transit (s.50), resale (s.54).

Res perit dominoMango crate bought and set aside for you but left at the shop overnight: if it rots, it rots for you, the owner.

Risk passes with property (s.26).

Try 3 CA Foundation-style questions

Q1. Which of the following is NOT 'goods' under the Sale of Goods Act?

  1. Stock and shares
  2. Actionable claims and money
  3. Growing crops agreed to be severed before sale
  4. Goodwill
Show answer

Answer: (2) Actionable claims and money

Goods means every kind of movable property other than actionable claims and money; it includes stock and shares, growing crops and grass.

Q2. A stipulation essential to the main purpose of a contract of sale is a

  1. warranty
  2. guarantee
  3. condition
  4. representation
Show answer

Answer: (3) condition

Section 12: a condition is essential to the main purpose; its breach lets the buyer reject the goods.

Q3. The rule 'nemo dat quod non habet' means

  1. no one can give a better title than he himself has
  2. let the buyer beware
  3. the thing perishes for its owner
  4. the seller must disclose defects
Show answer

Answer: (1) no one can give a better title than he himself has

Section 27: a buyer from a non-owner gets no better title than the seller had, subject to exceptions such as a mercantile agent or a seller in possession.

Practise all 13 questions Free · explanations for every option · see where you go wrong

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