Introduction & Types of Goods - The Sale of Goods Act(1930) , Business Law | Business Law - B Com PDF Download

Introduction

Every business operates by buying or selling goods, and in India, such transactions are governed by the Sale of Goods Act, 1930. This Act was introduced as a separate law for the sale of goods, replacing Sections 76 to 123 of the Indian Contract Act, 1872, which previously covered these transactions. These sections were repealed due to their inadequacy in addressing new challenges arising from the rapid increase in commercial transactions during industrialization. As a result, the Sale of Goods Act was enacted, incorporating provisions from the English Sale of Goods Act, 1893. Despite the establishment of this separate law, the Indian Contract Act still applies to contracts related to the sale of goods. However, the Sale of Goods Act does not define certain terms that are defined in the Contract Act. This article will provide an in-depth analysis of the Sale of Goods Act, 1930, examining its key provisions and case laws.

Definition Clause of the Sale of Goods Act, 1930

To grasp the concept of the Sale of Goods Act, 1930, it is essential to start with the definition clause outlined in Section 2 of the Act. This section provides the necessary definitions related to the subject matter. Here are some key clauses from Section 2:

Buyer

• According to Clause 1 of Section 2, the term "buyer" encompasses both a person who actually purchases goods and someone who is willing to do so. However, in the case of Helby v. Mathews (1895), it was clarified that a person is not considered a buyer if an agreement simply grants them the option to purchase the goods without imposing any legal obligation to do so.

Delivery

• Delivery refers to the act of transferring possession of goods voluntarily. There are two types of delivery: actual and constructive. Actual delivery occurs when the buyer receives the physical goods or the key to the location where the goods are stored. Constructive delivery happens when possession is transferred without changing custody or ownership, such as through symbolic delivery or attornment (acknowledging the delivery).

Goods

Clause 7 addresses the concept of "goods," which refers to any movable property that is not classified as money or actionable claims.

The Indian judiciary has provided interpretations regarding what constitutes goods, leading to the following considerations:

• In the case of Bacha F. Guzdar v. CIT (1955), the court deemed company shares as goods.
• Although Rash Behari v. Emperor (1936) ruled that gas and electricity are not goods, Associated Power Co. v. Ram Ratan (1970) recognized electricity as goods.
• The case of State of Maharashtra v. Champalal (1971) determined that standing timber on land, agreed to be severed before sale, constitutes goods.
• In Narayanaapa v. Bhaskar Krishnappa (1966), the interest of partners in partnership assets, including immovable property, was considered movable property and thus goods.
• Sugarcane supplied to a sugar factory was classified as goods in the case of U.P. Coop. Cane Unions Federations v. West U.P. Sugar Mills Assn. (2004).

Conversely, the following items were deemed "not goods" under this Section:

• Mahadeo v. State of Bombay (1959): Goods supplied by a building contractor during construction are not considered goods.
• R.D. Saxena v. Balram Prasad Sharma (2000): Documents entrusted to a lawyer are not classified as goods under this Section.
• Union of India v. Martin Lottery Agencies Ltd. (2009): The sale and purchase of lottery tickets are actionable claims and excluded from the definition of goods.

Specific Goods

• According to Clause 14 of Section 2, specific goods are items that are identified at the moment of sale, as opposed to generic or unascertained goods. When goods are specific, they are clearly distinguished and agreed upon by both parties at the time of the transaction. For instance, selling a car that is already in a person's possession is a sale of specific goods because the item is identified and agreed upon by the buyer and seller at the time of sale.
• In contrast, unascertained goods are those that are not identified at the moment of sale. For example, selling a car from a showroom that has different variants of cars available is a sale of unascertained goods. In this case, the specific car that the buyer will receive is not identified at the time of the sale, as there are multiple options available.

Types/Classification of Goods Under the Sale of Goods Act, 1930

The Sale of Goods Act, 1930 classifies goods into three main categories based on their existence, ownership, and dependency on future events. These classifications are important for determining the rights and obligations of buyers and sellers.

1. Existing Goods Existing goods are those that are physically present and owned or possessed by the seller at the time of the contract. They are further categorized into:

• Specific Goods (Section 2(14)): Goods that are specifically identified and agreed upon at the time of the contract. Example: A specific car, a particular painting, or a uniquely identified machine.
• Ascertained Goods: Goods that become specifically identified after the contract is made (similar to specific goods but identified later). Example: Selecting 10 sacks of rice from a larger lot of 100 sacks after the sale agreement.
• Unascertained Goods: Goods that are not specifically identified or agreed upon at the time of the contract. Example: Buying 50 kg of sugar from a bulk quantity without specifying which part of the lot will be delivered.

2. Future Goods (Section 2(6)): Goods that will be manufactured, produced, or acquired by the seller after the contract is made. The ownership of future goods cannot immediately pass to the buyer but is subject to the fulfillment of the contract. Example: A farmer agrees to sell the wheat crop that will be harvested next month.

3. Contingent Goods (Section 6(2)): Goods whose acquisition by the seller depends on the occurrence of a future uncertain event. Contingent goods are a subset of future goods. Example: A seller agrees to sell goods to a buyer only if a shipment arrives successfully.