Samacheer Kalvi 12th Commerce Notes Chapter 21 The Sale of Goods Act, 1930

Samacheer Kalvi 12th Commerce Notes Chapter 21 The Sale of Goods Act, 1930

→ Sale of goods is one of the most important act under special contract. This act was passed in the year 1930. Contracts for the sale of goods are subjected to general legal principles applicable to all contracts.

→ Contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property (ownership) of the goods to the buyer for a price. The term “ownership” is utmost importance in the sale of goods.

→ The elements are necessary for a contract of sale. Two parties, transfer of property, goods, price includes both sale and “agreement to sell”.

→ The term goods means every kind of movable property other than actionable claim and money. The term goods includes shares, stocks, growing crops, grass things attached to the land or farming part of the land agreed to be cut off from the land before sale.

→ The type of goods covered under the sale of goods act. Existing goods, contingent goods and future goods.

→ Transfer of property (ownership) in goods from the seller to the buyer is the main object of a contract of sale.

→ Condition is a stipulation which is essential to the main purpose of the contract of sale. Warranty is a stipulation which is collateral to the main purpose of contract.

→ A seller is deemed to be an unpaid seller
(a) When the whole of the price has not been paid or
(b) A bill of exchange or other negotiable instrument given to him has been dishonoured. Seller includes not only the actual seller but also an agent of a seller or a consignee.

(i) X purchased a hot water bottle from Y, retail chemist. X asked Y if it would stand boiling water. The chemist told him that the bottle was meant to hold hot water. The bottle burst when water was poured into it and injured his wife. State whether seller is liable for the injury suffered by the buyer and the consequent compensation, give your reasons.

The seller is not responsible for the injury because he already informed that the bottle is hot water bottle X’s wife poured boiled water in the bottle. So she was injured. So there is no need for compensation.

(ii) X asked a car dealer to suggest him car suitable for touring purposes. The dealer suggested a ‘Buggati Car’. Accordingly, X purchased it but found it unsuitable for touring purpose. State whether the car dealer is liable for breach of condition?

Yes, car dealer is responsible for breach of condition because he told “Buggati car” is suitable for touring purpose not for usage.

(iii) X, a dealer sold a plastic catapult to B. While using the catapult in the usual manner, it broke due to the fact that the materials used in its manufacture were unsuitable. As a result,the boy who was using it, blinded in one of his eyes. State whether the seller is liable or not.

The seller is liable. The materials used to manufacture catapult it is not a good quality. So that the boy was blinded in one of his eyes.

(iv) X bought from Y a heap of wheat the weight of which is 1000 kg at the rate of ₹ 8 per kg. and agrees to pay the price on the first day of the next month and the wheat is to be delivered at X’s godown on the following day. A fire broke out and the entire quantity of wheat was destroyed. State whether X is liable to pay the price or not. Why?

X is not liable, before the deliver of the goods were destroyed in Y’s go down. So it is not necessary for X to pay the price.

(v) X bought from Y a heap of wheat (weight 100 kg) at the rate of Rs. 8 per kg. and Y had to put the wheat in bags to deliver it to X. Y filled some bags in X’s presence, but before the remainder could be filled, a fire broke out and the entire quantity of wheat was destroyed. State whether X is liable to pay the price or not. Why?

X is not liable. The reason is non- delivery of the goods by Y. Before fill the wheat in bags, the godown caught fire. So it is not necessary for X to pay the price.

(vi) X bought from Y a heap of wheat at a rate of ? 8 per kg and Y had to weigh the wheat. Before weighing was completed, the wheat was destroyed by fire. State whether X is liable to pay the price or not. Why?
Clues: Students are advised to read thoroughly the implied warranties and conditions for the cases 1 to 3 and rules relating to transfer of ownership for cases 4 to 6.

X is not liable. Before weighing the wheat, the wheat was destroyed by fire. So it is not necessary for X to pay the price.

(a) Find out whether the following transactions can be included under the Contract of Sale:

(i) X agreed to sell 100 shares to Y for ? 10,000.
Contract of sale.

(ii) X agreed to sell his building for ? 1,00,000 to Y.
No

(iii) X agreed to exchange with Y 100 kg of rice valued at Rs. 20 per kg for 200 Kg of wheat valued at ? 12 per kg. and pay the difference in cash.
Contract of sale.

(iv) X agreed to transfer some jewellery to his prospective wife out of love and affection.
No

(v) X agree to buy a painting from an artist
Contract of sale.

(vi) X supplied a piece of cloth to a tailor to stitch a suit for him. The tailor agreed to supply lining materials and buttons.
No

(vii) X agreed to pledge his goods valued at ? 1,00,000 with Y Clues: Students are advised to understand the meaning for goods and the essential elements of contract of sale.
No

(b) Find out whether the following contracts of sale amount to sale or agreement to sell:

(i) X entered into a contract for sale entire crop of rice cultivated in his farm.
Agreement to sell

(ii) A railway administration agreed to sell coal-ash that might accumulated during the period of the contract.
Agreement to sell

(iii) X entered into a contract for sale of some goods in a particular ship to be delivered on the arrival of the ship.
No

(iv) X entered, into a contract for sale of a painting only if Z, its present owner sells it to him.
Agreement to sell

(c) State whether the seller is an unpaid seller or not in the following cases:

(i) X sold some goods to Y for ₹ 10,000. Y paid? 9,900 but failed to pay the balance.
Unpaid seller

(ii) X sold some goods to Y for ₹ 10,000 and received a cheque for the full price as conditional payment. On presentment, the cheque was dishonoured by the bank.
Unpaid seller

(iii) X sold some goods to Y for ₹ 10,000 on a credit of one month. One month has not yet expired.
No

(iv) X sold some goods to Y for ₹ 10,000 on a credit of one month and one month has expired and the price remains unpaid.
Unpaid seller

(v) X sold some goods to Y for ₹ 10,000 on a credit of one month. Y became insolvent during the period of credit.
Unpaid seller

Samacheer Kalvi 12th Commerce Notes

TN Board 12th Commerce Important Questions Chapter 21 The Sale of Goods Act, 1930

TN State Board 12th Commerce Important Questions Chapter 21 The Sale of Goods Act, 1930

Question 1.
What is a contract of sale of goods?
Answer:
Contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property (ownership) of the goods to the buyer for a price. The term “ownership” is utmost importance in the sale of goods.

Question 2.
List down the essential elements of a contract of sale.
Answer:

  1. Two parties
  2. Transfer of property
  3. Goods
  4. Price
  5. Includes both “sale” and agreement to sell.

Samacheer Kalvi TN State Board 12th Commerce Notes Chapter 21 The Sale of Goods Act, 1930

Question 3.
What is meant by goods?
Answer:

  1. The term goods mean every kind of movable property other than actionable claim and money.
  2. The term good includes shares, stocks growing crops, grass, things attached to the land.
  3. Goodwill, trademarks, copyrights, patent rights, etc., are also regarded as goods.

Question 4.
What is a Contingent Goods?
Answer:
Contingent goods are the goods, the acquisition of which by the seller depends upon a contingency. Contingent goods are a part of future goods.

Question 5.
What do you understand by warranty?
Answer:
Warranty represents a stipulation which is collateral to the main purpose of the contract. It is of secondary importance to the contract.

Samacheer Kalvi TN State Board 12th Commerce Notes Chapter 21 The Sale of Goods Act, 1930

Question 6.
Explain the meaning of Agreement to sell.
Answer:

  1. The property (ownership or title) in the goods has to pass at a future time or after the fulfillment of certain conditions specified in the contract.
  2. Where the goods under the agreement to sell are destroyed the loss falls squarely on the seller as the ownership is still vested with the seller even though the possession of the goods is with the buyer.
  3. Where the buyer violates the contract the seller can repossess the goods from the former. He can sue for damages for violation of the contract.
  4. If the buyer becomes insolvent before the payment of the price, the seller can retain the goods if they are under his possession or even he can repossess the goods even if the possession of the goods is transferred to the buyer.

Question 7.
Discuss in detail about existing goods.
Answer:

  1. Existing goods are those owned or possessed by the seller at the time of contract of sale.
  2. Goods possessed even refer to sale by agents or pledgers.
  3. Existing goods may be either specific goods, ascertained goods, generic or unascertained goods.

Samacheer Kalvi TN State Board 12th Commerce Notes Chapter 21 The Sale of Goods Act, 1930

Question 8.
Discuss the implied conditions and warranties in sale of goods contract.
Answer:
The term implied conditions means conditions which can be inferred from or guessed from the context of the contract. Following are the implied conditions.

(i) Conditions as to title:
In the case of sale, seller has a right to sell the goods. The buyer can assume that the seller has a right to sell the goods.

(ii) Conditions as to description:
In a contract of sale by description there is an implied condition that goods supplied should agree with the descriptions made by the seller.

(iii) Sale by sample:
Where goods are sold by showing samples by the seller.
Eg: Food grains. The bulk of goods supplied by the seller should be similar to the sample shown by the seller.

(iv) Conditions as to quality or fitness:
There is no implied condition as to the quality or fitness for any particular purpose of goods.

Question 9.
Discuss in detail the rights of an unpaid seller against the buyer personally.
Answer:
(i) Suit for price:
Where the ownership in the goods has passed to the buyer and the buyer refuses to pay for the goods, the seller can file case against the buyer for the price.

(ii) Suit for damages for non-acceptance:
Where the buyer wrongfully refuses to accept the goods, the seller can sue him for damages for non¬acceptance of the goods.

(iii) Suit for cancellation of the contract before the due date:
Where the buyer cancels the contract before the date of delivery, the seller may either treat the contract as continuing or wait till the due date or he can file a case against buyer immediately.

(iv) Suit for interest:
Where there is a specific agreement between buyer and seller regarding charging interest on the price, the seller can recover interest from the buyer from the due date of contract till the date of payment of purchase price.

Samacheer Kalvi TN State Board 12th Commerce Notes Chapter 21 The Sale of Goods Act, 1930

Question 10.
Explain in detail the elements of Contract of sale.
Answer:
Following essential elements are necessary for a contract of sale.
(i) Two parties:
A contract of sale involves two parties the seller and the buyer. Both are the two different persons. If a person buys his own good there is no sale.

(ii) Transfer of property:
To constitute sale, the seller must transfer or agree to transfer the ownership in the good to the buyer. A mere transfer of possession does not amount to sale.

(iii) Goods:
The subject matter of contract of sale must be goods. The term “goods” includes every kind of movable property, stocks and shares, growing crops etc. Goodwill, trademarks, copyrights, patent rights etc, are all also regarded as goods.

(iv) Price:
The monetary consideration for the goods sold is called price. If goods are sold partly for goods and partly for money, the contract is one of sale.

(v) Includes both “sale” and agreement to sell:
The term contract of sale includes both sale and agreement to sell. If the property in goods is transferred immediately to the buyer, it is called a sale. If the transfer of property takes place at a future date or on fulfilment of certain conditions it is called an agreement to sell.

Question 11.
Distinguish between sale and agreement to sell.
Answer:

TN State Board 12th Commerce Important Questions Chapter 21 The Sale of Goods Act, 1930 1

TN State Board 12th Commerce Important Questions Chapter 21 The Sale of Goods Act, 1930 2

Samacheer Kalvi TN State Board 12th Commerce Notes Chapter 21 The Sale of Goods Act, 1930

Question 12.
Classify goods under the Sale of Goods Act.
Answer:
(i) Existing goods:
Existing goods are those owned or possessed by the seller at the time of contract of sale. Goods possessed even refer to sale by agents or by pledgers. Existing goods may be either specific goods, ascertained goods and generic or unascertained goods.

(ii) Future goods:
These are goods which a seller does not possess at the time of contract of sale but which will be manufactured or produced or acquired by him after entering into the contract of sale agreement.

(iii) Contingent goods:
Contingent goods are the goods, the acquisition of which by the seller depends upon a contingency, (an event which may or may not happen) Contingent goods are a part of future goods.

Question 13.
Distinguish between Conditions and Warranty.
Answer:

TN State Board 12th Commerce Important Questions Chapter 21 The Sale of Goods Act, 1930 3

Samacheer Kalvi TN State Board 12th Commerce Notes Chapter 21 The Sale of Goods Act, 1930

Question 14.
Discuss in detail the rights of an unpaid seller against the goods.
Answer:
Where the property in the goods has passed to the buyer.
(a) Right to lien:
An unpaid seller has a right to retain the goods till he receives the price. But to exercise this lien,
(i) He must be in possession of goods.
(ii) The goods must have been sold without any stipulation as to credit or where goods have been sold on credit the terms of credit must have expired.

Circumstances under which the rights of lien is lost:
(i) When he delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer without reserving the right of disposal of the goods.
(ii) When the buyer or his agent lawfully obtain possession of them.
(iii) When the seller waives his right of lien.

(b) Right of stoppage in transit:
Goods must be neither with the seller nor with the buyer but should be in the hands of a carrier. Further the buyer must have become an unsolvant.

Termination of right to stoppage:
The right to stop the goods comes to an end.
(i) When the goods are delivered to the buyer or his agent.
(ii) When, on arrival of the goods at the appointed destination his agent, that he is holding the goods on his behalf.

Right to resale:
The unpaid seller can resell the goods.
(i) Where they are of a perishable in nature.
(ii) Where the seller has expressly reserved the right of resale in the contract itself.

Samacheer Kalvi TN State Board 12th Commerce Notes Chapter 21 The Sale of Goods Act, 1930

Choose the correct answer:

Question 1.
Sale of Goods Act was passed in the year:
(a) 1940
(b) 1997
(c) 1930
(d) 1960
Answer:
(c) 1930

Question 2.
Which of the below constitutes the essential element of contract of sale?
(a) Two parties
(b) Transfer of property
(c) Price
(d) All of the above
Answer:
(d) All of the above

Question 3.
Which of the below is not a good?
(a) Stocks
(b) Dividend due
(c) Crops
(d) water
Answer:
(b) Dividend due

Samacheer Kalvi TN State Board 12th Commerce Notes Chapter 21 The Sale of Goods Act, 1930

Question 4.
In case of the sale, the _________ has the right to sell.
(a) Buyer
(b) Seller
(c) Hirer
(d) Consignee
Answer:
(b) Seller

Question 5.
The property in the goods means the:
(a) Possession of goods
(b) Custody of goods
(c) Ownership of goods
(d) Both (a) and (b)
Answer:
(c) Ownership of goods

Question 6.
Specific goods denote goods identified upon the time of _______ of sale.
(a) Agreement
(b) Contract
(c) Order
(d) Obligation
Answer:
(b) Contract.

Samacheer Kalvi TN State Board 12th Commerce Notes Chapter 21 The Sale of Goods Act, 1930

Question 7.
In which of the following types, the ownership is immediately transferred to buyer?
(a) When goods are ascertained
(b) When goods are appropriate
(c) Delivery to the carrier
(d) Sale or return basis
Answer:
(c) Delivery to the carrier

Question 8.
__________ is a stipulation which is collateral to main purpose of contract.
(a) Warranty
(b) Condition
(c) Right
(d) Agreement
Answer:
(a) Warranty

Question 9.
Unpaid seller can exercise his right of lien over the goods, where he is in possession of the goods as:
(a) Owner of goods
(b) Agent of buyer
(c) Bailee for buyer
(d) All of these
Answer:
(d) All of these

Samacheer Kalvi TN State Board 12th Commerce Notes Chapter 21 The Sale of Goods Act, 1930

Question 10.
The unpaid seller can exercise his right of stoppage of goods in transit where the buyer:
(a) Becomes insolvent
(b) Refuses to pay price
(c) Payment of price
(d) Both (b) and (c)
Answer:
(a) Becomes insolvent

TN Board 12th Commerce Important Questions