L E G A L A S P E C T S O F B U S I N E S S 3

LEGAL ASPECTS OF BUSINESS.

SESSION-3

THE SALE OF GOODS ACT,1930.INTRODUCTION:TILL, 1930, TRANSACTIONS RELATING TO

SALE AND PURCHASE OF GOODS WERE REGULATED BY THE INDIAN CONTRACT ACT,1872.

IN 1930, SECTIONS 76 TO 123 OF THE INDIAN CONTRACT ACT WERE REPEALED AND A SEPARATE ACT CALLED ‘THE SALE OF GOODS ACT ,1930 WAS PASSED.THIS ACT EXTENDS TO WHOLE OF INDIA EXCEPT JAMMU AND KASHMIR.

SCOPE OF THIS ACT :THIS ACT DEALS WITH ‘GOODS’BUT NOT

WITH ANY MOVABLE PROPERTY , E.G., ACTIONABLE CLAIMS AND MONEY.THIS ACT DOES NOT DEAL WITH MOVABLE PROPERTY OTHER THAN GOODS AND IMMOVABLE PROPERTY.

CONTRACT OF SALE –MEANING –SEC4.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.

CONTRACT OF SALE IS A GENERIC TERM WHICH INCLUDES BOTH A SALE AS WELL AS AN AGREEMENT TO SELL.

ESSENTIAL ELEMENTS OF CONTRACT OF SALE:A) SELLER AND BUYERB) GOODSC) TRANSFER OF PROPERTYD) PRICEE) ESSENTIAL ELEMENTS OF VALID

CONTRACT.

A) SELLER AND BUYER: BUYER MEANS A PERSON WHO BUYS OR AGREES TO BUY GOODS SEC2(1).AND SELLER MEANS A PERSON WHO SELLLS OR AGREES TO SELL GOODS SEC2(13).

B) GOODS:GOODS MEANS EVERY KIND OF MOVABLE PROPERTY OTHER THAN ACTIONABLE CLAIMS AND MONEY AND INCLUDES STOCK AND SHARES, GROWING CROPS, GRASS AND THINGS ATTACHED TO OR FORMING A PART OF THE LAND WHICH ARE AGREED TO BE SEVERED BEFORE SALE OR UNDER THE CONTRACT OF SALE.SEC2(7).

NOTES:THE ACTIONABLE CLAIMS MEANS A

CLAIM WHICH CAN BE ENFORCED THROUGH THE COURTS OF LAW, E.G A DEBT DUE FROM ONE PERSON TO ANOTHER IS AN ACTIONABLE CLAIM.

THE MONEY HERE MEANS THE LEGAL TENDER MONEY I.E CURRENCY OF THE COUNTRY BUT NOT OLD COINS.

C) TRANSFER OF PROPERTY:PROPERTY MEANS THE GENERAL PROPERTY IN GOODS, AND NOT MERELY A SPECIAL PROPERTY.GENERAL PROPERTY IN GOODS MEANS OWNERSHIP OF THE GOODS.SPECIAL PROPERTY MEANS POSSESSION OF GOODS.

THUS THERE MUST BE EITHER TRANSFER OF GOODS OR AN AGREEMENT TO TRANSFER THE OWNERSHIP OF GOODS( IMMEDIATELY OR IN FUTURE).

D)PRICE: PRICE HERE MEANS THE MONETARY CONSIDERATION FOR THE SALE OF GOODS SEC2(10).WHEN CONSIDERATION IS FOR GOODS IT AMOUNTS TO BARTER SYSTEM. AND WHEN IT IS FOR NO CONSIDERATION THEN IT IS GIFT AND NOT SALE.

E) ESSENTIAL ELEMENTS OF A VALID CONTRACT- U/S 10 OF INDIAN CONTRACT ACT 1872.

DISTINCTION BETWEEN SALE AND AGREEMENT TO SELL:BASIS OF DISTINCTION:1) TRANSFER OF OWNERSHIP:SALE – TRANSFER OF OWNERSHIP OF

GOODS TAKES PLACE IMMEDIATELY.AGREEMENT TO SELL: TO HAPPEN AT A

FUTURE DATE OR SUBJECT TO FULFILMENT OF SOME CONDITION.

2) EXECUTED CONTRACT/EXECUTORY CONTRACT:

SALE: EXECUTED CONTRACTAGREEMENT TO SELL : EXECUTORY

CONTRACT.3) CONVEYANCE OF PROPERTY:SALE: A SALE CREATES JUS IN REM

(RIGHT AGAINST THE PROPERTY).AGREEMENT TO SELL: IT ONLY CREATES

JUS IN PERSONAM( RIGHT AGAINST THE PERSON)

4) TRANSFER OF RISK:SALE : TRANSFER OF RISK OF LOSS OF

GOODS TAKES PLACE IMMEDIATELY BECAUSE THE OWNERSHIP IS TRANSFERED .

AGREEMENT TO SELL: RISK OF LOSS OF GOODS IS NOT EXISTING AS THE OWNERSHIP IS NOT YET TRANSFERED.

5) RIGHTS OF SELLER AGAINST THE BUYERS BREACH:

SALE -SELLER: HE CAN SUE THE BUYER FOR THE PRICE EVEN THHOGH THE GOODS ARE IN HIS POSSESION.

AGREEMENT TO SELL:SELLER CAN SUE THE BUYER FOR DAMAGES ONLY.

6) RIGHTS OF BUYER AGAINST THE SELLERS BREACH:

SALE- BUYER CAN SUE THE SELLER FOR DAMAGES AND CAN SUE THE THIRD PARTY WHO BOUGHT THOSE GOODS.

AGREEMENT TO SELL: BUYER CAN SUE THE SELLER FOR DAMAGES ONLY.

HIRE PURCHASE AGREEMENT:MEANING: IT MEANS AN AGREEMENT

UNDER WHICH GOODS ARE LET ON HIREAND UNDER THE HIRER HAS AN OPTION TO PURCHASE THEM IN ACCORDANCE WITH THE TERM OF THE AGREEMENT AND INCLUDES UNDER WHICH:

POSSESSION OF GOODS IS DELIVERED BY THE OWNER THEROF TO A PERSON ON CONDITION THAT SUCH PERSON PAYS THE AGREED AMOUNT IN PERIODICAL INSTALMENTS.

2) THE PROPERTY IN THE GOODS IS TO PASS TO SUCH A PERSON ON THE PAYMENT OF LAST INSTALMENT AND

3) SUCH A PERSONHAS A RIGHT TO TERMINATE THE AGREEMENT AT ANY TIME BEFORE THE PROPERTY SO PASSES.

GOODS MEANING OF GOODS SEC 2(7):GOODS MEANS EVERY KIND OF MOVABLE

PROPERTY OTHER THAN ACTIONABLE CLAIMSAND MONEY, AND INCLUDES THE FOLLOWING:

STOCK AND SHARESGROWING CROPS, GRASS AND THINGS

ATTACHED TO OR FORMING PART OF THE LAND WHICH ARE AGREEDTO BE SEVERED BEFORE SALE OR UNDER THE CONTRACT OF SALE.

EXAMPLE OF GOODS: STOCKS , SHARES DEBENTURES, OLD RARE COINS, GOODWILL, TRADEMARK, PATENTS, ETC.

EXCLUSIONS :ACTIONABLE CLAIMS,LEGAL TENDER MONEY,IMMOVABLE PROPERTY.

TYPES OF GOODS:1) EXISTING GOODS:IT MEANS GOODS

WHICH ARE EITHER OWNED OR POSESSED BY THE SELLER AT THE TIME OF CONTRACT OF SALE.THE EXISTING GOODS MAY BE AS FOLLOWS:

SPECIFIC :LIKE T.V, D.V.D ETC.ASCERTAINED GOODS: WHEN PART OF

THE GOODS LYING IN BULK ARE IDENTIFIED AND EARMARKED FOR SALE.

UNASCERTAINED: GOODS LYING IN LOTS UNIDENTIFIED.

2) FUTURE GOODS:SEC 2(6) IT MEANS GOODS TO BE MANUFACTURED OR PRODUCED OR ACQUIRED BY THE SELLER AFTER MAKING OF THE CONTRACT OF SALE. THERE CAN BE AGREEMENT TO SELL ONLY AS ONE CANNOT DO A SALE OF WHAT HE DOES NOT POSSESS.

3) CONTINGENT GOODS: SEC6(2) THESE ARE THE GOODS THE ACQUISITION OF WHICH BY THE SELLER DEPENDS UPON CONTINGENCY WHICH MAY OR MAY NOT HAPPEN.