SOGA Notes

What is SOGA
The Sale of Goods Act, 1930 is an important piece of legislation in Indian
commercial law. It governs the contracts involving the sale and purchase of goods
and provides a clear legal framework outlining the rights, duties, liabilities, and
remedies available to both buyers and sellers.
It originally formed part of the Indian Contract Act, 1872, but was separated and
enacted as a distinct law in 1930 to provide a more focused and specialized legal
structure.
The Act came into force on 1st July 1930, and it primarily applies to movable
goods. It codifies the general principles relating to the sale of goods in India and is
largely influenced by English common law principles, particularly those from the
UK's Sale of Goods Act, 1893 (and later, 1979).

This law governs:

- How contracts for the sale of goods are formed,
- What constitutes valid consideration (price),
- When ownership of goods passes,
- The duties of buyers and sellers, and
- What legal remedies are available in case of breach.

The Act has 6 chapters and 66 sections, and it works in conjunction with the Indian
Contract Act, 1872, especially for general contract principles like offer, acceptance,
and consideration.
It applies across all states in India, unless a state has made specific modifications.

Purpose of SOGA
The purpose of the Sale of Goods Act, 1930 (SOGA) is to provide a clear and
uniform legal framework for contracts involving the sale of goods, ensuring
fairness, clarity, and legal protection for both buyers and sellers engaged in
commercial transactions.
- Codify Law Relating to Sale of Goods
The Act consolidates and codifies existing laws and principles governing the sale
of goods in India, creating consistency and predictability in commercial dealings.
- Define the Rights and Duties of Parties
It explicitly lays out the obligations of sellers (e.g., delivery of goods, passing good
title) and obligations of buyers (e.g., acceptance, payment), minimizing disputes
and misunderstandings.
- Provide Remedies for Breach
The Act provides both parties with legal remedies in the event of a breach (e.g.,
non-payment, non-delivery, delivery of defective goods), promoting contractual
accountability.
- Distinguish Between Different Types of Contracts
It differentiates between:
i. A Sale (where ownership transfers immediately), and
ii.An Agreement to Sell (where ownership will transfer at a future
time or upon fulfillment of conditions), clarifying the parties'
legal standing at different stages.
- Address Key Concepts in Commercial Sales
These include:
i. Conditions and warranties,
ii. Implied terms (such as fitness, merchantability),
iii. Transfer of property and risk,
iv. Delivery, inspection, and acceptance.

- Promote Smooth Functioning of Trade

By reducing ambiguity and legal risk, the Act supports efficient commerce and
encourages confidence in market transactions, especially in goods-based trade and
business.

Key Definitions
- Buyer
Section 2 (1) “buyer” means a person who buys or agrees to buy goods;
(not a buyer if the agreement grants an option to purchase without having any legal
obligation to buy)
- Seller
Section 2 () “seller”
- Goods
Section 2 (7) “goods” means every kind of moveable property other than
actionable claims and money
Includes
i. Stock and Shares
ii. Growing Crops
iii. Grass
iv. Things attached to or forming part of the land which are agreed to be
severed before (Standing Timber)
v. Gas and Electricity (50/50)

Excludes
i. Documents given to lawyers
ii. Lottery Tickets (Actionable Claims)

- Specific Goods
Section 2 (14) “specific goods” means goods identified and agreed upon at the time
a contract of sale is made;
(Example – the sale of a car in a person’s possession would be considered specific;
Whereas, sale of a car from showroom that has diff variants of the car)

Section 4
- Sale
Where under a contract of sale the property in the goods is transferred from the
seller to the buyer, the contract is called a sale
- Agreement to Sell
Where the transfer of the property in the goods is to take place at a future time or
subject to some condition thereafter to be fulfilled, the contract is called an
agreement to sell.
An agreement to, sell becomes a sale when the time elapses or the conditions are
fulfilled subject to which the property in the goods is to be transferred.

Formation of a Contract
Contract of Sale
Section 4 – Sale and Agreement to Sell
Formalities of the Contract
Section 5 – Contract of Sale How Made
Subject-Matter of Contract
Section 6 - Existing or Future Goods
Section 7 - Goods Perishing before Making of Contract
 Section 8 - Goods Perishing before Sale but After Agreement to Sell
Price
Section 9 - Ascertainment of Price
Section 10 - Agreement to Sell at Valuation
Conditions and Waranties
Section 11 - Stipulations as to time
Section 12 - Condition and warranty
Section 13 - When Condition to be Treated as Warranty
Section 14 - Implied Undertaking as to Title, etc
Section 15 - Sale by Description
Section 16 - Implied Conditions as to Quality or Fitness
Section 17 - Sale by Sample

Essential Elements of a Contract of a Sale

This part outlines the Essential Elements of a Contract of a Sale
A. Two Parties
The transaction must involve two parties: a seller who owns the goods and a buyer
who intends to purchase them.
Example: A farmer selling vegetables to a grocery store.
B. Goods as Subject Matter
Only movable goods can be subject to a sale contract under this Act. This excludes
immovable items like land or buildings.
Example: A dealer selling laptops to a tech store.
C. Transfer of Ownership
A sale involves transferring ownership from the seller to the buyer. This
differentiates it from other agreements like leases or bailments, where ownership
remains with the original owner.
Example: When a customer buys a car, they gain ownership rights, allowing them
to resell or use it freely.
D. Price as Consideration
The buyer must pay a specific price for the goods. The price can be paid in money,
partly in money and partly in goods, or through another agreed means.
Example: A store purchasing 100 bottles of juice for ₹30,000 — the price is paid in
money, fulfilling the requirement.

Types of Goods
The Act classifies goods into different categories:
- Existing Goods - Goods that are currently owned and possessed by the
seller.
- Future Goods - Goods that will be manufactured or acquired by the seller
after the contract is made.
- Contingent Goods: Goods whose acquisition depends on a future event, such
as harvests or imports.
Example: If a bookstore agrees to sell books to a buyer once they arrive
from a publisher, the books are considered future goods.

Conditions and Warranties

The Sale of Goods Act distinguishes between conditions (essential terms) and
warranties (less critical terms):
- Conditions [Section 12 (2)]
“A condition is a stipulation essential to the main purpose of the contract, the
breach of which gives rise to a right to repudiate the contract.”
This means: It’s a core term. If the seller breaches a condition, the buyer can reject
the goods and refuse to perform their part of the contract, in addition to possibly
claiming damages.
Examples
Sale by Description [Section 15]
A contract states: “Seller will deliver 50 kg of Kashmiri saffron.” - The seller
delivers Iranian saffron instead. - This is a breach of condition, because the identity
of the goods is wrong. - Buyer may reject the goods and cancel the contract.
Sale by Sample [Section 17]
Example: Seller shows a sample of cotton fabric, but delivers goods of much lower
quality. - Buyer can reject the entire consignment.
Implied Condition as to Title [Section 14(a)]
Example: Seller sells you a motorcycle, but it turns out to be stolen. - This is a
breach of the condition as to title. - Buyer can return the bike, recover the price,
and may even sue for damages.

Fitness for Purpose [Section 16(1)]

Example: You tell the seller you need a paint for exterior waterproofing. He sells
you interior emulsion paint. - The product is unfit for the disclosed purpose -
Breach of condition
- Warranties [Section 12(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 a right to reject the goods
or repudiate the contract.”
This means: The buyer must accept the goods, but can still claim compensation.
Examples
Minor Delay in Delivery
Example: Seller agrees to deliver mangoes on 1st May but delivers on 2nd May.
The mangoes are still fresh and acceptable. - It is a warranty breach. - Buyer may
claim transportation loss or price adjustment, but cannot cancel the sale.
Free After-Sales Service for 12 Months
Example: TV is delivered as agreed, but the seller refuses to provide the promised
free service. - This is not about the goods themselves, but an ancillary promise. -
Buyer can claim cost of service, but cannot reject the TV.
Slight Packaging Error
Goods are described to be in “branded sealed cartons,” but arrive in unmarked
boxes. Contents are correct. - This is not central to the value or purpose of the
goods. - Buyer may claim damages, but must accept the goods.

Conversion of Condition to Warranty [Section 13]

In certain cases, a breach of condition is treated as a breach of warranty:
- If the buyer accepts the goods, they may lose the right to reject.
- If the buyer elects to keep the goods, despite the breach.
- If the contract is non-severable and part delivery is accepted.

Example: You buy 100 shirts for resale, described as “premium cotton.” After
receiving and selling 10, you realize they are blended fabric. You cannot return the
remaining 90, but may claim damages.

Rights and Duties of Seller

These are mainly covered in Chapters IV and V of the Act.
RIGHTS of a SELLER/ UNPAID SELLER
Who is an Unpaid Seller ?
Defined in Section 45(1) of the Indian Sale of Goods Act, 1930:
A seller of goods is called an unpaid seller when:
- The whole price has not been paid, or
- A bill of exchange or another negotiable instrument was given but
dishonoured.
Even if only part of the price is unpaid, the seller is still treated as unpaid under
this section.

1. Right to Receive the Price (Section 55)

The seller has the right to sue for the price of goods if:
- Ownership has passed to the buyer, or
- The price is payable on a certain day regardless of delivery.
Example - If buyer refuses to pay after delivery, seller can sue for the agreed price.

2. Right of Lien (Sections 47–49)

The unpaid seller has the right to retain possession of goods until payment is made.
Applies only if seller still has possession of the goods.
Example - Seller agrees to sell 100 laptops. Buyer delays payment beyond agreed
terms. Seller keeps goods in warehouse and refuses to hand over. → Exercise of
lien.

3. Right of Stoppage in Transit (Section 50–52)

If goods are in transit and the buyer becomes insolvent, the seller can instruct the
carrier to stop delivery.
Example - Seller sends goods via railway. Before delivery, seller learns buyer is
bankrupt. Seller instructs railway not to deliver.
 4. Right of Resale (Section 54)
Seller may resell goods: If they are perishable, or If reasonable notice is given to
the buyer who still doesn’t pay.
Example - Buyer fails to pay for perishable fruits despite notice. Seller resells in
open market.

5. Right to Withhold Delivery (Section 46(1)(a))

If the price is not paid, seller may refuse to deliver goods.

DUTIES of the SELLER

These duties arise from the contract and the Act itself.
1. Duty to Deliver the Goods (Section 31)
Seller must deliver goods as per the contract terms - time, quantity, quality.

2. Duty to Deliver Goods of Contractual Description (Section 15)

The goods must match the description, sample, or both.
Example: If contract says “Samsung 500L fridge,” seller cannot deliver a different
model or size.

3. Duty to Pass Good Title (Section 14)

Seller must have the right to sell the goods. If the goods are stolen or third-party
owned, it’s a breach of condition.

4. Duty to Ensure Delivery within Time (Section 36(2))

If time is agreed, seller must deliver accordingly. If not, within a reasonable time.
 5. Duty to Deliver the Goods in the Agreed Quantity and Quality Covered
under:
Section 37: Part delivery
Section 15 & 16: Description, fitness, quality

6. Duty to Put Goods in a Deliverable State (Section 36(1))

Goods must be in a state fit for delivery when buyer is called to take delivery.

Rights and Duties of Buyer

RIGHTS of the BUYER
1. Right to Receive Delivery of Goods [Section 31 & 32]
The buyer has a right to receive delivery of goods as per the contract terms —
including time, place, and quantity.
Example: Buyer orders 100 sacks of rice for delivery on March 1. If the seller fails
to deliver or delivers late, buyer can claim damages or reject the goods (if time is
of the essence).

2. Right to Reject Non-Conforming Goods

If goods delivered do not conform to description, sample, or quality, the buyer can
reject them.
- Section 15: Sale by description
- Section 16: Fitness/quality
- Section 17: Sale by sample
Example: Buyer orders "premium wool" but receives synthetic blend. Buyer can
reject the goods.
 3. Right to Examine Goods [Section 41]
Buyer has a reasonable opportunity to inspect the goods before acceptance.
Example: Upon delivery of 200 laptops, the buyer may test a sample before
accepting or paying.

4. Right to Sue for Non-Delivery [Section 57]

If the seller refuses to deliver, the buyer may sue for damages.
Example: Buyer pays advance for delivery of medical equipment, but seller
defaults. Buyer can claim loss from alternate purchase.

5. Right to Sue for Damages for Breach of Warranty [Section 59]

If a warranty is breached, buyer cannot reject the goods, but can claim damages.
Example: A new printer includes a 12-month service warranty. If the service is
denied, buyer can claim compensation.

6. Right to Recover Price Paid (if contract is voided)

If the buyer has paid in advance and the contract is later terminated due to breach,
they can recover the amount paid.

7. Right to Specific Performance [Section 58]

Buyer can approach court to enforce the contract if damages aren't adequate,
especially for unique or rare goods.
Example: Artwork or antique furniture — buyer may demand specific
performance.
DUTIES OF THE BUYER
These are outlined under Sections 31 to 44 of the Indian Sale of Goods Act.
1. Duty to Accept Delivery of Goods [Section 31]
Buyer must accept and take delivery when seller makes a valid tender.
Example: If seller brings goods to the buyer's warehouse on the agreed date, buyer
cannot refuse without reason.

2. Duty to Pay the Price [Section 31 & 32]

Buyer must pay the price in full and on time as agreed in the contract.
Example: If payment is due on delivery, buyer must pay on the spot or seller can
withhold delivery.

3. Duty to Apply for Delivery [Section 35]

Buyer must demand delivery, unless otherwise agreed.
Example: If it is agreed that buyer will collect goods, seller is not obligated to
transport unless buyer applies.

4. Duty to Take Delivery Within Reasonable Time [Section 36(2)]

Buyer must take delivery within reasonable time, failing which he may be liable
for loss or warehousing charges.

5. Liability for Neglecting or Refusing Delivery [Section 44]

If buyer refuses to accept goods without valid reason, they must compensate the
seller for loss and damages.
Example: Goods are custom-made and ready on time, but buyer refuses to accept.
Seller may claim storage costs and damages.
 6. Duty to Examine Goods [Section 41]
Buyer must inspect the goods and notify defects promptly.
Failure to do so may be considered acceptance, limiting remedies.

Problems
Real-World Application of the Sale of Goods Act, 1930
1. Business Contracts for Supply of Products
When a business enters into a contract to sell goods to another party, this Act
governs the terms. For example:
A wholesaler selling machinery to a retailer.
An exporter entering into a sales agreement with a foreign buyer.
The contract must comply with SOGA provisions on:
- Price, delivery terms, and quantity,
- Passing of ownership, and
- Whether it is a 'sale' or 'agreement to sell'.
2. Disputes Over Defective Goods
If a buyer receives goods that are damaged, defective, or not as described, they can
claim:
- Breach of condition (if the defect goes to the root of the contract), or
- Breach of warranty (if it's a minor issue).
Example: A company buys 1,000 units of steel rods, but they are below the agreed
grade. The buyer can reject the goods or seek damages under the Act.

3. Ownership and Risk Issues

Suppose goods are destroyed during transit. The question is: Who bears the loss?
Under SOGA:
The party who owns the goods at the time of loss bears the risk (Section 26).
This is critical in logistics-heavy sectors like manufacturing and export-import.

4. Delayed Payment or Delivery

If the buyer delays payment or the seller delays delivery:
The affected party can sue for damages or rescind the contract under SOGA.
This is particularly important in high-volume, time-sensitive businesses.

Key Clauses in Contracts Reflecting SOGA

- Ownership shall pass upon Full Payment - (to delay transfer of risk),
- Goods must Conform to Specifications in Annex A,
- If delivery is delayed beyond 15 days, the buyer may cancel.

Remedies / Problems

A. Section 24
Ms. Preeti owned a motor car which she handed over to Mr. Joshi on sale or return
basis. After a week, Mr. Joshi pledged the motor car to Mr. Ganesh. Ms. Preeti now
claims back the motor car from Mr. Ganesh.

According to the Sales of Goods Act, 1930

Section 24 - When goods are delivered to the buyer on approval or “on sale or
return" or other similar terms, the property therein passes to the buyer -
(a) when the buyer signifies his approval or acceptance to the seller or does any
other act adopting the transaction;
(b) if he does not signify his approval or acceptance to the seller but retains the
goods without giving notice of rejection, then, if a time has been fixed for
the return of the goods, on the expiration of such time, and, if no time has
been fixed, on the expiration of a reasonable time; or
(c) he does something to the good which is equivalent to accepting the goods
e.g. he pledges or sells the goods.

Since, Mr. Joshi, who had taken delivery of the Motor car on Sale or Return basis
has pledged the motor car to Mr. Ganesh, and thus has attracted the third condition
that he has done something to the good which is equivalent to accepting the goods
e.g. he pledges or sells the goods. Therefore, the property therein (Motor car)
passes to Mr. Joshi. Now in this situation, Ms. Preeti cannot claim back her Motor
Car from Mr. Ganesh, but she can claim the price of the motor car from Mr. Joshi
only.

B. Section 27
J the owner of a car wants to sell his car. For this purpose, he hand over the car to
P, a mercantile agent for sale at a price not less than ₹ 50,000. The agent sells the
car for ₹ 40,000 to A, who buys the car in good faith and without notice of any
fraud. P misappropriated the money also. J sues A to recover the Car.

The problem in this case is based on the proviso to Section 27 of Sale of Goods
Act, 1930. The proviso provides the buyer of goods from a mercantile agent, who
has no authority from the principal to sell, gets a good title to the goods if:
 (1) The mercantile agent is in possession of the goods or documents of title to
the goods with the consent of the owner,
(2) The mercantile agent sells the goods while acting in the ordinary course of
business of a mercantile agent,
(3) The buyer acts in good faith and
(4) The buyer has not at the time of the contract of sale notice that the agent has
no authority to sell.
A mercantile agent is one who in the customary course of his business, has
authority either to sell goods, or to consign goods, for the purpose of sale, or to buy
goods, or to raise money on the security of goods [Section 2(9)].
In the instant case, P, the agent, was in the possession of the car with J‟s consent
for the purpose of sale. A, the buyer, therefore obtained a good title to the car as
per the above proviso to section 27.
Hence, J in this case, cannot recover the car from A.

C. Section 44
Mr. G sold some goods to Mr. H for certain price by issue of an invoice, but
payment in respect of the same was not received on that day. The goods were
packed and lying in the godown of Mr. G. The goods were inspected by H's agent
and were found to be in order. Later on, the dues of the goods were settled in cash.
Just after receiving cash, Mr. G asked Mr. H that goods should be taken away from
his godown to enable him to store other goods purchased by him. After one day,
since Mr. H did not take delivery of the goods, Mr. G kept the goods out of the
godown in an open space. Due to rain, some goods were damaged.
Section 44 of the Sales of Goods Act, 1932, when the seller is ready and willing to
deliver the goods and requests the buyer to take delivery, and the buyer does not
take delivery of the goods within a reasonable time, he is liable to the seller for any
loss occasioned by his neglect or refusal to take delivery and also for a reasonable
charge for the care and custody of the goods.
Risk of loss prima facie follows the passing of property in goods. Goods remain at
the seller's risk unless the property therein is transferred to the buyer, but after
transfer of property therein to the buyer the goods are at the buyer's risk whether
delivery has been made or not.
In the given case, since Mr. G has already intimated Mr. H that he wanted to store
some other goods and thus Mr. H should take the delivery of goods kept in the
godown of Mr. G, the loss of goods damaged should be borne by Mr. H.
If the price of the goods would not have settled in cash and some amount would
have been pending then Mr. G will be treated as an unpaid seller and he can
enforce the following rights against the goods as well as against the buyer
personally

D. Section 50
Ram sells 200 meters of cloth to Shyam and sends 100 meters by lorry and 100
meters by Railway. Shyam receives delivery of 100 meters of cloth sent by lorry,
but before he receives the delivery of the 100 meters of cloth sent by railway, he
becomes bankrupt. Ram being still unpaid, stops the goods in transit. The official
receiver, on Shyam’s insolvency claims the goods.
The problem is based on section 50 of the Sale of Goods Act, 1930 dealing with
the right of stoppage of the goods in-transit available to an unpaid seller. The
section states that the right is exercisable by the seller only if the following
conditions are fulfilled:
(i) The seller must be unpaid,
(ii) He must have parted with the possession of goods,
(iii) The goods must be in-transit,
(iv) The buyer must have become insolvent,
Applying the provisions to the given case, Ram being still unpaid, can stop the 100
meters of cloth sent by railway as these goods are still in-transit.
 - Mr. D sold some goods to Mr. E for ₹ 5,00,000 on 15 days credit. Mr. D
delivered the goods. On due date Mr. E refused to pay for it.
Remedies as per the Sale of Goods Act, 1930 (55, 56, 61)
Position of Mr. D - Mr. D is an unpaid seller as per section 45(1) of the Sale of
Goods Act, 1930. The seller of goods is deemed to be an ‘Unpaid Seller’ when the
whole of the price has not been paid or tendered.
Rights of Mr. D - As the buyer has taken the possession of the goods, therefore,
Mr. D cannot exercise the right against the goods, he can only exercise his rights
against the buyer i.e. Mr. E.
E. Section 55
Suit for Price - The price is payable after 15 days and Mr. E refuses to pay such
price. So, Mr. D may sue Mr. E for the price of the goods sold.
F. Section 56
Suit for Damages for Non-Acceptance - Mr. D may sue Mr. E for damages for non-
acceptance if Mr. E wrongfully neglects or refuses to pay for the goods. As regards
to the amount of damages, Section 73 of the Indian Contract Act, 1872 applies.
G. Section 61
Suit for Interest - If there is no specific agreement between the Mr. D and Mr. E as
to interest on the price of the goods, Mr. D may charge interest on the price from
the date on which payment becomes due till such day as he may notify to Mr. E.
MKM v Rajasthan Textile Mills Bhawani Madi
P sued for the cost of the delivered products as well as interest on the unpaid cost.
The District Judge rejected the interest claim on the grounds that there was no
contract to pay interest if the cost of the supplied items was not paid in full.
The plaintiff argued that under Section 61(2) of the Sale of Goods Act, 1930, the
plaintiff was entitled to a reasonable interest even in the absence of the contract.
The supply had been made up until September 18, 1962, and under normal
circumstances, the defendant should have paid the cost of the goods within a
reasonable amount of time after delivery.
However, the payment was over a year late, forcing the plaintiff to file a lawsuit to
recover the money. According to a ruling, in these situations, the lower courts
ought to have erred on the side of the plaintiff and applied Section 61(2) of the Sale
of Goods Act to grant interest on the amount of the purchase price of the goods.
The Rajasthan High Court permitted interest at 6% annually, which was regarded
as a reasonable rate of interest.

Target Groups
1. Manufacturer selling Goods to Distributor
Scenario: A textile manufacturer in Surat agrees to supply 10,000 metres of
premium cotton fabric to a distributor in Delhi.
If the fabric turns out to be synthetic or of inferior quality, the buyer (distributor)
may reject the goods under Section 15 (sale by description).
If the payment is not made, the manufacturer becomes an unpaid seller with rights
under Section 47–54.

2. Wholesaler selling to Retailer

Scenario: A wholesaler agrees to supply a retailer with 1,000 mobile phones by a
specific date before a festival.
If the wholesaler delivers late, the retailer may claim damages for lost seasonal
sales under Section 57 (non-delivery).
If the phones are defective, and warranty is promised, the retailer can claim
compensation under Section 59 (breach of warranty).

3. Online E-commerce Transaction

Scenario: A small business orders kitchen appliances via a B2B e-commerce
platform.
If the appliances delivered do not match the sample shown or description listed, the
buyer may reject them under Section 15 & 17.
If only part of the order is shipped and accepted, breach of condition may be
treated as breach of warranty under Section 13.

4. Exporter & International Contracts

Scenario: An Indian exporter supplies spices to a U.K.-based buyer.
If the buyer refuses to pay after goods are shipped, the exporter can exercise right
of stoppage in transit or sue for price (Section 50, 55).
If contract terms are governed by Indian law, SOGA applies directly.

5. Car Dealership Selling a Vehicle

Scenario: A customer purchases a new SUV described as "diesel automatic." On
delivery, it turns out to be "petrol manual."
Buyer can reject the vehicle under sale by description (Section 15).
The dealership would also lose the right to claim price, if repudiated.

6. Industrial Equipment Purchase

Scenario: A factory buys a custom conveyor belt system for their production line.
If the machinery fails to serve the disclosed purpose, it’s a breach of implied
condition as to fitness under Section 16(1).
Buyer may reject the system or claim damages.

7. Procurement in Government Projects

Scenario: A government agency procures infrastructure materials through tender.
If vendor delivers substandard materials, the agency may terminate contract and
sue under SOGA provisions.
Ensures enforceable standards in public contracts.