CA Foundation Business Laws: Sale of Goods Act Notes
Sale of Goods Act is a high-weightage CA Foundation Business Laws topic carrying 21 marks. It explains the contract of sale, types of goods, sale vs agreement to sell, and caveat emptor. Questions mainly focus on conditions, warranties, and unpaid seller's rights through case studies
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Sale of Goods Act, 1930 is a critical part of the CA Foundation Business Laws syllabus, carrying a significant weightage of 21 marks in the examination. Typically, students face three questions of 7 marks each, covering both theoretical concepts and case-study-based scenarios.
Introduction to Sale of Goods Act 1930
The Sale of Goods Act was originally a part of the Indian Contract Act, 1872, but was separated to form a distinct act on 1st July 1930. It extends to the whole of India and specifically governs the law relating to the sale of movable property.
Key Definitions
Understanding the fundamental terms is essential for mastering the Sale of Goods Act 1930 CA Foundation notes
Buyer: A buyer is an individual who purchases goods or enters into an agreement to purchase goods from another party.
Seller: A seller is a person who transfers goods for a price or agrees to transfer goods under a contract of sale.
Goods: Goods refer to all types of movable property, excluding money and actionable claims. The term includes items such as stocks and shares, crops that are growing, grass, and objects attached to land, provided they are intended to be separated from the land before the sale is completed.
Formation of Contract of Sale
A 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.
Essential Elements of a Sale
A contract of sale is valid only when certain essential elements are fulfilled. These elements define the legal structure of a sale under the Sale of Goods Act, 1930. Understanding them helps in answering both theoretical and case-study questions.
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Two Parties are essential: There must be a buyer and a seller.
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Goods: The subject matter must be movable property.
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Transfer of Property: Refers to the transfer of general property (ownership) and not just special property.
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Price: The consideration must be money.
Classifications of Goods
For a thorough understanding of Business Laws Sale of Goods Act, one must distinguish between the types of goods:
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Existing Goods: Goods physically in existence at the time of the contract.
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Future Goods: Future goods are items that do not exist at the time of entering into the contract and are intended to be manufactured, produced, or obtained by the seller at a later stage in order to fulfill the agreement.
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Contingent Goods: Contingent goods are goods whose availability to the seller depends on the occurrence or non-occurrence of an uncertain event, meaning the sellerโs ability to supply them is conditional upon a future contingency.
Difference Between Sale and Agreement to Sell
Understanding the difference between a sale and an agreement to sell is essential under the Sale of Goods Act. The distinction is based on the timing of transfer of ownership, nature of the contract, and risk of loss. This topic is frequently tested in CA Foundation exams through direct and case-study questions.
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Difference Between Sale and Agreement to Sell |
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Feature |
Sale |
Agreement to Sell |
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Transfer of Property |
Ownership passes immediately to the buyer. |
Ownership passes at a future date or upon fulfillment of conditions. |
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Nature of Contract |
Executed Contract. |
Executory Contract. |
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Type of Goods |
Generally for existing and specific goods. |
Generally for future or contingent goods. |
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Risk of Loss |
Risk follows ownership; falls on the buyer. |
Risk remains with the seller until ownership passes. |
Conditions and Warranties
A contract of sale often contains stipulations regarding the nature of the goods.
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Condition: A stipulation essential to the main purpose of the contract. Its breach gives the right to repudiate the contract.
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Warranty: A stipulation collateral to the main purpose. Its breach gives rise to a claim for damages but not a right to reject goods.
Doctrine of Caveat Emptor
The term "Caveat Emptor" means "Let the Buyer Beware". Generally, the seller is not responsible for the buyer's bad choice. However, exceptions apply if the seller is guilty of fraud or if the goods are sold by description/sample and do not match.
Unpaid Seller and Remedies
An unpaid seller is one who has not been paid the full price or has received a negotiable instrument that has been dishonored.
Rights of an Unpaid Seller
An unpaid seller is granted certain legal rights to protect their interest when payment is not received. These rights arise under the Sale of Goods Act, 1930 and apply only under specific conditions. They are commonly asked in CA Foundation exams as direct and case-based questions.
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Right of Lien: To retain possession of goods until payment.
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Right of Stoppage in Transit: To regain possession while goods are with a carrier.
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Right of Resale: To resell the goods under specific conditions.
Examination Weightage & Strategy
The CA Foundation Sale of Goods Act section is vital for clearing the Business Laws paper.
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Unit 1 & 2: Focus on definitions and differences (Sale vs. Hire Purchase).
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Unit 3 & 4: High priority for case-study questions regarding transfer of ownership and unpaid seller rights.
Note: Students are advised to practice previous year questions (PYQs) and Model Test Papers (MTPs) to master the case-study format. Detailed notes and one-shot lectures are available on the PW App for comprehensive preparation.
Sale of Goods Act One-Shot Video
For a detailed conceptual breakdown and line-by-line explanation of the ICAI module, refer to the video lecture below: