CHAPTER 1

The Sale of Goods Act, 1930

Introduction

The Indian Contract Act was passed in 1872. Before that, law relating to the sale of goods was outside the limits of the Original Jurisdiction of the High Courts and was extremely uncertain in its application. The English law relating to the sale of goods which was the basis of Chapter VII of the Indian Contract Act, 1872 had undergone sea changes and was finally codified in 1893. Considering all the facts and pros and cons of the Chapter VII of the Contract Act, a draft Bill was prepared on the lines of the English Sale of Goods Act, 1893, embodying the provisions of law relating to sale of goods in a separate enactment.

In order to ensure general approval for a measure of such a highly technical character the Government of India in 1929 appointed a committee to consider generally the question of amending the law relating to sale of goods contained in Chapter VII of the Indian Contract Act, 1872 and in particular to examine the draft Bill.

This committee agreed to the proposal that the law relating to the sale of goods should be embodied in a separate enactment and considered the draft Bill referred to it. In September, 1929 the Indian Sale of Goods Bill was introduced in the Legislative Assembly.

Statement of Objects and Reasons

The Bill has been explained in the Report of the Special Committee as given below:

(i)The Committee assembled at Simla on the 29th April, 1929, when its first meeting was held and continued its deliberations daily until the 9th May, 1929. A Bill to amend and define the law relating to the Sale of Goods, with the notes setting forth the reasons for the proposed amendment which had already been prepared in the Legislative Department of the Government of India was placed before us, and formed the basis of our discussions.

(ii)As mentioned in the introductory part, the law relating to the sale of goods or movables was not uniform and also outside the limits of the original jurisdiction of the High Courts, extremely uncertain in its application. Within the limits of the Presidency-towns the rules of English law, including those in the statute of frauds, were applied, whilst in the mofussil it was doubtful whether the statute of frauds was applicable and as observed by the Indian Law Commissioners in their Second Report, the Judge was to a great extent without the guidance of any positive law beyond the rule that his decision should be such as he deemed to be in accordance with "justice, equity and good conscience". To remedy their unsatisfactory State of Affairs the Indian Law Commissioners framed in their Second Report, dated the 28th July, 1866, a set of rules relating to the general law of contracts including therein provisions relating to the sale of movables. The draft of Law Commissioners underwent several changes at the hands of the then Law Members, Sir Henry Maine and Sir James Stephen, and also in the Select Committee of the Indian Legislature. But, as stated by Sir James Stephen himself while presenting the Report of the Select Committee on the Indian Contract Bill, the Chapter on the Sale of Goods, except in regard to the rule as to market overt represented generally the English Law on the subject as it then stood.

(iii)Rules of English law were, however, largely dominated by the provisions of the statute of frauds which was passed in the reign of Charles the second. The Law Commissioners, as well as those who were ultimately responsible for framing the Indian Contract Act, at once realised that the provisions of the statute of frauds, although followed in the Presidency towns, were not suitable to the conditions prevailing in this country, and that "any law relating to this important subject must at any rate be free from the inexpressible confusion and intricacy which is thrown over every part of the statute in consequence of its vague language".

(iv)In 1870, various branches of law were being codified in British India. The main object in view was, in the words of Sir James Stephen, "that of providing a body of law to the Government of the country so expressed that it might be readily understood both by English and Native Government servants without extrinsic help from the English law libraries". What was urgently needed was a guide for the judge or magistrate who had but little legal training, derived little or no assistance from the Bar and worked at a distance from any law library.

(v)The law relating to the sale of goods appertains mainly to mercantile transactions. There can be no doubt that during the last half-century conditions in this country relating to trade and business have undergone material changes. Methods of business, have largely altered and new relations have arisen between man and man. In dealing with these relations, it has been necessary to give recognition to new principles and the Indian Courts have found that a law enacted more than fifty years ago is entirely inadequate to enable them to deal with these new regulations or give effect to the new principles. The result has been that on various occasions the Courts have had to hold that Chapter VII of the Indian Contract Act is not exhaustive, and to import therein analogies from the decision of the English Courts.

(vi)The English law relating to the sale of goods which was admittedly the basis of Chapter VII of the Indian Contract Act has itself since 1872 undergone drastic changes and was finally codified in 1893 by the present Sale of Goods Act (56 and 57 Vict., C 71) which discards many of the old common law rules upon which Chapter VII of the Indian Act was based in favour of provisions more suited to modern conditions or more convenient in actual practice.

(vii)By the Bill referred to our consideration, the law relating particularly to the sale of goods is embodied in a separate enactment, although many of the general principles contained in the Indian Contract Act will continue to be applicable thereto. When Sir James Stephen moved the Indian Contract Bill, he admitted that it was not and could not pretend to be, a complete code upon the branch of law to which it related. He, however, expressed a hope that in later years it would be easy to enact supplementary chapters relating to the several branches of the law of contract which the Bill did not touch. This hope has never been fulfilled. In later years it was found more convenient to have separate enactments for the several branches of the law of contract, e.g. the Transfer of Property Act, the Negotiable Instruments Act, and the Merchant Shipping Act. In our opinion in view of the complexity of modern conditions, the time has now come when this process should be accelerated by embodying the different branches of law relating to contract in separate self-contained enactments; and we hope that the Bill which we attach to our Report may be passed into law at an early date and may be but the first of the series required to complete the task which we have outlined above.

(viii)The Bill referred to us was mainly based on the English Sale of Goods Act, 1893. This Act has stood the test of nearly thirty-five years of practical application and in the words of Lord Parker in re Parchim, (1918) AC 157 at pages 160-161 "is a very successful and correct codification of this branch of the mercantile law." As is shown in Appendix B to our Report, most of the Colonies and Overseas Dominions have adopted and re-enacted the Act with only such small variations as have been found necessary to adopt its provisions to local circumstances. It is also remarkable, that the Uniform Sales Act passed in 1906 in the USA and adopted in twenty out of fifty-three-States and territories is based very largely on the English Act. These facts constitute striking evidence of the completeness and the universal suitability of its provisions.

(ix)In mercantile transactions a conflict of laws should, as far as possible, be avoided. Uniformity of law in various countries, particularly in those which have business or trade dealings with one another, is highly convenient and desirable. We, therefore, approve of the proposal to adopt the provision of the English Sale of Goods Acts so far as they are suitable to Indian conditions as the basis for the present Bill and thus to make the Indian Law relating to the sale of goods, as nearly as possible, uniform with the law in force in other parts of the British Empire.

(x)The provisions of the English Act are far more elaborate and comprehensive than those of Chapter VII of the Indian Contract Act, and in their arrangement the English Act is more logical and methodical. As we have already observed, it has revised and brought up to the date rules of the English Common Law. Moreover, the adoption of the English Act as the basis of present Bill will enable Indian Courts to interpret its provisions in the light of the decisions of the English Courts.

(xi)In adopting the provisions of the English Act, we have not been unmindful of the needs and exigencies of this country. Wherever it has been found that a rule obtaining in England, such as that relating to market overt is not suitable to Indian conditions, the rule has been rejected. We, have, moreover, carefully scrutinised the provisions of the English Act in the light of the decisions of English Courts since 1893, and where those decisions have shown the provisions of the English Act to be defective or ambiguous, we have attempted to improve upon them. We have also retained several of the provisions of the Indian Contract Act, which we consider necessary or useful to meet special conditions existing in India. The Bill as revised by us on the above lines.

Further, following points were also discussed:

(a)The present Bill embodies the principles that the question whether a contract for the sale of goods does or does not pass the property in the goods from the buyer to the seller must in all cases be determined by the intention of the parties to the contract. The provisions of Chapter VII of the Indian Contract Act are vague and conflicting on this point. The Bill codifies the rules by which that intention may be ascertained, but the operation of these rules will be displaced by any terms of the contract defining the intention or by any attendant circumstances, including the conduct of the parties, rendering it ascertainable. In following this principles, we have to borne in mind that in mercantile matters the certainty of the rule is often of more importance than the substance. If the parties know before-hand what their legal position is, they can provide for their particular wants by express stipulation. Sale, after all, is a consensual contract, and the Bill does not prevent the parties from making any bargain they please. Its object is to lay down clear rules for the cases where the parties have either framed no intention or failed to express it.

(b)The distinction between a sale and an agreement to sell which was not clear in Chapter VII of the Indian Contract Act, has been clearly brought out. This distinction is very necessary to determine the rights and liabilities of the parties to the contract.

(c)It is made clear that a contract of sale can be made by mere offer and acceptance. Neither payment nor delivery is necessary for the purpose.

(d)Before 1893 the law in England relating to warranties and conditions was in a very confused state. In the Indian Contract Act the word "warranty" has been used in a very vague sense. In some provisions it denotes a condition which would enable a party aggrieved by its breach to repudiate the contract while in others it enables him to claim damages only. In the Bill, this ambiguity has been removed.

(e)There is much conflict of decisions in India regarding the meaning of section 108 of the Indian Contract Act, which relates to sales by ostensible owners. This is to a certain extent due to the obscure phraseology of the section itself. We have tried to remove this obscurity in clauses 27 to 30 of the Bill to simplify the law on the subject.

(f)We have elaborated the rules relating to delivery to carriers, stoppage in transit and auction sales.

(g)We have anxiously considered the question of the retention of the Illustrations appearing in Chapter VII of the Indian Contract Act and of the insertion of Illustrations to new provisions. Our decision is that the better policy is to forego all Illustrations, leaving the courts to continue the sections as they stand.

Act 3 of 1930

The Indian Sale of Goods Bill having been passed by the Legislative Assembly received its assent on 15th March, 1930. It came into force on the 1st day of July, 1930 as the Indian Sale of Goods Act, 1930. By section 2 of the Indian Sale of Goods (Amendment) Act, 1963 (33 of 1963) the word 'Indian' has been omitted and now it has been termed as the Sale of Goods Act, 1930 (3 of 1930).