Chapter 21 — The Sale of Goods Act 1930: Exercise Solutions
I. Choose the Correct Answer
Q1. The Sale of Goods Act was enacted in the year ________. Answer: a) 1930
Q2. A contract of sale includes ________. Answer: d) All of the above (sale and agreement to sell)
Q3. Which of the following is not goods? Answer: c) Dividend due — it is an actionable claim, not goods.
Q4. The person who transfers ownership of goods is called ________. Answer: b) Seller
Q5. The main purpose of a contract of sale is transfer of ________. Answer: a) Ownership of goods
Q6. A contract of sale is a ________. Answer: b) Contract
Q7. When goods are delivered to the carrier, it is called ________. Answer: c) Delivery to the carrier
Q8. A stipulation collateral to the main purpose is called ________. Answer: a) Warranty
Q9. Implied conditions include ________. Answer: d) All of these
Q10. The unpaid seller loses his right of lien when the buyer ________. Answer: d) Becomes insolvent
Additional MCQs
Q1. A contract of sale involves ________ parties. Answer: b) 2 parties (seller and buyer)
Q2. An agreement to sell is an ________ contract. Answer: b) Agreement (executory contract)
Q3. The subject matter of a contract of sale is ________. Answer: c) Goods
Q4. Goods owned by the seller at the time of contract are called ________ goods. Answer: a) Existing
Q5. Goods identified and agreed upon at the time of contract are called ________ goods. Answer: b) Specific
Q6. The consideration for a contract of sale is ________. Answer: a) Money (price)
Q7. A sale is an ________ contract. Answer: c) Executed
Q8. A stipulation of secondary importance is a ________. Answer: b) Warranty
Q9. The price in a contract of sale is the ________. Answer: c) Price
Q10. Which statements are correct? (i) A contract of sale involves two parties (ii) The consideration is always money Answer: d) i and ii are correct
II. Match the Following
| List I | List II | Answer |
|---|---|---|
| i. Ascertained Goods | 4. Similar to specific goods | i — 4 |
| ii. Unascertained Goods | 3. Not ascertained | ii — 3 |
| iii. Contingent Goods | 2. Depends upon a contingency | iii — 2 |
| iv. Future Goods | 1. After agreement | iv — 1 |
III. Assertion and Reason
Q1. Assertion (A): A contract of sale involves two parties — seller and buyer. Reason (R): A person cannot buy goods from himself.
IV. Very Short Answer Questions
Q1. What is a contract of sale? Answer: A contract of sale is an agreement where the seller transfers or agrees to transfer the ownership of goods to the buyer for a price. It includes both a sale and an agreement to sell.
Q2. What are the essential elements of a contract of sale? Answer: The essential elements are: Two parties (seller and buyer), Goods (movable property), Price (monetary consideration), Transfer of ownership, and it must include both sale and agreement to sell.
Q3. What are goods under the Sale of Goods Act? Answer: Goods means every kind of movable property other than actionable claims and money. It includes stock, shares, growing crops, grass, and things attached to land which are agreed to be severed before sale.
Q4. What are contingent goods? Answer: Contingent goods are future goods whose sale depends upon an event that may or may not happen. They are a sub-category of future goods.
Q5. What is a warranty? Answer: A warranty is a stipulation collateral to the main purpose of the contract. It is of secondary importance, and its breach only entitles the buyer to claim damages, not to cancel the contract.
V. Short Answer Questions
Q1. What is an agreement to sell? Answer: An agreement to sell is a contract where the property in goods passes to the buyer at a future time or after conditions are fulfilled. It is an executory contract — the ownership transfer is deferred until the specified conditions are met.
Q2. What are existing goods? Explain the types. Answer: Existing goods are goods owned or possessed by the seller at the time of the contract. They include: 1. Specific goods — identified and agreed upon at the time of contract. 2. Ascertained goods — goods that become specific out of a larger quantity after identification. 3. Generic/Unascertained goods — goods not specifically identified at the time of contract.
Q3. What are the implied conditions in a contract of sale? Answer: The implied conditions are: 1. Title — the seller has the right to sell the goods. 2. Description — goods shall correspond with the description. 3. Sale by Sample — the bulk shall correspond with the sample. 4. Quality or Fitness — goods must be reasonably fit for the buyer's purpose. 5. Merchantability — goods must be of merchantable quality. 6. Wholesomeness — goods must be wholesome (e.g., food items must be safe for consumption). 7. Trade Usage — any usage of trade must be followed.
Q4. What are the implied warranties in a contract of sale? Answer: The implied warranties are: 1. Quiet Possession — the buyer shall enjoy the goods without disturbance. 2. Free from Encumbrances — goods are not subject to any charge or lien. 3. Dangerous Goods — the seller must warn the buyer of any known danger in the goods.
VI. Long Answer Questions
Q1. Explain the elements of a contract of sale. Answer: The essential elements are: 1. Two parties — there must be a seller and a buyer who are different persons; a person cannot buy from himself. 2. Transfer of Property — the ownership of goods must pass from seller to buyer. 3. Goods — the subject matter must be movable property, excluding money and actionable claims. 4. Price — the consideration must be monetary; exchange of goods for goods is a barter, not a sale.
Q2. Distinguish between sale and agreement to sell.
| Point | Sale | Agreement to Sell |
|---|---|---|
| Insolvency of buyer | Seller must return goods | Buyer can retain goods |
| Risk of loss | Lies with buyer | Lies with seller |
| Ownership | Transfers immediately | Transfers in future |
| Nature | Executed contract | Executory contract |
| Insolvency of seller | Buyer can claim goods | Buyer can only claim money |
| Right to resell | Seller cannot seize goods | Seller can resell goods |
| Breach | Treated as breach of contract | Treated as breach of agreement |
Q3. Explain the classification of goods.
1. Existing Goods — owned or possessed by the seller at the time of contract:
- Specific goods — identified and agreed upon at the time of contract.
- Ascertained goods — become specific out of a larger quantity after identification.
- Unascertained goods — not specifically identified at the time of contract.
2. Future Goods — goods not yet in existence or not yet possessed by the seller at the time of contract. They come into existence after the agreement.
3. Contingent Goods — a sub-category of future goods whose sale depends upon an event that may or may not happen.
Q4. Distinguish between condition and warranty.
| Point | Condition | Warranty |
|---|---|---|
| Significance | Essential to the main purpose | Collateral (secondary) to the main purpose |
| Treatment | Breach of condition may be treated as breach of warranty | Breach of warranty cannot be treated as breach of condition |
| Ownership | Cannot transfer without fulfilling condition | Ownership can transfer even if warranty is breached |
| Remedy | Cancel contract and claim damages | Claim damages only |
| Meaning | Essential stipulation | Collateral stipulation |
Q5. Explain the rights of an unpaid seller.
Rights against the buyer: 1. Suit for price — the seller can sue the buyer for the price if goods have been accepted. 2. Suit for damages for non-acceptance — if the buyer wrongfully refuses to accept goods, the seller can claim damages. 3. Suit for cancellation before due date — the seller can cancel the contract if the buyer repudiates before the due date.
Rights against the goods: 1. Lien — the seller can retain possession of goods until payment is received (seller must be in possession; not applicable if sold on credit). 2. Stoppage in transit — the seller can stop goods in transit if the buyer becomes insolvent before taking delivery. 3. Resale — the seller can resell the goods, especially perishable goods, to recover the unpaid amount.
Common Mistakes
- Confusing sale (executed contract, ownership transfers immediately) with agreement to sell (executory contract, ownership transfers later).
- Stating that dividend due is goods — it is an actionable claim, which is excluded from the definition of goods.
- Confusing condition (essential) with warranty (collateral) — a breach of condition can be treated as a breach of warranty, but not vice versa.
- Forgetting that the consideration in a contract of sale must be money — barter is not a sale.
- Confusing specific goods, ascertained goods, and unascertained goods — specific goods are identified at the time of contract, ascertained goods become specific later, and unascertained goods are not identified.
- Omitting the lien condition that the seller must still be in possession of the goods.
- Stating that the unpaid seller's right of lien applies when goods are sold on credit — it does not.
Exam Checklist
- [ ] Can define a contract of sale and list its essential elements
- [ ] Can distinguish between sale and agreement to sell with at least 6 points
- [ ] Can classify goods into existing (specific, ascertained, unascertained), future, and contingent
- [ ] Can list all 7 implied conditions (Title, Description, Sale by Sample, Quality/Fitness, Merchantability, Wholesomeness, Trade Usage)
- [ ] Can list all 3 implied warranties (Quiet Possession, Free from Encumbrances, Dangerous Goods)
- [ ] Can distinguish between condition and warranty with a comparison table
- [ ] Can explain the rights of an unpaid seller against the buyer (3 rights) and against the goods (3 rights)
- [ ] Know that contingent goods depend on an uncertain event and are a sub-category of future goods
- [ ] Remember that actionable claims and money are excluded from the definition of goods