Unit 3: Sale of Goods Act & Consumer Protection Act
Mercantile Law notes · PTU syllabus (BCOM 302-18)
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Unit summary
Buying and selling goods is the most common commercial activity, and consumers need protection from unfair sellers. This unit covers the Sale of Goods Act, 1930 — contract of sale, sale vs agreement to sell, sale vs hire purchase, conditions and warranties, transfer of property and rights of an unpaid seller — and the objectives, features and structure of consumer protection law.
After this unit you can
- Explain the formalities and essentials of a contract of sale
- Distinguish sale from agreement to sell and hire purchase
- Explain conditions and warranties, transfer of property and rights of an unpaid seller
- Explain the objectives, features and redressal structure of the Consumer Protection Act
PTU syllabus topics
- Formalities of a contract of sale
- distinction between sale and agreement to sell
- sale vs. hire-purchase agreement
- conditions and warranties
- transfer of property
- rights of an unpaid seller
- objectives
- features and structure of the Consumer Protection Act
- 1986
Importance
Essential to the contract
Collateral to the main purpose
Breach gives right to
Reject goods and claim damages
Damages only
Example
Car must be of the stated model
Free service for one year
Topic 1
Contract of sale: formalities
A contract of sale is one where the seller transfers or agrees to transfer property in goods to the buyer for a price (Section 4).
- Essentials: two parties, goods (movable property — existing, future or contingent; specific, ascertained or unascertained), price in money, transfer of property, all essentials of a valid contract.
- Formalities (Section 5): made by offer and acceptance; may be in writing, by word of mouth, partly both, or implied from conduct; may provide for immediate or instalment delivery and payment.
- Price (Section 9): fixed by the contract, by agreed manner, or by course of dealing; otherwise a reasonable price.
Topic 2
Sale vs agreement to sell; sale vs hire purchase
Property passes
Immediately
At a future date or on a condition
Nature
Executed contract
Executory contract
Risk
With the buyer
With the seller
Remedy on breach
Seller can sue for the price
Seller can sue only for damages
Seller's insolvency
Buyer can claim goods
Buyer can only claim dividend
Ownership
Passes at once
Passes after the last instalment
Buyer's position
Owner
Bailee until the option is exercised
Termination
Buyer cannot return the goods
Hirer may return the goods and stop paying
Resale by buyer
Good title passes
Hirer cannot pass good title
Topic 3
Conditions and warranties
- Condition (Section 12(2)): a stipulation essential to the main purpose — breach gives the right to repudiate the contract.
- Warranty (Section 12(3)): a stipulation collateral to the main purpose — breach gives only a claim for damages.
- A breach of condition may be treated as a breach of warranty (Section 13) — e.g., when the buyer accepts the goods.
Title
Seller has the right to sell
Description
Goods correspond with the description
Sample
Bulk corresponds with the sample; reasonable opportunity to compare
Description and sample
Both must match
Fitness for purpose
Buyer relies on seller's skill (Priest v. Last)
Merchantability
Goods of saleable quality
Wholesomeness
Eatables fit for consumption (Frost v. Aylesbury Dairy)
- Implied warranties: quiet possession, freedom from encumbrances, disclosure of dangerous nature of goods.
- Caveat emptor ("let the buyer beware" — Section 16): the buyer must examine goods; exceptions: fitness for purpose when the buyer relies on the seller's skill, merchantability, sale by description, trade usage, fraud, sale by sample.
Topic 4
Transfer of property and unpaid seller's rights
- Specific goods in a deliverable state: property passes when the contract is made (Section 20).
- Specific goods to be put in deliverable state, weighed or measured: when that is done and the buyer has notice.
- Goods on approval / sale or return: when the buyer signifies approval or retains beyond the time fixed.
- Unascertained goods: when goods are ascertained and unconditionally appropriated to the contract (Section 23).
- Risk prima facie passes with property (Section 26).
- Transfer of title by non-owner — nemo dat quod non habet (no one can give what they do not have); exceptions: mercantile agent, joint owner, voidable contract, seller or buyer in possession.
Against the goods
Lien (retain possession), stoppage in transit (if buyer insolvent), right of resale
Against the buyer personally
Suit for price, damages for non-acceptance, damages for repudiation, interest
Topic 5
Consumer protection: objectives, features and structure
The syllabus names the Consumer Protection Act, 1986 — it has been replaced by the Consumer Protection Act, 2019 (in force from 20 July 2020). Both are explained below.
Objectives
- Protect consumers against unfair trade practices, defective goods and deficient services.
- Provide simple, speedy and inexpensive redressal.
- Establish consumer councils and redressal agencies.
Consumer rights
- 1
Right to safety
- 2
Right to be informed
- 3
Right to choose
- 4
Right to be heard
- 5
Right to seek redressal
- 6
Right to consumer education
Features
- Consumer: a person who buys goods or hires services for consideration, not for resale or commercial purpose; under the 2019 Act includes online and teleshopping buyers.
- Complaints about unfair or restrictive trade practices, defects, deficiency in service, excess price, hazardous goods.
- Three-tier quasi-judicial redressal machinery.
- 2019 Act additions: Central Consumer Protection Authority (CCPA), product liability, e-commerce rules, mediation, e-filing, penalties for misleading advertisements and endorsements, complaint can be filed where the complainant resides.
Structure of redressal agencies
| Commission | 1986 Act limit | 2019 Act limit (as revised in 2021) | Appeal to |
|---|---|---|---|
| District | Up to ₹20 lakh | Up to ₹50 lakh | State Commission within 45 days |
| State | ₹20 lakh to ₹1 crore | ₹50 lakh to ₹2 crore | National Commission within 30 days |
| National | Above ₹1 crore | Above ₹2 crore | Supreme Court within 30 days |
- Consumer Protection Councils at central, state and district levels promote consumer rights.
Exam tip
State both Acts in the exam if your question paper mentions 1986 — examiners accept answers that note the 2019 replacement.
Key terms
- Contract of sale
- Transfer of property in goods for a price
- Condition
- A stipulation essential to the main purpose; breach permits repudiation
- Caveat emptor
- Let the buyer beware
- Unpaid seller
- A seller not fully paid, with rights against goods and buyer
- Consumer
- A person buying goods or services for consideration, not for resale
Quick revision
- Sale = property passes now; agreement to sell = later.
- Hire purchase: ownership after the last instalment.
- Implied conditions: title, description, sample, fitness, merchantability.
- Unpaid seller: lien, stoppage in transit, resale + suits.
- Consumer redressal: District → State → National → Supreme Court.
Important exam questions
Practice questions written to the PTU exam pattern for this unit's syllabus: short answers (Section A style) and long answers (Sections B and C style).
Short-answer questions
- Q1.What is a contract of sale?
- Q2.Distinguish condition and warranty.
- Q3.State any two exceptions to caveat emptor.
- Q4.What is stoppage in transit?
- Q5.Who is a consumer?
- Q6.What is the pecuniary jurisdiction of the District Commission?
Long-answer questions
- Q1.Explain the essentials of a contract of sale and distinguish sale from agreement to sell and hire purchase.
- Q2.Explain implied conditions and warranties under the Sale of Goods Act.
- Q3.Explain the rules for transfer of property and the rights of an unpaid seller.
- Q4.Explain the objectives, features and redressal machinery of the Consumer Protection Act.
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