The Sale of Goods Act, 1930

(c)Contract of sale resembles with contracts of hire purchase very closely, and indeed the real object of a contract of hire purchase is the sale of the goods ultimately.

Hire Purchase Agreements are governed by the Hire-purchase Act, 1972.

The term “hire-purchase agreement” means an agreement under which goods are let on hire and under which the hirer has an option to purchase them in accordance with the terms of the agreement and includes an agreement under which-

(a)Possession of goods is delivered by the owner thereof to a person on condition that such person pays the agreed amount in periodical instalments, and

(b)The property in the goods is to pass to such person on the payment of the last of such instalments, and

(c)Such person has a right to terminate the agreement at any time before the property so passes.

The main points of distinction between the ‘Sale’ and ‘Hire-Purchase’ are as follows:

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, September 2025, 6(c) (New Scheme).

(a)Specific goods to be put into a deliverable state (Section 21 of the

Sale of Goods Act, 1930): Where there is a contract for the sale of specific goods and the seller is bound to do something to the goods for the purpose of putting them into a deliverable state, the property does not pass until such thing is done and the buyer has notice thereof.

According to section 26, “unless otherwise agreed, the goods remain at the seller’s risk until the property therein is transferred to the buyer, but when the property therein is transferred to the buyer, the goods are at the buyer’s risk whether delivery has been made or not”.

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However, Section 26 also lays down an exception to the rule that ‘risk follows ownership.’ It provides that where delivery of the goods has been delayed through the fault of either buyer or seller, the goods are at the risk of the party in fault as regards any loss which might not have occurred but for such fault.

In the instant case, S had paid in full and purchased a specific dress but the dress required alteration, and it was agreed that the shopkeeper would inform S after alteration for collection. The ownership had already passed to S when she paid for the dress, subject to alteration. The delivery was conditional upon the shopkeeper informing S after alteration.

Even though the ownership may have passed to S, the seller (shopkeeper) failed to complete the delivery by not informing S. Under Section 26, when delivery is delayed due to the fault of the seller, the loss falls upon the party at fault.

Therefore, the shopkeeper is liable to refund the cost of the dress to S.

Alternative Answer

The given problem is based on the concept “Agreement to Sell” under section 4 of the Sale of Goods Act, 1930. The term is defined in Section 4(3) of the Sale of Goods Act, 1930, as - “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, it is called an agreement to sell.” Thus, whether a contract of sale of goods is an absolute sale or an agreement to sell, depends on the fact whether it contemplates immediate transfer from the seller to the buyer or the transfer is to take place at a future date. Hence, in an agreement to sell, the ownership of the goods is not transferred immediately. It is intending to transfer at a future date upon the completion of certain conditions thereon.

In the instant case, though S had paid and purchased a specific dress, but the dress required alteration. Shopkeeper assured S that it would take just one day to get the dress altered and it was agreed that he would inform S after alteration for collection. This reflects that transfer or property in goods is to be transferred subject to fulfilment of the condition i.e., after the alteration.

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Further, Reservation of right of disposal given under Section 25, is applicable here. This section preserves the right of disposal of goods to secure that the price is paid before the property in goods passes to the buyer. Where there is contract of sale of specific goods or where the goods have been subsequently appropriated to the contract, the seller may, by the terms of the contract or appropriation, as the case may be, reserve the right to dispose of the goods, until certain conditions have been fulfilled. In such a case in spite of the fact that the goods have already been delivered to the buyer, the property therein will not pass to the buyer till the condition imposed, if any, by the seller has been fulfilled.

Therefore, still the ownership lies with the seller on account of nonfulfilment of condition as to informing to the S that the dress is altered and is ready.

Further the plea taken by Shopkeeper that 10 days were passed after the alteration done and he is not liable for damage caused, is not justifiable on account of not being a reasonable circumstance and a ground.

Hence, in the light of the given facts, the shopkeeper is liable to refund the cost of the dress to S.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, May 2025, 2(a) (New Scheme).

(c)(i) Section 64 of the Sale of Goods Act, 1930 provides following rules to regulate the sale by auction:

(A)Bid with notification : Right to bid may be reserved expressly by or on behalf of the seller and where such a right is expressly reserved, but not otherwise, the seller or any one person on his behalf may bid at the auction.

Bid by seller without notification: Where the sale is not notified to be subject to a right to bid on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ any person to bid at such sale, or for the auctioneer knowingly to take any bid from the seller or any such person; and any sale contravening this rule may be treated as fraudulent by the buyer.

(B)Bidder to retract from his bid: The sale is complete when the auctioneer announces its completion by the fall of hammer or in any other customary manner. Until such announcement is made, any bidder may retract from his bid.

(C)Effect of pretending bidding: If the seller makes use of pretended bidding to raise the price, the sale is voidable at the option of the buyer.

(ii)Delivery of wrong quantity [Section 37 of the Sale of Goods Act,

1930]: Where the seller delivers to the buyer a quantity of goods less than he contracted to sell, the buyer may reject them, but if the buyer

SUGGESTED ANSWER

accepts the goods so delivered he shall pay for them at the contract rate. [Sub-section (1)]

Where the seller delivers to the buyer a quantity of goods larger than he contracted to sell, the buyer may accept the goods included in the contract and reject the rest, or he may reject the whole. If the buyer accepts the whole of the goods so delivered, he shall pay for them at the contract rate. [Sub-section (2)]

Where the seller delivers to the buyer the goods he contracted to sell mixed with goods of a different description not included in the contract, the buyer may accept the goods which are in accordance with the contract and reject, or may reject the whole. [Sub-section (3)]

The provisions of this section are subject to any usage of trade, special agreement or course of dealing between the parties. [Subsection (4)]

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, September 2024, 6(c) (New Scheme).

(a)Ascertainment of price (Section 9 of the Sale of Goods Act, 1930):

By virtue of Section 9, the price in a contract of sale may be-

(1)fixed by the contract, or

(2)agreed to be fixed in a manner provided by the contract, e.g., by a valuer, or

(3)determined by the course of dealing between the parties.

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Agreement to sell at valuation (Section 10):

Section 10 provides for the determination of price by a third party.

1.Where there is an agreement to sell goods on the terms that price is to be fixed by the valuation of a third party and that third party either does not or cannot make such valuation, the agreement is thereby avoided.

However, a buyer who has received and appropriated the goods, must pay a reasonable price for them.

2.In case the third party is prevented from making the valuation by the default of either party, the party not at fault may maintain a suit for damages against the party in fault.

(i)In the instant case, Priya handed over the keys of her twowheeler to Sony and it was decided between them that price of the vehicle will be fixed by Priya’s father. However, Priya’s father refused to fix the price as he did not want Priya to sell her vehicle. As the keys have already been handed over to Sony, Priya cannot take back the keys from Sony and Sony shall pay reasonable price to Priya for the two-wheeler.

(ii)If Priya had not handed over the vehicle to Sony, the contract could have been avoided as Priya’s father refused to fix the price of the vehicle.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, June 2024, 2(a) (New Scheme).

(a)An ‘Auction Sale’ is a mode of selling property by inviting bids publicly and the property is sold to the highest bidder. Section 64 of the Sale of Goods Act, 1930 regulates the legal requirements for the sale by auction.

In terms of the provisions of the above Section, following are some of the requirements, which inter alia are required to be complied with for conduct of a valid auction sale-

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(i)Where the goods are sold in lots: Where the goods are put up for sale in lots, each lot is prima facie deemed to be subject of a separate contract of sale.

(ii)Right to bid may be reserved: Right to bid may be reserved expressly by or on behalf of the seller and where such a right is expressly reserved, but not otherwise, the seller or any one person on his behalf may bid at the auction.

(iii)Where the sale is not notified by the seller: Where the sale is not

notified to be subject to a right to bid on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ any person to bid at such sale, or for the auctioneer knowingly to take any bid from the seller or any such person; and any sale contravening this rule may be treated as fraudulent by the buyer.

(iv)Reserved price: The sale may be notified to be subject to a reserve or upset price;

In the first Auction sale, the rejection of Mr. Dev’s bidding was not justified since the information as to the right to bid was not expressly given. Therefore, this auction sale was unlawful.

In auction sale of lot 2, since right to bid was not notified, it shall not be lawful for the seller to bid himself or to employ any person to bid at such sale. Therefore, auction made in favour of Mr. Dheer will be considered lawful.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, June 2024, 5(a) (New Scheme).

(c)According to Section 24 of the Sales of Goods Act, 1930, in case of delivery of goods on approval basis, the property in goods passes from seller to the buyer:-

(i)When the person to whom the goods are given either accepts them or does an act which implies adopting the transaction.

(ii)When the person to whom the goods are given retains the goods without giving his approval or giving notice of rejection beyond the time fixed for the return of goods and in case no time is fixed after the lapse of reasonable time.

In the given case, J (seller) has delivered on approval 100 bags of rice of 10 kg each to local retailer (buyer) on sale or returnable basis within a month of delivery. Out of these 100 bags, the local retailer sold 5 bags to K (customer). It implies that the local retailer has accepted 5 bags out of 100.

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A week later, local retailer received the complaint of some defect in the rice bags, so, he wanted to return all the bags to the J (seller).

According to the above provisions, the local retailer is entitled to return only 95 bags to the J (seller) and not those 4 bags which are not used by

K.Because, as per clause (i) above, the local retailer has already sold 5

bags, signifying that he has done an act which implies adopting the transaction relating to those 5 bags.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, June 2024, 6(c) (New Scheme).

(a)(i) As per section 30(2) of the Sale of Goods Act, 1930, where a buyer with the consent of the seller obtains possession of the goods before the property in them has passed to him, he may sell, pledge or otherwise dispose of the goods to a third person, and if such person obtains delivery of the goods in good faith and without notice of the lien or other right of the original seller in respect of the goods, he would get a good title to them.

In the instant case, furniture was delivered to Y under an agreement that price was to be paid in three instalments; the furniture to become property of Y on payment of third instalment. Y sold the furniture to Z before the third instalment was paid. Here, Z acquired a good title to the furniture, since he purchased the furniture in good faith.

Hence, X will not succeed in his suit for the recovery of the furniture as Z acquired a good title of the furniture.

(ii)According to Section 37(1) of the Sale of Goods Act, 1930, where the seller delivers to the buyer a quantity of goods less than he contracted to sell, the buyer may reject them, but if he accepts the goods so delivered, he shall pay for them at the contract rate.

In the instant case, R delivered 700 kg of tomatoes on 15th July, 2023 and agrees to deliver 300 kg in the next month. Later R failed to deliver the balance quantity and B

(buyer)refused to pay the price of 700 kg of tomatoes.

Considering the above provisions, we can conclude that B cannot refuse to pay for 700 kg of tomatoes to R.

Important Note: The answer can also be given as per Section 34 of the Sale of Goods Act, 1930, which provides that a delivery of part of goods, in progress of the delivery of the whole has the same effect, for the purpose of passing the property in such goods, as a delivery of the whole.

In the instant case, R delivered 700 kg of tomatoes on 15th July, 2023 and agrees to deliver 300 kg in the next month. Later R failed to deliver the balance quantity and B (buyer) refused to pay the price of 700 kg of tomatoes.

Considering the above provisions, we can conclude that B cannot refuse to pay for 700 kg of tomatoes to R.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, December 2023, 5(a) (Old Scheme).

(c)As per the provisions of Section 2(10) of the Sale of Goods Act, 1930, price is the consideration for sale of goods and therefore is a requirement to make a contract of sale. Section 2(10) is to be read with Section 9 of the Sale of Goods Act, 1930.

According to Section 9 of the Sale of Goods Act, 1930, the price in a contract of sale may be fixed by the contract or may be left to be fixed in manner thereby agreed or may be determined by the course of dealing between the parties.

Even though both the parties missed to discuss the price of the car while making the contract, it will be a valid contract, rather than being uncertain and void; the buyer shall pay a reasonable price in this situation.

In the given case, Mr. A and Mr. B have entered into a contract for sale of a motor car, but they did not fix the price of the same. Mr. A refused to sell the car to Mr. B on this ground. Mr. B can legally demand the car from Mr. A and Mr. A can recover a reasonable price of the car from Mr. B.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, June 2023, 1(c) (Old Scheme).

(c)(i) Goods perishing before making of Contract (Section 7 of the Sale of Goods

Act, 1930): In accordance with the provisions of the Sale of Goods Act, 1930 as contained in Section 7, a contract for the sale of specific goods is void, if at the time when the contract was made; the goods without the knowledge of the seller, perished or become so damaged as no longer to answer to their description in the contract, then the contract is void ab initio.

(ii)Goods perishing before sale but after agreement to sell (Section 8 of the Sale

of Goods Act, 1930): Where there is an agreement to sell specific goods, and subsequently the goods without any fault on the part of the seller or buyer perish or become so damaged as no longer to answer to their description in the agreement before the risk passes to the buyer, the agreement is thereby avoided or becomes void.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, May 2022, 1(c) (Old Scheme).

(a)As per Section 4(3) of the Sale of Goods Act, 1930, 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, but 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 and as per Section 4(4), 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.

(i)On the basis of above provisions and facts given in the question, it can be said that there is an agreement to sell between Sonal and Jeweller and not a sale. Even though the payment was made by Sonal, the property in goods can be transferred only after the fulfilment of conditions fixed between the buyer and the seller. As due to Ruby Stones, the original design is disturbed, bangles are not in original position. Hence, Sonal has right to avoid the agreement to sell and can recover the price paid.

(ii)If Jeweller offers to bring the bangles in original position by repairing, he cannot charge extra cost from Sonal. Even though he has to bear some expenses for repair; he cannot charge it from Sonal.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, May 2022, 5(a) (Old Scheme).

(a)The main points of distinction between the 'Sale' and 'Hire-Purchase' are as follows:

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, December 2021, 4(a) (Old Scheme).

(a)(i) Sale by description [Section 15 of the Sale of Goods Act, 1930]:

Where there is a contract of sale of goods by description (including size, colour, specifications), there is an implied condition that the goods shall correspond with the description. The buyer is not bound to accept and pay for the goods which are not in accordance with the description of goods.

Romi had placed a customised order specifying size and colour that suited her office cabin. If the sofa delivered does not correspond to the agreed description (size and colour), Romi has the right to reject it.

Implied condition of fitness for purpose [Section 16(1)]: Where

the buyer makes known to the seller the particular purpose for which the goods are required and relies on the seller's skill or judgment, there is an implied condition that the goods shall be reasonably fit for that purpose. Since Romi described her exact requirements (size, colour scheme matching her office cabin) and relied on Parth's showroom expertise, this implied condition is also triggered.

In the instant case, Romi had specifically reserved the right to reject the sofa if it was not according to the agreed size and color description. Mr. Parth accepted this condition and fixed a maximum approval period of 20 days after delivery and installation. This was a sale on approval with a fixed return period under Section 24.

Even if the sofa did not correspond with the description or was not fit for the intended purpose, Romi's remedy was to give notice of rejection within the 20-day period. She failed to do so, therefore the property in the sofa passed to Romi automatically on expiry of the 20-days period and her right to reject on grounds of description or fitness was available only within the approval period - having retained the sofa without rejection, she is now bound to pay.

Romi cannot refuse payment of ₹ 45,000 after the expiry of the

20-days approval period. The property in the sofa was passed to her and her right to reject on grounds of description or fitness was available only within the approval period.

(ii)Rule related to Acceptance of Delivery of Goods (Section 42):

Acceptance is deemed to take place when the buyer-

(a)intimates to the seller that he had accepted the goods; or

(b)does any act to the goods, which is inconsistent with the ownership of the seller; or

(c)retains the goods after the lapse of a reasonable time, without intimating to the seller that he has rejected them.

In the instant case, Romi’s conduct clearly indicates acceptance because she allowed installation and assembly of the sofa, she paid ₹ 4,500 towards cartage and packing, she additionally paid ₹ 1,500 for

carrying the sofa to the 9th floor by stairs and she retained and used the sofa beyond the agreed approval period of 20 days. These acts are inconsistent with rejection of goods.

Therefore, Romi had signified her approval before the specified day through her conduct. Hence, the sofa is deemed to have been accepted by her.

Alternate Answer to (ii)

(ii)Section 24 of the Sale of Goods Act, 1930, which deals with 'Sale

on Approval' (Sale or Return): 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 he 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.

In the instant case, Romi’s conduct clearly indicates that the goods pass to her because she allowed installation and assembly of the sofa, she paid ₹ 4,500 towards cartage and packing, she additionally paid ₹ 1,500 for carrying the sofa to the 9th floor by stairs and she

retained and used the sofa beyond the agreed approval period of 20 days.

Therefore, Romi had signified her approval before the specified day through her conduct. This implies that she has accepted the Sofa.

(iii)Suit for Price (Section 55): According to Section 55 of the Sale of Goods Act, 1930, where under a contract of sale, the property in the goods has passed to the buyer and the buyer wrongfully neglects or refuses to pay for the goods according to the terms of the contract, the seller may sue him for the price of the goods.

Damages for Non-Acceptance (Section 56): Where the buyer

wrongfully neglects or refuses to accept and pay for the goods, the seller may sue the buyer for damages for non-acceptance.

Interest and Special Damages (Section 61): Allows the Court to award interest on the price from the date of tender or from the date of the suit, as the court deems fit.

In the instant case, Mr. Parth is not bound to accept ₹ 25,000 as full and final settlement because the rejection by Rumi

was delayed and acceptance had already deemed to be taken place and the sofa was customized and not easily resalable.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, May 2026, 2(a) (New Scheme).

(a)(i) Condition as to quality or fitness [Section 16(1) of the Sale of Goods Act, 1930]:

There is implied condition on the part of the seller that the goods supplied shall be reasonably fit for the purpose for which the buyer wants them, provided the following conditions are fulfilled:

(a)The buyer should have made known to the seller the particular purpose for which goods are required.

(b)The buyer should rely on the skill and judgement of the seller.

(c)The goods must be of a description dealt in by the seller, whether he be a manufacturer or not.

Similarly, where the goods are bought by description from a seller who deals in goods of that description, there is an implied condition that the goods shall be of mercantile quality [Section 16(2)].

In the instant case, Rishi informed the dealer about the heavy and strong clay of his farmhouse and relied upon the dealer’s expertise for selecting the tractor and seed planter machines. Therefore, the implied condition as to fitness for purpose under Section 16(1) applies.

As regards the tractor, it broke down within 16 days because it was unsuitable for the intended purpose. This amounts to breach of the implied condition regarding fitness for purpose.

Breach of a condition gives the buyer the right to treat the contract as repudiated and reject the goods and claim refund of price.

Hence, Rishi is entitled to reject and return the tractor and repudiate the contract relating to the tractor.

(ii)In case of the six seed planter machines, only one machine was defective and unsuitable, whereas the remaining five machines were suitable and had already been used by Rishi. Further, the bill contained separately itemized pricing and serial numbers, indicating a severable contract.

The seed planter that broke down on the same day (16th day) was also found unsuitable for the specific field/purpose. This is essentially breach of implied condition of fitness for purpose under Section 16(1). Therefore, Rishi can return this one machine and claim refund.

Also, according to Section 37(3), where the seller delivers to the buyer the goods he contracted to sell mixed with goods of a different description not included in the contract, the buyer may accept the goods which are in accordance with the contract and reject or may reject the whole.

The remaining 5 seed planters were used and found to be suitable for the field. Since they performed as expected, there is no breach of any condition or warranty for these 5 machines.

Therefore, Rishi can reject and return only the defective seed planter machine (breach of fitness condition), but he cannot return all six seed planter machines since the remaining five machines were suitable and already accepted by use.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, May 2026, 5(a) (New Scheme).

(a)Major difference between a Condition and Warranty under the Sale of Goods Act, 1930:

The following are the major differences between a ‘Condition’ and a ‘Warranty’ as per the provisions of the Sale of Goods Act, 1930.

(i)This is a case of ‘Breach of Warranty’ as to undisturbed possession.

As per Section 14(b) of the Sale of Goods Act, 1930, if the buyer having got possession of the goods, is later on disturbed in his possession, he is entitled to sue the seller for the breach of the warranty.

Therefore, Sudhir shall be held responsible for a breach and Ashutosh is entitled to sue Sudhir, the seller without title, for the recovery of the purchase price.

Alternative Answer (i)

This is a case of ‘Breach of Condition’ as to Title.

As per Section 14(a) of the Act, the condition implied is that the seller has the right to sell the goods (means he should be the real owner) at the time when the property is to pass.

If the seller’s title/ownership turns out to be defective, the buyer must return the goods to the true owner and recover the price from the seller.

In the given case, Sudhir has no right to sell as he was not the actual owner of laptop even though he sold the laptop to Ashutosh for consideration of ₹ 10,000/-. As the title of Sudhir turned out to be

defective, Ashutosh should return the laptop to Mahendra and recover the full price paid from Sudhir.

Thus, Sudhir has breached the implied condition as to title.

Therefore, Sudhir shall be held responsible for a breach and Ashutosh is entitled to sue Sudhir, the seller without title, for the recovery of the purchase price.

(ii)This is a case of breach of condition of ‘Sale by Description’.

As per Section 15 of the Act, where there is a contract of sale of goods by description, there is an implied condition that the goods shall correspond with the description.

The buyer is not bound to accept and pay for the goods which are not in accordance with description.

Therefore, Anita is entitled to reject the Couch as it was not Italian as narrated on the e-commerce platform and ask for refund if already paid.

(iii)This is a case of ‘Breach of Warranty’ as to Non-existence of Encumbrances.

As per Section 14(c) of the Act, there is an implied warranty that the goods shall be free from any charge or encumbrance in favour of any third party not declared or known to the buyer before or at the time the contract is entered into.

In the given case the car was already hypothecated in favour of a bank. However, Rishabh took another loan of ₹ 5 Lakhs from his friend

Sandeep on the basis of security of his car, without informing him about hypothecation of car.

Therefore, Sandeep may file a suit against Rishabh for recovery of the money with interest. It may be noted that Sandeep can file a Civil Suit on a Competent Court to recover damages. The claim would be for loss suffered due to breach of Warranty and not the ownership of the Car.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, January 2026, 2(a) (New Scheme).

(a)(i) Whether Raj would be held responsible?

According to Section 16(1) of the Sale of Goods Act, 1930, there is an implied condition that the goods shall be reasonably fit for the purpose for which they are purchased, provided the buyer makes the purpose known to the seller and relies on the seller's skill or judgment.

In the instant case, Raj is the manufacturer. As a manufacturer of talcum powder, there is an implied condition that the product is fit for human skin usage. Since the powder contained a chemical residue that caused skin irritation, it was not of merchantable quality, meaning it was not fit for its ordinary purpose (application to the body).

The chemical residue constitutes a "latent defect" (not discoverable by ordinary inspection), making the product unmerchantable and unfit for use. Therefore, the doctrine of caveat emptor (let the buyer beware) does not apply here because the defect was not discoverable by ordinary inspection, and the seller (as manufacturer) is liable for the fitness of the product.

Raj, the manufacturer of the talcum powder, is responsible for the skin irritation of Vikas. Raj cannot deny liability based on the buyer's selection because the product was not of "merchantable quality," which is an implied condition in sale of goods. Vikas can claim damages from Raj for the skin irritation caused by the defective talcum powder.

(ii)If Raj is only a Trader: Section 16(2) of the Sale of Goods Act, 1930 states that where goods are bought by description from a seller who deals in goods of that description (whether he is the manufacturer or not), there is an implied condition that the goods shall be of "merchantable quality".

Even if Raj is merely a trader selling a popular brand in a sealed container, the goods must still be merchantable (i.e., fit for use). A product that causes skin irritation due to chemical residue is not of merchantable quality. The seller is liable for latent defects in the goods even if they are sold in a sealed container, as the seller is expected to sell goods that are fit for consumption/use.

Raj is still responsible for selling goods of unmerchantable quality, even if he is just a trader.

Alternate Answer (ii)

One of the exceptions of doctrine of Caveat Emptor is that, in case where the goods are purchased under its patent name or brand name, there is no implied condition that the goods shall be fit for any particular purpose [Section 16(1)].

Here, the buyer is relying on the particular brand name. However, when goods are sold in a sealed container of a reputed brand, the trader does not manufacture the goods and has no control over the contents.

Here, Raj is only a trader, not a manufacturer. So, the manufacturer is responsible and not Raj.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, January 2026, 5(a) (New Scheme).

(a)(i) Fitness as to Quality or Use [Section 16 (1) of the Sale of Goods Act, 1930]

According to Section 16(1) of the Sale of Goods Act, 1930 there is implied condition on the part of the seller that the goods supplied shall be reasonably fit for the purpose for which the buyer wants them, provided the following conditions are fulfilled:

1.The buyer should have made known to the seller the particular purpose for which goods are required.

2.The buyer should rely on the skill and judgement of the seller.

3.The goods must be of a description dealt in by the seller, whether he be a manufacturer or not.

In some cases, the purpose may be ascertained from the conduct of the parties or from the nature of the goods sold. Where the goods can be used only for one purpose, the buyer need not tell the seller the purpose for which he requires the goods.

In the instant case, Ms. S clearly informed the Seller that she needed a laptop for high end graphic design work. The Seller recommended a model, creating an implied condition that it would be suitable for that purpose. The laptop failed to meet the required performance standards, breaching the implied condition of fitness.

Ms. S can take legal action against the seller. The seller breached the implied condition as to fitness for purpose, since the laptop recommended was not suitable for high-end graphic design work.

(ii)According to Section 30(1) of the Sale of Goods Act, 1930, if a person has sold goods but continues to be in possession of them or of the documents of title to them, he may sell them to a third person, and if such person obtains the delivery thereof in good faith and without notice of the previous sale, he would have good title to them, although the property in the goods had passed to the first buyer earlier.

A pledge or other disposition of the goods or documents of title by the seller in possession are equally valid.

Therefore, in the instant case, RL Jewellers have got good title over the jewellery sold by Mr. S and Mr. R cannot take any action against RL Jewellers. However, Since Mr. S has violated the condition of pledge, he can claim only from the property of Mr. S as he has become insolvent.

(ii)ALTERNATE ANSWER

Condition as to Title [Section 14(a)]: In every contract of sale, unless there is an agreement to the contrary, the first implied condition on the part of the seller is that

(a)in case of a sale, he has a right to sell the goods, and

(b)in the case of an agreement to sell, he will have right to sell the goods at the time when the property is to pass.

In simple words, the condition implied is that the seller has the right to sell the goods (means he should be the real owner) at the time when the property is to pass. If the seller’s title/ownership turns out to be defective, the buyer must return the goods to the true owner and recover the price from the seller.

Warranty as to non-existence of encumbrances [Section 14(c)]: An

implied warranty that the goods shall be free from any charge or encumbrance in favour of any third party not declared or known to the buyer before or at the time the contract is entered into.

In every agreement of sale, it is an implied condition that the Seller will have a right to sell the goods at the time when the property is to pass.

In the above case Mr. S was not real owner as he already pledges the jewellery to Mr. R.

On the other hand, it is implied warranty that the goods will be free from any charge and encumbrance. In above case Mr. S has not disclosed encumbrance to Jewellers and sold jewellery.

Thus, M/s RL Jewellers will not be liable to return the jewellery for which he already paid. Mr. R can file a suit against Mr. S. But here in this situation S declared himself insolvent. So, Mr. R can recover from property of Mr. S only.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, September 2025, 5(a) (New Scheme).

(a)(i) According to Section 18 of the Sale of Goods Act, 1930, where there is a contract of sale for unascertained goods, the property in goods cannot pass to the buyer unless and until the goods are ascertained. The buyer can get the ownership right on the goods only when the goods are specific and ascertained.

According to section 20 of the Sale of Goods Act, 1930, where there is an unconditional contract for sale of specific goods in deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment of price or the time of delivery of the goods, or both, is postponed. Here, the condition is goods must be ready for delivery.

In the instant case, since the microchips were specifically identified and were in a deliverable state when the contract was formed on August 1, 2023, ownership (and risk) likely passed to PQR Enterprises on August 1, 2023.

Therefore, PQR Enterprises will suffer the loss.

Goods are not specifically identified and ascertained:

If the microchips were not specifically identified and marked for PQR Enterprises at the time of the contract, MNO Limited will suffer the loss, as the risk would not have transferred to PQR Enterprises.

SUGGESTED ANSWER

(ii)As per Section 27 of the Sale of Goods Act, 1930, “no one can transfer a better title than they themselves have.” This means that a person who is not the owner of goods cannot convey ownership unless authorized by the true owner.

Also, Section 14(a) imposes an implied condition in every contract of sale that the seller has the right to sell the goods means he should be the real owner. If the seller’s title turns out to be defective, the buyer must return the goods to the true owner and recover the price from the seller.

In the instant case, A will succeed in his action against B for the return of the price, as B had no title to sell the stolen motorcycle, and the sale was in breach of the implied condition.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, January 2025, 2(a) (New Scheme).

(a)(i) Delivery of the goods to the carrier [Section 23(2) of the Sale of

Goods Act, 1930]: Where, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) for the purpose of transmission to the buyer, and does not reserve the right of disposal, he is deemed to have unconditionally appropriated the goods to the contract.

In the instant case, the Institute of Science, Pune placed an order for various chemicals worth ₹ 1,50,000 from a supplier in Delhi. The seller

SUGGESTED ANSWER

dispatched the consignment via a courier without reserving any right of disposal over the goods. The consignment was lost in transit. According to Section 23(2), it is an unconditional appropriation of goods because of which the Institute of Science, Pune (buyer) has become the owner of the goods. Therefore, it will bear the risk of loss of the consignment in the way. Hence, the buyer’s claim is not valid.

(ii)Condition as to Merchantability [Section 16(2) of the Sale of Goods

Act, 1930]: Where goods are bought by description from a seller who deals in goods of that description (whether he is the manufacturer or producer or not), there is an implied condition that the goods shall be of merchantable quality.

There are two requirements for this condition to apply:

(a)Goods should be bought by description.

(b)The seller should be a dealer in goods of that description.

Provided that, if the buyer has examined the goods, there shall be no implied condition as regards defects which such examination ought to have revealed.

The expression “merchantable quality”, though not defined, nevertheless connotes goods of such a quality and in such a condition a man of ordinary prudence would accept them as goods of that description. It does not imply any legal right or legal title to sell.

In the instant case, the defect in the engine could not have been detected even with a reasonable inspection.

Therefore, Adarsh can invoke the implied condition of merchantability and is entitled to repudiate the contract due to the defect in the car.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, January 2025, 5(a) (New Scheme).

(a)(i) According to Section 15 of the Sale of Goods Act, 1930, where there is a contract of sale of goods by description, there is an implied condition that the goods shall correspond with the description. The buyer is not bound to accept and pay for the goods which are not in accordance with the description of goods.

In the instant case, the contract specified that the basmati rice should be grown in Chhattisgarh, packed in pink colour bags of 25 kg each but the seller mistakenly packed 1800 kg of rice from Maharashtra in white bags of 30 kg each, and only 200 kg of rice from Chhattisgarh in the correct pink bags.

Therefore, the buyer has the right to reject the entire quantity of basmati rice supplied by the buyer as the goods do not correspond with the description.

ANSWER TO SECOND PART

In case the buyer has to accept the entire quantity of rice to fulfil his other contracts with other parties, he can claim damages which provides that where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may sue the seller for damages for non-delivery.

ALTERNATE ANSWER TO SECOND PART

Section 13 of the Sale of the Goods Act, 1930 specifies cases where a breach of condition be treated as a breach of warranty. As a result of which the buyer loses his right to rescind the contract and can claim damages only.

In the following cases, a contract is not avoided even on account of a breach of a condition:

SUGGESTED ANSWER

(i)Where the buyer altogether waives the performance of the condition. A party may for his own benefit, waive a stipulation. It should be a voluntary waiver by buyer.

(ii)Where the buyer elects to treat the breach of the conditions, as one of a warranty. That is to say, he may claim only damages instead of repudiating the contract. Here, the buyer has not waived the condition but decided to treat it as a warranty.

According to above stated provision, there is a breach of condition, and the buyer can reject the goods. But if the buyer so elects, he may treat it as a breach of warranty, hence he may accept the entire quantity to fulfil his other contracts with other parties and claim damages.

(ii)Section 10 of the Sale of Goods Act, 1930 provides for the determination of price by a third party.

1.Where there is an agreement to sell goods on the terms that price has to be fixed by the third party and he either does not or cannot make such valuation, the agreement will be void.

2.In case the third party is prevented by the default of either party from fixing the price, the party at fault will be liable to the damages to the other party who is not at fault.

In the instant case, as Kusum cannot do valuation of laptop due to non-sharing of particulars and configuration by Kartik who was bound by his promise, the agreement will be void.

The other remedy available to Vasant is that he can claim damages from Kartik as he will be liable for the damages to Vasant who is not at fault.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, September 2024, 2(a) (New Scheme).

(c)Various types of implied warranties are covered under Sections 14 and 16 of the Sale of Goods Act, 1930 which are as follows:

1.Warranty as to undisturbed possession [Section 14(b)]: An implied warranty that

the buyer shall have and enjoy quiet possession of the goods. That is to say, if the buyer having got possession of the goods, is later on disturbed in his possession, he is entitled to sue the seller for the breach of the warranty.

2.Warranty as to non-existence of encumbrances [Section 14(c)]: An implied

warranty that the goods shall be free from any charge or encumbrance in favour of any third party not declared or known to the buyer before or at the time the contract is entered into.

3.Warranty as to quality or fitness by usage of trade [Section 16(3)]: An implied

warranty as to quality or fitness for a particular purpose may be annexed or attached by the usage of trade.

4.Disclosure of dangerous nature of goods: Where the goods are dangerous in nature and the buyer is ignorant of the danger, the seller must warn the buyer of the probable danger. If there is a breach of warranty, the seller may be liable in damages.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, December 2023, 1(c) (Old Scheme).

(a)(i) According to Section 64 of the Sale of Goods Act, 1930, the sale is complete when the auctioneer announces its completion by the fall of hammer or in any other customary manner.

In the given question, the auction sale is complete on 7th March, 2023.

(ii)As per the provisions of Sub-Section (2) of Section 17 of the Sale of Goods Act, 1930, in a contract of sale by sample, there is an implied condition that:

(a)the bulk shall correspond with the sample in quality;

(b)the buyer shall have a reasonable opportunity of comparing the bulk with the sample.

In this case, M received the goods by sample from L but since the goods were not

according to the sample, M can reject the goods and can sue L.

With regard to K and L, L can recover damages from K and K can recover damages from J. But, for both K and L, it will not be treated as a breach of implied condition as to sample as they have accepted and sold the goods according to Section 13(2) of the Sale of Goods Act, 1930.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, June 2023, 5(a) (Old Scheme).

(a)(i) Yes, Mr. J can refuse to replace the marble as he has supplied the marble as per the requirement of the buyer i.e. Mr. K.

Duty of Mr. K (the buyer) is that he has to examine the marbles and tiles carefully and should follow the caution given by Mr. J i.e. the seller that tiles can bear only a reasonable weight before laying them in the parking space of his house.

Duty of Mr. J (the seller) is that the goods supplied (i.e. tiles and marbles) shall be reasonably fit for the purpose for which the buyer wants them.

According to the doctrine of Caveat Emptor, it is the duty of the buyer to satisfy himself before buying the goods that the goods will serve the purpose for which they are being bought.

In this case Mr. K has accepted the marbles without examination. Hence, there is no implied condition as regards to defects in marbles. Mr. J can refuse to replace the marble as he has supplied the marble as per the requirement of the buyer i.e., Mr. K.

Alternate Answer

(a)(i) According to doctrine of caveat emptor the buyer cannot hold the seller responsible for defect in goods supplied as it is the duty of the buyer to make a proper selection or choice of the goods. Section 16(1) also provides that there is no implied condition as to quality of fitness of the goods sold for any particular purpose. However, as an exception to this doctrine, the section further provides that if the buyer had made known to the seller the purpose of his purchase; relied on the seller’s skill and j udgement; and Seller’s business is to supply goods of that description then it shall be the duty of the seller to supply such goods as are reasonably fit for that purpose.

In the instant case, Mr. K has made known to Mr. J the purpose of his purchase and relied on his skill and judgement. It was the duty of Mr. J to supply the marbles fit for that purpose including for second floor. Since the marbles supplied were not fit for second floor Mr. J is liable to replace the marbles to the extent not fit for that purpose.

Duty of Mr. K (the buyer) As per the above doctrine it was the duty of the buyer Mr. K to make known to Mr. J the purpose of his purchase of marbles. He has fully performed his part arranging the visit of Mr. J to the site.

Duty of Mr. J (the seller) is that the goods supplied (i.e. tiles and marbles) shall be reasonably fit for the purpose for which the buyer wants them. If Mr. K relied on the skill and judgement of Mr. J he failed to perform his duty by neglecting the request of Mr. K to visit second floor resulting in supplies of unfit marbles for the purpose of Mr. K.

Considering the above provisions Mr. J will be liable to replace the marbles not fit for the second floor as Mr. J is bound to the implied condition to supply the marbles as per the requirement of Mr, J when he has made him known about that and relied on his skill and judgement.

(ii)According to the doctrine of Caveat Emptor, it is the duty of the buyer to satisfy himself before buying the goods that the goods will serve the purpose for which they are being bought.

Here, Mr. J supplied the boxes of tiles with a word of caution that the tiles can bear only a reasonable weight. Even though the tiles were laid in the car parking space of Mr. K and got damaged later because of vehicle used for unloading of cement bags were beyond the reasonable weight. Hence, the seller i.e., M/s Makrana Marbles is not liable as the buyer Mr. K as before laying down the tiles, has to satisfy himself that the tiles will serve the specific purpose i.e., can be used for car parking space only.

Therefore, the replacement of the damaged tiles cannot be imposed on M/s Makrana Marbles.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, November 2022, 5(a) (Old Scheme).

(a)(i) Sale by sample [Section 17 of the Sale of Goods Act, 1930]: In a contract of sale

by sample, there is an implied condition that

(a)the bulk shall correspond with the sample in quality;

(b)the buyer shall have a reasonable opportunity of comparing the bulk with the sample,

(c)the goods shall be free from any defect rendering them un-merchantable, which would not be apparent on reasonable examination of the sample. This condition is applicable only with regard to defects, which could not be discovered by an ordinary examination of the goods. If the defects are latent, then the buyer can avoid the contract. This simply means that the goods shall be free from any latent defect i.e. a hidden defect.

(ii)The following are the implied warranties operative under the Act:

1.Warranty as to undisturbed possession [Section 14(b)]: An implied

warranty that the buyer shall have and enjoy quiet possession of the goods. That is to say, if the buyer having got possession of the goods, is later on disturbed in his possession, he is entitled to sue the seller for the breach of the warranty.

2.Warranty as to non-existence of encumbrances [Section 14(c)]: An implied

warranty that the goods shall be free from any charge or encumbrance in favour of any third party not declared or known to the buyer before or at the time the contract is entered into.

3.Warranty as to quality or fitness by usage of trade [Section 16(3)]: An

implied warranty as to quality or fitness for a particular purpose may be annexed or attached by the usage of trade.

Regarding implied condition or warranty as to the quality or fitness for any particular purpose of goods supplied, the rule is ‘let the buyer beware’ i.e., the seller is under no duty to reveal unflattering truths about the goods sold, but this rule has certain exceptions.

4.Disclosure of dangerous nature of goods: Where the goods are dangerous in nature and the buyer is ignorant of the danger, the seller must warn the buyer of the probable danger. If there is a breach of warranty, the seller may be liable in damages.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, May 2022, 4(a) (Old Scheme).

(a)(i) Condition as to quality or fitness [Section 16(1) of the Sale of Goods Act, 1930]:

The condition as to the reasonable fitness of goods for a particular purpose may be implied if the buyer had made known to the seller the purpose of his purchase and relied upon the skill and judgment of the seller to select the best goods and the seller has ordinarily been dealing in those goods.

There is implied condition on the part of the seller that the goods supplied shall be reasonably fit for the purpose for which the buyer wants them, provided the following conditions are fulfilled:

(a)The buyer should have made known to the seller the particular purpose for which goods are required.

(b)The buyer should rely on the skill and judgement of the seller.

(c)The goods must be of a description dealt in by the seller, whether he be a manufacturer or not.

In the instant case, as the timber supplied by the seller is commercially fit for the purposes for which it was ordered, it means the implied condition on the part of the seller is fulfilled.

Hence, TK cannot reject the timber.

Alternatively, the above answer can also be provided as under:

According to Section 15 of the Sale of Goods Act, 1930 where there is a contract for the sale of goods by description, there is an implied condition that the goods shall correspond with the description. The buyer is not bound to accept and pay for the goods which are not in accordance with the description of goods.

Thus, it has to be determined whether the buyer has undertaken to purchase the goods by their description, i.e., whether the description was essential for identifying the goods where the buyer had agreed to purchase. If that is required and the goods tendered do not correspond with the description, it would be breach of condition entitling the buyer to reject the goods.

In the instant case, as the timber supplied by seller varies in thickness from 1 inch to 1.4 inches, it does not correspond with the description ordered by TK i.e. of 1 inch, TK may reject the timber.

(ii)Right of stoppage in transit (Section 50 of the Sale of Goods Act, 1930):

Subject to the provisions of this Act, when the buyer of goods becomes insolvent, the unpaid seller who has parted with the possession of the goods has the right of stopping them in transit, that is to say, he may resume possession of the goods as long as they are in the course of transit and may retain them until paid or tendered price of the goods.

When the unpaid seller has parted with the goods to a carrier and the buyer has become insolvent, he can exercise this right of asking the carrier to return the goods back, or not to deliver the goods to the buyer.

In the instant case, CD, the buyer becomes insolvent, and 450 bags are in transit. AB, the seller, can stop the goods in transit by giving a notice of it to CD. The official receiver, on CD’s insolvency cannot claim the bags.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, December 2021, 5(a) (Old Scheme).

(c)(i) Under the Sale of Goods Act, 1930, even if goods have been delivered to the buyer, the seller may restrain passing of property in the following situations:

1.Right of Stoppage in Transit [Section 50]: When the buyer

becomes insolvent after goods have been dispatched but are still in transit (not yet received by the buyer), the unpaid seller may stop the goods in transit and resume possession. This right operates during the transit period.

2.Reservation of Right of Disposal (Section 25 of the Sale of

Goods Act, 1930): This Section preserves the right of disposal of goods to secure that the price is paid before the property in goods passes to the buyer.

Where there is contract of sale of specific goods or where the goods have been subsequently appropriated to the contract, the seller may, by the terms of the contract or appropriation, as the case may be, reserve the right to dispose of the goods, until certain conditions have been fulfilled. In such a case in spite of the fact that the goods have already been delivered to the buyer or to a carrier or other bailee for the purpose of transmitting the same to the buyer, the property therein will not pass to the buyer till the condition imposed, if any, by the seller has been fulfilled. (sub-section 1)

Circumstances where seller is presumed to have reserved the

right of disposal [Section 25(2)]: If the goods are shipped or delivered to a railway administration for carriage and by the bill of lading or railway receipt, as the case may be, the goods are deliverable to the order of the seller or his agent, then the seller will be prima facie deemed to have reserved to the right of disposal. (Sub Section 2)

Where the seller draws a bill on the buyer for the price and sends to him the bill of exchange together with the bill of lading or (as the case may be) the railway receipt to secure acceptance or payment thereof, the buyer must return the bill of lading, if he does not accept or pay the bill.

And if he wrongfully retains the bill of lading or the railway receipt, the property in the goods does not pass to him. (Sub Section 3).

(ii)Determination of Price by Third Party: Section 10 of the Sale of Goods Act, 1930 provides for the determination of price by a third party.

1.Where there is an agreement to sell goods on the terms that price has to be fixed by the third party and he either does not or cannot make such valuation, the agreement will be void.

2.In case the third party is prevented by the default of either party from fixing the price, the party at fault will be liable to the damages to the other party who is not at fault. If only part of the goods has been delivered and the third party fails to value, the buyer must pay a reasonable price for those goods actually delivered and accepted.

3.However, a buyer who has received and appropriated the goods must pay a reasonable price for them in any eventuality.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, May 2026, 6(c) (New Scheme).

(c)Primary rule determining the passing of property from seller to buyer

(i)Where the goods are Ascertained (Section 19 of the Sale of Goods

Act, 1930): Where there is a contract for the sale of specific or ascertained goods, the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred. [sub-section (1)]

For the purpose of ascertaining the intention of the parties, regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case. [sub-section (2)]

Unless a different intention appears, the rules contained in Sections 20 to 24 are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer. [sub-section (3)]

Stages of goods while passing of property

(a)Specific goods in a deliverable state

Section 20 of the Act provides that where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment of the price or the time of delivery of the goods, or both, is postponed. Here, condition is goods must be ready for delivery.

(b)Specific goods to be put into a deliverable state.

Section 21 of the Act provides that where there is a contract for the sale of specific goods and the seller is bound to do something to the goods for the purpose of putting them into a deliverable state, the property does not pass until such thing is done and the buyer has notice thereof.

(c)Specific goods in a deliverable state, when the seller has to do anything thereto in order to ascertain price.

Section 22 of the Act provides that where there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to weigh, measure, test or do some other act or thing with reference to the goods for the purpose of ascertaining the price, the property does not pass until such act or thing is done and the buyer has notice thereof.

(ii)Where the goods are Unascertained: Where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained. [Section 18]

The rules in respect of passing of property of unascertained goods are as follows:

1.Sale of unascertained goods by Description and Appropriation

[Section 23(1)]: Appropriation of goods involves selection of goods with the intention of using them in performance of the contract and with the mutual consent of the seller and the buyer.

The essentials are:

a.There is a contract for the sale of unascertained or future goods.

b.The goods should conform to the description and quality stated in the contract.

c.The goods must be in a deliverable state.

d.The goods must be unconditionally (as distinguished from an intention to appropriate) appropriated to the contract either by delivery to the buyer or his agent or the carrier.

e.The appropriation must be made by:

-the seller with the assent of the buyer; or

-the buyer with the assent of the seller.

f.The assent may be express or implied.

g.The assent may be given either before or after appropriation

2.Delivery of the goods to the carrier [Section 23(2)]: Where, in

pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) for the purpose of transmission to the buyer, and does not reserve the right of disposal, he is deemed to have unconditionally appropriated the goods to the contract.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, January 2026, 3(c) (New Scheme).

(c)(i) Suit for Specific Performance (Section 58 of the Sale of Goods Act,

1930): Where the seller commits of breach of the contract of sale, the buyer can appeal to the court for specific performance. The court can order for specific performance only when the goods are ascertained or specific.

This remedy is allowed by the Court subject to these conditions:

(a)The contract must be for the sale of specific and ascertained goods.

(b)The power of the court to order specific performance is subject to provisions of Specific Relief Act of 1963.

(c)It empowers the Court to order specific performance where damages would not be an adequate remedy.

(d)It will be granted as remedy if goods are of special nature or are unique.

(ii)Right of Re-Sale [Section 54 of the Sale of Goods Act, 1930]: The

right of re-sale is a very valuable right given to an unpaid seller. In the absence of this right, the unpaid seller’s other rights against the goods that is lien and the stoppage in transit would not have been of much use because these rights only entitled the unpaid seller to retain the goods until paid by the buyer.

The unpaid seller can exercise the right to re-sell the goods under the following conditions:

(i)Where the goods are of a Perishable in Nature: In such a case,

the buyer need not be informed of the intention of resale.

(ii)Where he gives notice to the buyer of his intention to

re-sell the goods: If after the receipt of such notice the buyer fails within a reasonable time to pay or tender the price, the seller may resell the goods.

(iii)Where an unpaid seller who has exercised his right of lien or stoppage in transit re-sells the goods:

The subsequent buyer acquires the good title thereof as against the original buyer, despite the fact that the notice of re-sale has not been given by the seller to the original buyer.

(iv)A re-sale by the seller where a right of re-sale is expressly

reserved in a contract of sale: Sometimes, it is expressly agreed between the seller and the buyer that in case the buyer makes default in payment of the price, the seller will re-sell the goods to some other person. In such cases, the seller is said to have reserved his right of re-sale and he may re-sell the goods on buyer’s default.

(v)Where the property in goods has not passed to the buyer: The

unpaid seller has in addition to his remedies a right of withholding delivery of the goods. This right is similar to lien and is called “quasi-lien”. This is the additional right used in case of agreement to sell.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, January 2026, 6(c) (New Scheme).

(a)(i) According to the provisions of the Sale of Goods Act, 1930, in case of ‘specific goods’, the property shall pass on the formation of contract only if the goods are specific (Section 19).

Goods are in a deliverable state i.e. the seller has done all that he is required to do, to put the goods in such a state that the buyer shall be bound to take the delivery of the same (Section 20).

If the seller is bound to do something in respect of the goods to put them in a deliverable state and he is not yet done the same, then the possession of goods shall pass on to the buyer in the future, when the seller does what is required to do and brings the same to the knowledge of the buyer. (Section 21).

In the given case, the seller X was required to conduct repairs in respect of the machine before he buys the same. Thus, the possession of property intends to take place when the repairs are conducted by X and Y has the knowledge of the same. Since the machine is destroyed before repairs could be completed, the possession of property has not taken place.

The risk of loss vests with X and therefore cannot recover the price from Y.

ALTERNATE ANSWER

(a)(i) Goods perishing before sale but after agreement to sell (Section 8

of the Sale of Goods Act, 1930): Where there is an agreement to sell specific goods, and subsequently the goods without any fault on the part of the seller or buyer perish or become so damaged that they no longer answer to their description in the agreement before the risk passes to the buyer, the agreement is thereby avoided or becomes void.

In the instant case, the machine was destroyed without the fault of any person while being repaired. X cannot recover the price from Y as the performance of contract became impossible due to supervening impossibility.

(ii)According to Section 16(1) of the Sale of Goods Act, 1930, normally in a contract of sale, there is no implied condition or warranty as to quality or fitness for any particular purpose of goods supplied.

The general rule is that of “Caveat Emptor” that is “let the buyer beware”.

But where the buyer expressly or impliedly makes known to the seller the particular purpose for which the goods are required and also relies on the seller’s skill and judgement and that this is the business of the seller to sell such goods in the ordinary course of his business, the buyer can make the seller responsible.

In the given case, VK purchased the dark blue coloured cloth from PK without informing him i.e. uniforms would be prepared and used by employees. Therefore, VK cannot make PK responsible on the ground that cloth was found unfit.

VK cannot treat it as a breach of implied condition as to fitness and quality and has no right to recover damages from PK.

In view of the above, VK will not succeed in getting any remedy as per the provisions of the Sale of Goods Act, 1930.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, September 2025, 2(a) (New Scheme).

(c)(i) Reservation of right of disposal: Section 25 of the Sale of Goods Act, 1930, preserves the right of disposal of goods to secure that the price is paid before the property in goods passes to the buyer.

Where there is contract of sale of specific goods or where the goods have been subsequently appropriated to the contract, the seller may, by the terms of the contract or appropriation, as the case may be, reserve the right to dispose of the goods, until certain conditions have been fulfilled. In such a case in spite of the fact that the goods have already been delivered to the buyer or to a carrier or other bailee for the purpose of transmitting the same to the buyer, the property therein will not pass to the buyer till the condition imposed, if any, by the seller has been fulfilled.

Circumstances under which the right to disposal may be reserved:

In the following circumstances, seller is presumed to have reserved the right of disposal:

(1)If the goods are shipped or delivered to a railway administration for carriage and by the bill of lading or railway receipt, as the case may be, the goods are deliverable to the order of the seller or his agent, then the seller will be prima facie deemed to have reserved to the right of disposal.

(2)Where the seller draws a bill on the buyer for the price and sends to him the bill of exchange together with the bill of lading or (as the case may be) the railway receipt to secure acceptance or payment thereof, the buyer must return the bill of lading, if he does not accept or pay the bill.

And if he wrongfully retains the bill of lading or the railway receipt, the property in the goods does not pass to him.

(ii)Section 13 of the Sale of Goods Act, 1930, specifies cases where a breach of condition be treated as a breach of warranty. As a result of which the buyer loses his right to rescind the contract and can claim damages only.

SUGGESTED ANSWER

In the following cases, a contract is not avoided even on account of a breach of a condition:

(i)Where the buyer altogether waives the performance of the condition. A party may for his own benefit, waive a stipulation. It should be a voluntary waiver by buyer.

(ii)Where the buyer elects to treat the breach of the conditions, as one of a warranty. That is to say, he may claim only damages instead of repudiating the contract. Here, the buyer has not waived the condition but decided to treat it as a warranty.

(iii)Where the contract is non-severable and the buyer has accepted either the whole goods or any part thereof.

(iv)Where the fulfilment of any condition or warranty is excused by law by reason of impossibility or otherwise.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, May 2025, 6(c) (New Scheme).

(c)If the seller commits a breach of contract, the buyer gets the following rights against the seller:

1.Damages for non-delivery [Section 57 of the Sale of Goods Act,

1930]: Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may sue the seller for damages for nondelivery.

2.Suit for specific performance (Section 58): Where the seller commits

of breach of the contract of sale, the buyer can appeal to the court for specific performance. The court can order for specific performance only when the goods are ascertained or specific.

This remedy is allowed by the court subject to these conditions:

(a)The contract must be for the sale of specific and ascertained goods.

(b)The power of the court to order specific performance is subject to provisions of the Specific Relief Act of 1963.

(c)It empowers the court to order specific performance where damages would not be an adequate remedy.

(d)It will be granted as remedy if goods are of special nature or are unique.

3.Suit for breach of warranty (Section 59): Where there is breach of

warranty on the part of the seller, or where the buyer elects to treat breach of condition as breach of warranty, the buyer is not entitled to reject the goods only on the basis of such breach of warranty. But he may -

(i)set up against the seller the breach of warranty in diminution or extinction of the price; or

(ii)sue the seller for damages for breach of warranty.

4.Repudiation of contract before due date (Section 60): Where either

party to a contract of sale repudiates the contract before the date of delivery, the other may either treat the contract as subsisting and wait till the date of delivery, or he may treat the contract as rescinded and sue for damages for the breach.

SUGGESTED ANSWER

5.Suit for interest:

(1)Nothing in this Act shall affect the right of the seller or the buyer to recover interest or special damages, in any case where by law interest or special damages may be recoverable, or to recover the money paid where the consideration for the payment of it has failed.

(2)In the absence of a contract to the contrary, the court may award interest at such rate as it thinks fit on the amount of the price to the buyer in a suit filed by him for the refund of the price (in a case of a breach of the contract on the part of the seller) from the date on which the payment was made.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, January 2025, 6(c) (New Scheme).

(c)Sale of unascertained goods and Appropriation:

Where there is a contract for the sale of unascertained goods by description and goods of that description are in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer.

Whereas, Appropriation of goods involves selection of goods with the intention of using them in performance of the contract and with the mutual consent of the seller and the buyer.

The essentials elements are:

(a)There is a contract for the sale of unascertained or future goods.

(b)The goods should conform to the description and quality stated in the contract.

(c)The goods must be in a deliverable state.

(d)The goods must be unconditionally (as distinguished from an intention to appropriate) appropriated to the contract either by delivery to the buyer or his agent or the carrier.

(e)The appropriation must be made by:

(i)the seller with the assent of the buyer; or

(ii)the buyer with the assent of the seller.

(f)The assent may be express or implied.

(g)The assent may be given either before or after appropriation.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, November 2022, 1(c) (Old Scheme).

(a)(i) Rights of lien (Section 47 of the Sale of Goods Act, 1930)

An unpaid seller has a right of lien on the goods for the price while he is in possession, until the payment or tender of the price of such goods. It is the right to retain the possession of the goods and refusal

SUGGESTED ANSWER

to deliver them to the buyer until the price due in respect of them is paid or tendered.

Exercise of right of lien: This right can be exercised by him in the following cases only:

(a)where goods have been sold without any stipulation of credit; (i.e., on cash sale)

(b)where goods have been sold on credit but the term of credit has expired; or

(c)where the buyer becomes insolvent.

In the instant case, P is still in possession of the goods and the full price was not paid by Q within the stipulated time i.e. till 31st December 2024. Therefore, P is an unpaid seller and can rightfully exercise lien under Section 47.

Even though the unpaid amount is only ₹ 20,000, P’s refusal to deliver

the goods is valid. Thus, P is legally justified in exercising right of lien.

(ii)Legal Rules of Auction sale: Section 64 of the Sale of Goods Act, 1930 provides following rules to regulate the sale by auction:

Completion of the contract of sale: The sale is complete when the auctioneer announces its completion by the fall of hammer or in any other customary manner. Until such announcement is made, any bidder may retract from his bid.

In the instant case, the sale of sculpture to L is not complete as only hammer falls but the auctioneer did not announce “you are the highest bidder”.

Therefore, L’s claim contending that the auctioneer is bound to sell the sculpture to him at the price he bid is not valid as the auction sale was not complete.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, May 2025, 5(a) (New Scheme).

(a)(i) As per the provisions of section 24 of the Sale of Goods Act, 1930, 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 when he does something to the good which is equivalent to accepting the goods e.g. he pledges or sells the goods.

Referring to the above provisions, we can analyse the situation given in the question.

Since, Mangesh, who had taken delivery of the camera on Sale or Return basis and delivers the same to Rahul on sale for cash only or return, 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 (Camera) passes to Mangesh.

Now, Rahul delivered it to Vishal on a sale or return without paying cash to Mangesh.

Since Rahul did not pay cash and had not exercised the option to purchase, ownership of the camera did not pass to Rahul. Therefore, Rahul is not liable to pay the price of the camera either.

Since Vishal did not accept the goods and the camera was lost by theft (despite his due care), Vishal is not liable for the price of the camera as ownership had not passed to him.

Therefore, Mangesh is solely liable to pay the price of the camera to Ashok, as he accepted the camera on a "sale or return" basis and did not return it within a reasonable time.

SUGGESTED ANSWER

(ii)According to Section 51 of the Sale of Goods Act, 1930, when the carrier wrongfully refuses to deliver the goods to buyer, the right of stoppage in transit is lost and transit comes to an end.

On the other hand, according to section 57 of the Sale of Goods Act, 1930, where buyer suffers losses due to non-delivery, he can sue seller for damages on account of non-delivery.

In the instant case, the transit came to an end when Chetan wrongfully refused to deliver the goods to Baburam, and he suffered a huge loss due to non- delivery. Hence, Ansari cannot exercise the right of stoppage of goods in transit as the transit has already come to an end.

Baburam can claim loss suffered due to non-delivery from Ansari.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, September 2024, 5(a) (New Scheme).

(a)Seller’s lien (Sectio n 47 of the Sale of Goods Act, 1930): According to sub-section (1),

the unpaid seller of goods who is in possession of them is entitled to retain possession of them until payment or tender of the price in the following cases, namely:-

(a)where the goods have been sold without any stipulation as to credit;

(b)where the goods have been sold on credit, but the term of credit has expired;

(c)where the buyer becomes insolvent.

According to sub-section (2), the seller may exercise his right of lien notwithstanding that he in possession of the goods as agent or bailee for the buyer.

As per the provisions of Section 48, where an unpaid seller has made part delivery of the goods, he may exercise his right of lien on the remainder, unless such part delivery has been made under such circumstances as to show an agreement to waive the lien.

Termination of lien (Section 49): According to sub-section (1), the unpaid seller of goods loses his lien thereon-

(a)when he delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer without reserving the right of disposal of the goods;

(b)when the buyer or his agent lawfully obtains possession of the goods;

(c)by waiver thereof.

The unpaid seller of goods, having a lien thereon, does not lose his lien by reason only that he has obtained a decree for the price of the goods. [Sub-section (2)]

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, December 2023, 4(a) (Old Scheme).

(a)If the seller commits a breach of contract, the buyer gets the following rights against the seller:

1.Damages for non-delivery [Section 57 of the Sale of Goods Act, 1930]: Where

the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may sue the seller for damages for non-delivery.

2.Suit for specific performance (Section 58): Where the seller commits breach of the contract of sale, the buyer can appeal to the court for specific performance. The court can order for specific performance only when the goods are ascertained or specific and where damages would not be an adequate remedy.

3.Suit for breach of warranty (Section 59): Where there is breach of warranty on the part of the seller, or where the buyer elects to or is forced to treat breach of condition as breach of warranty, the buyer is not by reason only of such breach of warranty entitled to reject the goods on the basis of such breach of warranty; but the buyer may -

(i)set up against the seller the breach of warranty in diminution or extinction of the price; or

(ii)sue the seller for damages for breach of warranty.

4.Repudiation of contract before due date (Section 60): Where either party to a

contract of sale repudiates the contract before the date of delivery, the other may either treat the contract as:

•subsisting and wait till the date of delivery, or

•he may treat the contract as rescinded and sue for damages for the breach.

5.Suit for interest:

(1)The buyer is entitled to recover interest or special damages, or to recover the money paid where the consideration for the payment of it has failed.

(2)In the absence of a contract to the contrary, the court may award interest at such rate as it thinks fit on the amount of the price to the buyer in a suit by him for the refund of the price in a case of a breach of the contract on the part of the seller from the date on which the payment was made.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, June 2023, 4(a) (Old Scheme).

(a)Right of re-sale [Section 54 of the Sale of Goods Act, 1930]:

The unpaid seller can exercise the right to re-sell the goods under the following conditions:

(i)Where the goods are of a perishable nature: In such a case, the buyer need not be informed of the intention of resale.

(ii)Where he gives notice to the buyer of his intention to re-sell the goods: If after

the receipt of such notice the buyer fails within a reasonable time to pay or tender the price, the seller may resell the goods.

It may be noted that in such cases, on the resale of the goods, the seller is also entitled to:

(a)Recover the difference between the contract price and resale price, from the original buyer, as damages.

(b)Retain the profit if the resale price is higher than the contract price.

It may also be noted that the seller can recover damages and retain the profits only when the goods are resold after giving the notice of resale to the buyer. Thus, if the goods are resold by the seller without giving any notice to the buyer, the seller cannot recover the loss suffered on resale. Moreover, if there is any profit on resale, he must return it to the original buyer, i.e. he cannot keep such surplus with him [Section 54(2)].

(iii)Where an unpaid seller who has exercised his right of lien or stoppage in

transit resells the goods: The subsequent buyer acquires the good title thereof as against the original buyer, despite the fact that the notice of re-sale has not been given by the seller to the original buyer.

(iv)A re-sale by the seller where a right of re-sale is expressly reserved in a

contract of sale: Sometimes, it is expressly agreed between the seller and the buyer that in case the buyer makes default in payment of the price, the seller will resell the goods to some other person. In such cases, the seller is said to have reserved his right of resale, and he may resell the goods on buyer’s default.

It may be noted that in such cases, the seller is not required to give notice of resale. He is entitled to recover damages from the original buyer even if no notice of resale is given.

(v)Where the property in goods has not passed to the buyer: The unpaid seller has

in addition to his remedies a right of withholding delivery of the goods. This right is similar to lien and is called “quasi - lien”.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, November 2022, 4(a) (Old Scheme).