Why Every Salesperson Should Know the Sale of Goods Act

As a salesperson, you are the frontline ambassador of your company—responsible for presenting products or services, negotiating terms, and closing deals. While persuasive communication and relationship-building skills are indispensable, a strong understanding of the legal framework that governs the sale of goods can be the difference between a smooth transaction and a costly dispute. In India, the Sale of Goods Act, 1930 (hereafter referred to as “SOGA” or “the Act”) is the foundational statute that defines the rights and obligations of buyers and sellers. This article walks you through every facet of the Sale of Goods Act that a modern salesperson needs to internalize, illustrated with practical, real-world examples—ensuring you can navigate contracts confidently, protect your company and customers, and ultimately drive more reliable sales.

Overview of the Sale of Goods Act, 1930
Scope and Applicability
Contract of Sale: Formation and Essentials
Classification of Goods
Price, Delivery, and Passing of Property (Title)
Implied Conditions and Warranties
Transfer of Risk and Title
Performance of Contract: Obligations of Seller and Buyer
Breach of Contract and Remedies
Practical Examples for Sales Situations
Ethical Selling Practices Under SOGA
Avoiding Disputes: Best Practices for Salespeople
Conclusion

1. Overview of the Sale of Goods Act, 1930

The Sale of Goods Act (SOGA) was enacted in 1930 to consolidate and amend the law relating to the sale of goods in India. It codifies the essential elements of a contract of sale, sets forth implied conditions and warranties, and outlines the rights and remedies available to both parties. For sales teams, knowledge of SOGA is not merely academic—it informs how you negotiate price, deliver products, handle returns, and manage risk.

Key objectives of SOGA include:

Defining “goods,” “sale,” and “agreement to sell.”
Outlining the formation and essentials of a valid sale contract.
Specifying implied conditions (fundamental terms) and warranties (ancillary promises).
Establishing rules for delivery, transfer of property (title), and passing of risk.
Providing remedies in the event of breach of contract by either party.

Understanding these objectives helps sales professionals structure offers, draft clear quotations, and draft standard sales agreements that reduce ambiguity. From a risk-management perspective, knowing when title passes and when implied conditions apply can prevent costly misunderstandings. In this article, we will explore every major provision that you, as a salesperson, need to know.

2. Scope and Applicability

2.1. What Qualifies as “Goods”?
Under Section 2(7) of SOGA, “goods” are defined as every kind of movable property other than actionable claims and money. This includes:

Existing goods: Goods owned or possessed by the seller at the time of the contract (e.g., a batch of laptops in stock).
Future goods: Goods to be manufactured or acquired by the seller after the contract is made (e.g., a smartphone model yet to be released).
Specific goods: Goods identified and agreed upon at the time a contract is made (e.g., a particular car identified by chassis number).
Unascertained goods: Goods not identified until after the contract is made (e.g., 100 barrels of crude oil to be drawn from a larger stock).

As a salesperson, you must distinguish which category your product falls into. For instance, if you are selling electronic component kits (specified by batch number), those are existing and specific. If you promise to supply 5,000 T-shirts to be manufactured in the future, they qualify as future and unascertained. This classification affects how and when the property and risk pass from seller to buyer.

2.2. Selling Businesses vs. Selling Goods
SOGA applies strictly to the sale of goods, not to the sale of businesses or real property. For example, if your company sells software licenses (intangible products), those are considered “goods” under the Information Technology Act, 2000, but not under SOGA directly; however, courts often treat software licenses as goods for practical purposes. Always be clear whether you are dealing with tangible, movable items (covered by SOGA) or intangible assets (covered by separate laws).

2.3. Sales by Auction
Section 64 defines a sale by auction. As a salesperson representing a company that participates in e-auctions—say, for surplus industrial machinery—you need to know that, at an auction, the sale is complete when the auctioneer announces its completion by the fall of the hammer. Until that moment, bidders can withdraw their offers. This principle is critical if you, for instance, are disposing of returns or overstocks via auction.

3. Contract of Sale: Formation and Essentials

3.1. Definition of “Contract of Sale”
Section 4 of SOGA defines a contract of sale of goods as “a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price.” Here, the essential ingredients are:

Transfer (or Agreement to Transfer) of Property: The seller must transfer ownership or agree to transfer it in the future.
Price: Consideration paid or promised for the goods. Under Section 2(10), “price” can be money or money’s worth.

Key takeaway for a salesperson: Avoid vague language such as “subject to our usual terms” without specifying what those terms are. If the buyer and seller fail to agree on a price, there is no valid contract unless the contract includes a mechanism for determining the price (e.g., “market price on the date of delivery”).

3.2. Offer and Acceptance
Like any contract, the sale contract is formed through offer and acceptance. A offer is a clear statement of willingness to sell goods on specified terms, and acceptance is an unequivocal assent to those terms.

Example 1: Written Quotation
Your electronics distribution company sends an email to a retail chain quoting: “We offer 1,000 LED modules (Model ABC) at ₹650 each, delivery in four weeks, payment due 30 days after invoice.” Once the retailer emails back, “We accept your terms—confirm order,” a valid contract is formed. Until that moment, either party can withdraw (unless the seller has communicated an irrevocable offer). Always include a clear expiry date on your quotations—e.g., “Offer valid until 6^th June 2025”—to avoid being bound indefinitely.

3.3. Sale vs. Agreement to Sell
Section 4 distinguishes between a sale (immediate transfer of property) and an agreement to sell (transfer of property at a future date or upon certain conditions). This distinction can affect when the buyer acquires ownership and bears risk.

Sale (Immediate Transfer): “I will sell you 500 widgets today for ₹20,000.” Ownership (title) passes when the contract is made, provided delivery is possible.
Agreement to Sell (Future): “I will sell you 500 widgets on 1^st July 2025 for ₹20,000.” Ownership remains with the seller until 1^st July 2025 or until other conditions are met.

Example 2: Pre-Order Scenario
Your company launches a new smartphone model, to be produced in August 2025. A customer pays ₹5,000 as an advance deposit to secure a device. This is an agreement to sell. The buyer only obtains ownership when the phones are manufactured and shipped—which could be subject to quality checks and other preconditions. If, in the interim, you face a supply-chain disruption, you might not be able to deliver. Since ownership has not yet passed, you can refund the deposit or offer an alternative without breaching SOGA (though commercial goodwill considerations still apply).

Understanding whether your transaction is a “sale” or an “agreement to sell” helps you manage risk, insurance coverage, and pre-shipment inspections.

4. Classification of Goods

4.1. Specific, Ascertained, and Unascertained Goods
SOGA classifies goods into three primary categories:

Specific Goods: Goods identified and agreed upon at the time the contract is made (e.g., Car Chassis No. 1234).
Ascertained Goods: Specific goods that have been identified post-contract (e.g., an order for 100 barrels of oil that are specifically drawn from Tank A once the contract is signed).
Unascertained Goods: Goods that are not specifically identified at the time of contract (e.g., “500 kg of wheat to be delivered from our bulk stock”).

Why Does This Matter?
The moment title and risk pass depends on whether goods are specific, ascertained, or unascertained. For specific goods, title passes once the contract is made (unless the parties agree otherwise). For ascertained goods, title passes once goods are ascertained and a contract exists. For unascertained goods, title cannot pass until the goods are ascertained (e.g., segregated, labeled, or otherwise earmarked for the buyer).

Example 3: Textile Wholesale
Your textile firm contracts to supply “1,000 meters of cotton fabric” to a garment manufacturer. If you have a bulk stock of 10,000 meters, the goods are unascertained until you pick and mark 1,000 meters specifically for that buyer. Only then does the property pass—along with the risk—from seller to buyer. Salespeople must know that if the warehouse suffers fire damage before ascertaining the specific 1,000 meters, your company still bears the loss. If, however, you segregate those 1,000 meters on May 10, 2025, and the contract was made on May 9, 2025, property passes once segregation occurs.

4.2. Existing Goods vs. Future Goods vs. Contingent Goods

Existing Goods: Owned or possessed by the seller at contract formation (e.g., finished products in stock).
Future Goods: Manufactured or acquired later by the seller (e.g., a pre-ordered piece of machinery not yet built).
Contingent Goods: Future goods that depend on a contingency (e.g., sale of insurance policies contingent on the insurer’s approval).

Example 4: Customized Machinery
Your engineering firm agrees to build and sell a CNC machine customized to a client’s specification. At the time of contract (March 1, 2025), the machine does not yet exist. These are future goods. Until the machine is manufactured, tested, and ready for dispatch, ownership remains with your firm. If you go bankrupt on March 15, 2025, the buyer becomes an unsecured creditor for the deposit—emphasizing why clear communication and contingency clauses (e.g., “delivery subject to successful testing”) are critical.

5. Price, Delivery, and Passing of Property (Title)

5.1. Fixation of Price
Section 9 of SOGA states that the price can be:

Fixed by the contract itself (e.g., ₹1,00,000 for 10 cameras).
Determined by a method agreed by the parties (e.g., “Market price on delivery date”).
Left to be fixed in a manner agreed upon (e.g., “Best of-shop price on date of dispatch”).

If the price is not fixed or made determinable, the buyer is not bound to take or pay for the goods, and the seller can treat the contract as repudiated. As a salesperson, always ensure that either:

You state a clear, firm price, or
You specify a transparent formula (e.g., “Cost-plus 15%”) or tie it to a recognized index (e.g., commodity benchmark).

5.2. Delivery: Time, Place, and Manner
Delivery is the voluntary transfer of possession from seller to buyer. Under Section 31–33:

Time of Delivery: Fixed by the contract, or if not fixed, then within a reasonable time. Always specify delivery timelines to avoid “reasonable time” disputes (what is “reasonable” can vary from industry to industry).
Place of Delivery: Must be specified or, if not, assumed to be the seller’s place of business (unless goods are at another location).
Manner of Delivery: If the contract is silent, the buyer must take delivery in the manner customary or usual in that kind of transaction.

Example 5: FMCG Distribution
Your FMCG company agrees to deliver 500 cartons of shampoo to a retailer in Bengaluru “within 10 days.” You state in the contract: “Delivery at Bengaluru warehouse, recipient to arrange last-mile transport.” By doing so, you pinpoint time (“10 days”), place (“Bengaluru warehouse”), and manner (“buyer arranges local transport”). If a dispute arises—say you deliver on Day 12 and charge demurrage—the buyer’s obligation depends on whether “10 days” was a strict term or a “reasonable” timeframe. Explicitly stating “strict delivery by 5^th June 2025; beyond which ₹500/day demurrage” avoids ambiguity.

5.3. Passing of Property (Title)
Sections 18–20 deal with when ownership passes from seller to buyer. This is critical for sales teams because it determines who bears the risk of loss:

Specific Goods in a Deliverable State: Title passes when the contract is made, unless parties agree otherwise.
Goods Requiring Weighing, Measuring, or Testing: Title passes when such operations are completed and the buyer is notified.
Unascertained Goods: Title passes when goods are ascertained (e.g., separated, identified).

Example 6: Electronics Retailer
You contract to sell “50 Model XYZ laptops currently in your Mumbai warehouse” to a corporate customer. Since these are specific goods in a deliverable state, title automatically passes when the contract is formed—even if you haven’t physically moved the goods. If your warehouse is affected by theft the next day, the buyer still owns the laptops and can claim from your insurer. As a salesperson, it’s prudent to clarify if you intend to retain title until payment. Add a clause: “Title to remain with Seller until full payment is received” (this is known as a “reservation of title” clause), which prevents ownership transfer until payment clearance.

6. Implied Conditions and Warranties

The Sale of Goods Act implies certain terms into every sales contract, even if not expressly mentioned. These fall into two buckets: conditions (fundamental terms) and warranties (ancillary terms). Breach of a condition allows the buyer to reject goods; breach of a warranty only entitles the buyer to claim damages.

6.1. Implied Conditions

Condition as to Title (Section 14(a)): The seller has the right to sell the goods. If you source goods from a third party (e.g., parallel imports of branded cosmetics), ensure your supplier has legal title. Otherwise, the buyer can reject the goods for defective title.
Condition as to Description (Section 14(b)): Goods must correspond to the description. If you advertise “Genuine Leather Jackets” and deliver jackets made of synthetic leather, the buyer can reject the entire lot.
Condition as to Merchantability (Section 14(c)): Goods sold in the course of business must be of merchantable quality. If you sell 500 mobile phones and half of them have defective screens, the buyer can reject them.
Condition as to Fitness for Purpose (Section 14(c)): If the buyer specifies a particular purpose and relies on the seller’s skill, the goods must be fit for that purpose. (Exception: Seller need not know of the particular purpose if buyer fails to communicate it). If an industrial buyer says, “I need a pump that can handle acidic solutions” and you supply a standard pump, you breach this condition.
Condition as to Sample (Section 15): If the sale is by sample, goods must correspond both in bulk and quality to the sample. If you send a sample bottle of shampoo promising “250 ml, rich lather,” but deliver bulk bottles of 200 ml, the buyer can reject.

6.2. Implied Warranties

Warranty as to Quiet Possession (Section 14(d)): Buyer’s possession should not be disturbed by any third party’s claim. If you sell land mobile communication units leased from a third party and the lessor reclaims them, you breach this warranty.
Warranty as to Freedom from Encumbrance (Section 14(e)): Goods should be free from any charge or encumbrance unknown to the buyer. For instance, selling branded smartphones that are still under financing agreements breaches this warranty if the financier claims repossession.
Warranty as to Tender of Delivery (Section 31): Seller must make the goods available to the buyer in the manner agreed. If you promise “CIF Mumbai” but deliver FCA Chennai (Free Carrier), you breach this warranty.

Example 7: Kitchen Appliance Wholesale
You are selling 200 “Stainless Steel Mixer-Grinders” to a large retailer. Your contract states “as per sample” and “10-year warranty on motor.” Under Section 15, the bulk mixers must match the sample at the buyer’s showroom (appearance, finish, features). Under Section 14(c), each mixer must be of merchantable quality—i.e., it should run continuously without unplanned stops for at least the industry-standard 100-hour endurance test. Further, if the retailer had told you, “We need mixers that can grind spices to fine powder,” under Section 14(c) you have an implied fitness-for-purpose duty to supply models that meet that requirement. If your bulk supply arrives with dull blades that cannot grind properly, the retailer can reject the goods and claim damages for breach of implied conditions and warranties.

As a salesperson, always:

Communicate clearly any limitations (e.g., “Suitable for light domestic use only”).
Document buyer’s special requirements in writing (e.g., “Please confirm that you need heavy-duty wet grinders for industrial use”).
Ensure your supplier guarantees product quality to cover your own implied warranty obligations.

7. Transfer of Risk and Title

While property (title) determines ownership, risk refers to who bears the loss if goods are destroyed or damaged. SOGA distinguishes between property and risk—title may pass at one moment, but risk could pass earlier or later.

7.1. Risk in Specific Goods

For specific goods, risk passes with property unless the parties agree otherwise. That means if the contract states “CIF Mumbai,” risk passes at the port of loading. If it states “Ex-Works Delhi factory,” risk passes when goods are handed over at the factory premises.

Example 8: Online Furniture Retailer
You sell a batch of 50 teakwood chairs to an e-commerce marketplace on “FOB Kolkata Port.” Under Incoterms (non-statutory but widely recognized), FOB (Free On Board) means you bear all costs and risks until the chairs are loaded onto the ship at Kolkata Port. Once they cross the ship’s rail, risk transfers to the buyer. Suppose a cyclone delays the vessel and, during loading, the port crane swings and breaks ten chairs—because risk was still with you until the chairs crossed the ship’s rail, you must replace or refund those ten chairs unless you had separate marine insurance. As a salesperson handling FOB contracts, always confirm who arranges and pays for insurance. If you state “FOB Kolkata Port, seller to insure until loading,” you explicitly assume risk until loading point.

7.2. Risk in Unascertained Goods

For unascertained or future goods, risk does not pass until goods are ascertained. In other words, you cannot shift risk until the goods are identified and set aside for the buyer.

Example 9: Bulk Chemical Supply
Your chemical company agrees to supply “5,000 liters of industrial-grade ethanol” from your 100,000-liter stock. Until you weigh out, test, and set aside exactly 5,000 liters, risk remains with you. If your storage tank develops a leak before the specific batch is ascertained, you bear the loss. To manage this, many chemical suppliers specify: “Once goods are pumped into Buyer’s designated receiving tank and acceptance certificate signed, risk passes to Buyer.” Ensure you record the exact date, time, and volume pumped, and have the buyer sign the acceptance certificate to document risk transfer.

7.3. Risk in Transit

SOGA does not expressly cover “transit risk” or “ex-works” scenarios; these are governed by commercial practices and Incoterms. However, you should explicitly state shipping terms—“Ex-Works,” “FCA,” “CPT,” “CIF,” etc.—to clarify who bears risk during transit. If you fail to specify, courts may determine risk based on the nature of the contract (e.g., whether delivery is to be at seller’s premises or buyer’s warehouse).

8. Performance of Contract: Obligations of Seller and Buyer

Both parties have specific duties once a contract of sale is formed. As a salesperson, you must ensure your company fulfills its obligations—otherwise, you risk breach of contract claims.

8.1. Seller’s Obligations (Section 32)

Deliver Goods and Right to Dispose: The seller must deliver goods and ensure the buyer can enjoy quiet possession. If your warehouse is shared with another company that enters receivership, you risk the buyer’s possession being disturbed.
Deliver Goods Free from Encumbrances: Goods must be free from any undisclosed charges or liens. If you supply branded refrigerators but the bank has a hypothecation charge, the buyer can return the goods on discovering the charge.
Transfer Documents of Title (if any): If the goods are in transit under a bill of lading or railway receipt, you must hand over these documents so the buyer can claim goods from carriers.
Ensure Goods Conform to Contract: Quality, quantity, and description must match what was agreed.

Example 10: Pharmaceutical Distributor
You sell hospital-grade ventilators to a medical center. Under SOGA, you must (a) deliver the exact model specified (e.g., Model VENT-X2), (b) ensure they are free from any third-party claims (e.g., not leased equipment), (c) deliver the manufacturer’s warranty certificates and operation manuals, and (d) deliver them in working order as per contract specifications. If one ventilator arrives with damaged controls, the hospital can reject that machine and claim damages for breach of the implied condition of merchantability and the express term of “in working order.”

8.2. Buyer’s Obligations (Section 37)

Accept and Pay for Goods: In accordance with contract terms. If the buyer refuses to take delivery of conforming goods, the seller can sue for the price and damages.
Take Delivery: If the buyer is bound to take delivery and fails to do so, the seller can resell the goods after giving notice.

Example 11: Bulk Rice Purchase
Your agricultural firm contracts with a food processor: “Supply 10,000 kg of Basmati rice at ₹50/kg; payment net 60 days; delivery ex-factory Lucknow on 1^st July 2025; buyer to arrange transport.” If the buyer fails to send transport, you can require payment and store the rice at the buyer’s risk, after giving a reasonable notice (e.g., “Send transport by 30^th June 2025, failing which handling and storage charges of ₹1,000/day will apply”). When the buyer refuses to pay ₹5,00,000 after taking delivery, you can sue for the price plus interest—as long as the delivered rice matched the contract. Ensure all delivery documents (e.g., weighbridge tickets, quality test results) are handed over at delivery to validate performance.

9. Breach of Contract and Remedies

Whenever either party fails to perform contractual obligations, SOGA provides specific remedies. Knowing these remedies empowers you to negotiate settlements or prepare counterpositions if disputes arise.

9.1. Buyer’s Remedies (Section 55)

Reject Goods: If goods or delivery breach a condition (e.g., wrong model, substandard quality).
Sue for Non-Acceptance and Price: If the buyer fails to accept or pay when due, the seller can claim the price and damages (see Astley v. Reynolds [I.B.R. Reports, 168 E.R. 223]).
Claim Damages for Non-Delivery: If the seller fails to deliver, the buyer can sue for any loss directly arising from breach (subject to mitigation of damages). This is often calculated as the difference between contract price and market price at the time of breach.
Would You be Able to Resell & Recover?: Section 55(2) allows the buyer who has covered (bought similar goods elsewhere) to claim the difference between cover price and contract price.

Example 12: Automotive Parts Dealer
Your auto-parts dealership orders 200 spark plugs from a manufacturer at ₹100 each. Delivery due by 1^st May 2025. The manufacturer fails to deliver. On 10^th May 2025, you buy 200 spark plugs in the open market at ₹120 each to fulfill your customer orders. Under SOGA, you can sue the manufacturer for ₹20 × 200 = ₹4,000 as damages (difference between ₹120 cover price and ₹100 contract price). Additionally, you can claim incidental expenses (e.g., expedited freight charges), provided you can show those costs were a natural consequence of the breach and you mitigated damages. Keep all invoices, freight receipts, and communications to substantiate your claim.

9.2. Seller’s Remedies (Section 55)

Claim the Price: If the buyer accepts goods and then fails to pay.
Damages for Non-Acceptance: If the buyer wrongfully refuses or neglects to pay or take delivery, the seller can claim damages (difference between contract price and resale price), provided the seller gives notice of resale (Section 57) or elects to retain goods and sue for price (Section 56).
Seller’s Lien (Section 47): If the buyer is insolvent or fails to pay, the seller can retain possession until payment or resale. However, once the seller loses possession (e.g., delivers to buyer’s agent), the lien is gone unless there is a contractual reservation of title.
Stoppage in Transit (Section 50): If the buyer becomes insolvent, the seller can stop goods in transit. This applies only if conditions are met (e.g., notice to carrier before buyer or buyer’s agent gain possession).

Example 13: Textile Exporter
Your firm exports 5,000 meters of silk fabric to a buyer in Germany for €5/meter, payable by Letter of Credit (L/C) at sight. The buyer’s bank dishonors the L/C on arrival. You ship via container; the container is en route. On learning of the dishonor, you send an immediate “stop goods” instruction to the shipping line and the freight forwarder. Because you have stopped goods in transit, you retain possession at the port’s logistic center instead of losing them to the buyer. You can then resell to another importer at €4.50/meter (market down-cycle) and claim damages: (€5 – €4.50) × 5,000 = €2,500. This example highlights the strategic importance of “stoppage in transit” clauses in your sales agreement and coordination with logistics providers.

9.3. Specific Performance and Injunctions

In certain rare cases—especially when goods are unique or of special value—the aggrieved party can seek specific performance (compelled delivery of goods) or a court injunction preventing further breach. Section 62 and Section 63 of SOGA recognize that in some situations, damages are inadequate because identical goods are not readily available in the market.

Example 14: Sale of Antique Furniture
Your client enters into a contract to buy a rare 18^th-century rosewood cabinet from an antique dealer. If the dealer sells it to someone else, your client can petition for specific performance—asking the court to force the dealer to deliver that exact cabinet—because no identical cabinet exists. When negotiating such high-value or unique-item sales, ensure your standard terms reserve the right to seek injunctive relief and specific performance to strengthen your position.

10. Practical Examples for Sales Situations

In this section, we present detailed, scenario-based examples from different industries—FMCG, electronics, automotive, chemicals, and services—to show how SOGA principles apply day-to-day. Each example includes common pitfalls and suggested best practices.

10.1. FMCG Distribution: Returnable Packaging and Quality Claims

Scenario: Your company distributes a branded soft drink in returnable glass bottles to a chain of convenience stores. Each case (24 bottles) is sold at ₹200. The bottles incur a handling deposit of ₹10 each (₹240 for a case) that the retailer recovers when returning empty bottles.

Key Legal Points:

Sale by Description: The contract specifies “24×300 ml returnable glass bottles, carrying a refundable deposit of ₹10 per bottle.” If the retailer receives 24 plastic bottles by mistake, they can reject the entire lot (breach of condition as to description).
Condition as to Merchantability: Each batch must be fit for human consumption and contain the advertised sugar content. If lab tests find sugar below standard, it breaches merchantable quality—even if only one bottle out of 100 bottles is substandard. The retailer can reject the entire batch unless you offer replacement or credit.
Deposit (Separate Contract): The deposit for returnable bottles is a collateral contract. Under SOGA, when the retailer returns empty bottles, you must refund ₹10 per bottle. If your warehouse fails to refund ₹2,000 for 200 returned bottles, the retailer can claim the deposit under breach of the collateral contract.
Passing of Property vs. Risk: The title in goods (soft drinks + bottles) passes at the moment the retailer signs the delivery docket at the warehouse gate (Ex-Works). Risk passes at the same time—so if a bottle breaks in transit after loading, the retailer bears the loss. To clarify, your document states: “Title and risk pass on signing delivery docket. Handling deposit refunded upon receipt of empty bottles.”