PREFACE TO THIRTEENTH EDITION
I am deeply grateful to the esteemed educators and students for their positive reception of the twelfth edition of my book, Business Law. Their encouraging support has inspired me to bring forth this thirteenth edition.
I would like to extend my special thanks to Dr. D.K. Jain (SBSC Eve.), Dr. Kalpana Bhola (JDM), Dr. Kiran Suchdeva (JMC), Nikita Kuhar (Satyawati Evening), as well as my other colleagues and students who have contributed their valuable suggestions and feedback. I kindly request their continued collaboration in enhancing the content of future editions.
My sincere appreciation also goes to my esteemed colleagues at Daulat Ram College, and to Prof. Savita Roy, Principal of Daulat Ram College, for their unwavering inspiration, encouragement and best wishes.
This edition has undergone a comprehensive revision, ensuring it aligns with the latest CBCS Syllabus for Paper BCH DSC 1.2 of the B.Com (Hons.) Four Years (8-Semester) CBCS Programme at Delhi University and other Central Universities across India, as per the revised structure introduced in the academic year 2022-23.
Salient Features of the Book
The Central Government on February 2, 2024, notified the Indian Contract (Amendment) Bill, 2024 to further amend the Indian Contract Act, 1872. The amended definition of coercion as per section 15 has been added in Chapter 5.
The Indian Penal Code (IPC) has been replaced with the Bharatiya Nyaya Sanhita (BNS), the CrPC with Bharatiya Nagarik Suraksha Sanhita (BNSS) and the Indian Evidence Act has been replaced with the Bharatiya Sakshya Adhiniyam (BSA). The Bharatiya Nyaya Sanhita, 2023 (“BNS”) was enacted on December 25, 2023, repealing and replacing the Indian Penal Code, 1860
(“IPC”) as the new penal code of the country. The three new criminal laws which replace the Indian Penal Code, Code of Criminal Procedure and Evidence Act will come into effect from July 1, 2024. Some of the top provisions of BNS and brief description of the other two Acts has been provided in Chapter 6.
The Ministry of Corporate Affairs (MCA) vide its Notification No. G.S.R. 110(E) dated 11th February, 2022, has notified that the provisions of some sections of the Companies Act, 2013 shall be applicable to LLP. These sections have been covered in Chapter 19.
The Ministry of Corporate Affairs (MCA) vide Notification No.
G.S.R. 644(E) issued on 4th September 2023 has substituted the Forms 3 and 4 in the Limited Liability Partnership Rules, 2009 which has to be filed electronically. These rules may be called Limited Liability Partnership (Second Amendment) Rules, 2023 and have been included in Chapter 20.
On October 27, 2023, the Central Government notified the Limited Liability Partnership (Third Amendment) Rules, 2023, bringing in major changes pertaining to maintaining a register of partners, providing of declaration disclosing beneficial interest, etc. These Amended rules have been added in Chapter 21.
Practical Exercises as per New Education Policy have been covered in the present edition at the last before DU Question Papers asked in different years. In the present edition under UNIT 4, Sale of Goods Act, 1930 case studies where Caveat Emptor is applicable have also been incorporated. The objectives of these exercises is to provide practical exposure to the readers to handle daily life situations.
Key Updates in the Current Edition:
The Third Schedule of the Mediation Act, 2023, amends section 28 of the Indian Contract Act, 1872. The Mediation Act, 2023, introduced exceptions to section 28 of the Indian Contract Act, 1872, which generally prohibits agreements to restrict legal remedies. These exceptions have been added in Chapter 7.
The MCA has introduced several updates in 2025 to make the LLP registration process more efficient and compliant with global standards. These Key changes have been incorporated in Chapter 20.
Vide Notification No. G.S.R. 475(E), dated 5th August 2024 the Ministry has centralized the striking off of Limited Liability Partnerships (LLPs) by empowering the CPACE for processing of e-Forms related to striking off of LLPs. Key highlights have been covered in Chapter 20
Effective from April 1, 2025, partnership firms and Limited Liability Partnerships (LLPs) have been subject to significant income tax changes. The key amendments include an increase in the permissible limits for partner remuneration and the introduction of section 194T, which mandates Tax Deducted at Source (TDS) on payments to partners. These amendments have been inserted in Chapter 21.
Enriched Content: Certain chapters have been expanded to enhance readers’ understanding of key concepts and legal terminology.
YouTube Channel for Business Law: I have launched a YouTube channel, Business Laws (@sushmaarorabusinesslaws1370), where I have uploaded 75 videos covering the full syllabus, as well as past DU examination question papers. Readers are welcome to engage with the content and ask questions in the comment section, which I will address promptly.
I am confident that this revised edition will prove to be an invaluable resource for students and educators involved in Business Laws Paper BCH DSC 1.2 of B.Com. (Hons.) under the FYUP program at the University of Delhi and other Central Universities across India.
My heartfelt gratitude goes to my husband, O.P. Arora, Advocate, my daughter, Raman Arora and my son, Mannu Arora, Manager at Deloitte, for their continuous support and encouragement.
I also wish to express my appreciation to the editorial and production teams for their dedicated efforts in bringing this edition to fruition.
I encourage readers to share constructive feedback, which will be incorporated into future editions to further improve the book.
Happy Reading!
ICA, 1872 : REMEDIES FOR BREACH OF CONTRACT
ICA, 1872 : CONTRACT OF AGENCY
PRACTICAL EXERCISES
QUESTION PAPERS
SALE OF GOODS ACT, 1930 : NATURE
AND FORMATION OF CONTRACT OF SALE
14.1 INTRODUCTION
Sale of Goods Act is one of very old Mercantile Law. Initially, the law relating to the Sale of Goods Act was contained in Chapter VII (Sec. 76-Sec. 123) of the Indian Contract Act, 1872. Subsequently, these Sections in Contract Act were repealed and Separate Sale of Goods Act was enacted in 1930. The Sale of Goods Act, 1930, has been adopted from the English Sale of Goods Act, 1863, as consolidated in 1979. This Act applies to the whole of India except the State of Jammu and Kashmir. It came into force on 1st July 1930 as the Indian Sale of Goods Act, 1930. By Section 2 of the Indian Sale of Goods (Amendment) Act, 1963 (33 of 1963) the word “Indian” has been omitted and now its stands as THE SALE OF GOODS ACT, 1930 (3 of 1930).
Note: A bill for Jammu and Kashmir Reorganisation Act, 2019 was introduced and passed in the Rajya Sabha on 5th August, 2019. It was passed by the Lok Sabha on 6th August, 2019 and received the President assent on 9th August, 2019. By virtue of Jammu & Kashmir Reorganisation Act, 2019 (w.e.f 31st October, 2019) the Sale of Goods Act is applicable to the whole of India. Prior to this the Sale of Goods Act was applicable to the whole of India ‘Except the State of Jammu & Kashmir’.
14.2 PROVISIONS OF THE INDIAN CONTRACT ACT
The Sale of Goods Act is complimentary to Contract Act. Basic provisions of the Contract Act such as, offer and acceptance, free consent, legality of the object, lawful consideration etc., apply to contract of sale of goods also. In fact, Section 3 of the Sale of Goods Act provides :
“The unrepealed provisions of the Contract Act shall continue to apply to contracts for the sale of goods, in so far as they are not inconsistent with the express provisions of this Act.”
Expressions used but not defined in the Sale of Goods Act, 1930 and defined in the Indian Contract Act, 1872, have the meanings assigned to them in that Act [Sec. 2(15)].
The Act provides freedom to the contracting parties and they are left free to make their own bargains. Sec. 62 lays down :
“Where any right, duty or liability would arise under a contract of sale by implication of law, it may be negatived by or varied by express agreement or by the course of dealing between the parties or by usage, if the usage is such as to bind both parties to the contract.”
14.3 CHAPTERS AND SECTIONS
The law relating to the Sale of Goods Act, 1930 has been discussed under seven chapters consisting of Sections 1 to 64, 64A and 66. The definitions given under section 2(1) to (15) are exhaustive.
14.4 CERTAIN TERMS DEFINED IN THE ACT
(a) Buyer. According to Sec. 2(1) “buyer” means a person who buys or agrees to buy goods.
(b) Seller. According to Sec. 2(13) “seller” means a person who sells or agrees to sell the goods.
(c) Delivery. “Delivery” means voluntary transfer of possession from one person to another [Sec. 2(2)].
(d) Document of Title to the Goods. It is a document used in the ordinary course of business as a proof of the possession or control of goods. It authorizes, either by endorsement or by delivery, the possessor of the document to transfer or receive the goods represented by it [Sec. 2(4)].
The document of title of the goods includes the following documents :
(i) The Bill of Lading. It is a document issued by a shipping company acknowledging the receipt of goods for carrying to a specified port. It also contains the terms and conditions for the such transportation of goods and full description of the goods such as, their markings and contents as declared by the consignor.
(ii) The Dock Warrant. It is a document used by a shipping port authority that certifies title of goods to a consignee or consigner while a shipment is stored in a warehouse or storage lot.
(iii) The Warehouse Keeper’s Certificate. It is a document issued by a warehouse keeper stating that certain goods are kept in his warehouse.
(iv) The Wharfinger’s Certificate. Wharf is a landing place where ship may tie up for loading/unloading cargo. Certificate issued by owner or manager of a wharf is called wharfinger’s certificate.
(v) The Railway Receipt. It is a document acknowledging the receipt of goods specified therein for transportation to a place mentioned therein. It is transferable but not a negotiable instrument.
(vi) The Multimodal Transport Document (MT Document). Means a document evidencing a multimodal transport contract and which can be replaced by electronic data interchange messages in so far as permitted by applicable law and can be :
(A) Issued in a negotiable form or
(B) Issued in a non-negotiable form indicating a named consignee.
Multimodal transport contract means a single contract for the carriage of goods by at least two different modes of transport.
(vii) Delivery Order. It is an order given by an owner of goods to (the carrier or warehouse keeper) directing that person to deliver the goods to a person named in the order.
(e) Fault. “Fault” means wrongful act or default [Sec. 2(5)].
(f) Insolvent. A person is said to be “insolvent” who has ceased to pay his debts in the ordinary course of business, or cannot pay his debts
(
as they become due, whether he has committed an act of insolvency or not [Sec. 2(8)].
g) Mercantile Agent. “Mercantile agent means a mercantile agent having in the customary course of business as such agent authority either to sell goods, or to consign goods for the purposes of sale, or to buy goods, or to raise money on the security of goods [Sec. 2(9)].
(
h) Price. “Price” means the monetary consideration for a sale of goods [Sec. 2(10)].
(
i) Property. “Property” means the general property in goods, and not merely a special property [Sec. 2(11)].
(
j) Quality of goods. “Quality of goods” includes their status or condition [Sec. 2(12)].
14.5 DEFINITION OF A CONTRACT OF SALE
According to Sec. 4(i) of the Act a contract of sale is “a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price”.
A contract of sale may be absolute or conditional.
Sale. Where under a contract of sale the property (ownership) in the goods is transferred from the seller to the buyer, immediately e.g., cash sale, the contract is called a Sale or absolute contract [Sec. 4(3)].
An Agreement to Sell. Where the transfer of property in the goods is to take place at a future time or subject to some conditions thereafter to be fulfilled, the contract is called an agreement to sell or conditional contract [Sec. 4(3)].
EXAMPLES
1. On 1st July, A agrees to sell computer to B for ` 30,000 with the intention of transferring the ownership to him immediately. B agrees to pay the price on 4th July. It is a sale or absolute contract.
2. A agrees to buy B’s Honda City car and pay ` 5 lac provided his wife gives her approval for the same. It is an agreement to buy for A and an agreement to sell for B.
CASE LAW : *Johnson vs. Mecdonald (1842)
Facts : A agreed to buy from B certain quantity of aluminium. The ship carrying the aluminium was yet to arrive from London. Held, it was only an agreement to sell and not sale. The ownership could be transferred to A only on arrival of the ship.
When does an agreement to sell become a sale?
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.
EXAMPLE
If in the example 2 given above, A’s wife gives approval for the car then the agreement to sell will become a sale, i.e., the property in goods shall pass from B to A on the payment of price.
14.6 ESSENTIALS OF A VALID CONTRACT OF SALE
The above mentioned definition reveals the following essential features of a valid contract of sale :
1. There Must Be at Least Two Parties. A contract of sale is a bilateral contract. To execute a sale, there must be at least two parties-a buyer and a seller. A person cannot buy his own goods.
CASE
LAW : State of Gujarat vs. Raman Lal and Co. (1965)
Facts : A partnership firm was dissolved and the surplus assets, including some goods were divided among the partners. The sales tax officer wanted to tax this as a sale. The court observed that “partners were themselves the joint owners of goods and they could not be both sellers and buyers. Moreover no money consideration moved between the parties.”
CASE LAW : C.M. Tansport Co. vs. I.T.O. AIR (1966)
Facts : A company, by a resolution, transferred its buses to a partnership consisting of persons who were also members of the company. The Income Tax Officer regarded this transaction as sale. Held, it was a sale as the company being a separate legal person, the transfer was not by the persons to themselves.
However, one may act in two capacities, i.e., buyer as well as the seller in the following exceptional cases :
(i) A partner may buy the goods from the firm in which he is a partner or he may sell the goods to the firm.
(ii) A agent may purchase his own goods for the principal with his consent.
(iii) Where the goods of a person are sold in execution of a decree, he may himself buy the goods just to retain their ownership.
(iv) Where a pledgee sells the goods pledged with him on non-payment of this money and the pledgee may purchase such goods himself.
(v) Where one part owner sells his share to another part owner, the latter becomes the sole owner.
2. A Contract of Sale may be Express or Implied. According to Sec. 5(2) subject to the provisions of any law for the time being in force, a contract of sale may be made in writing or by words of mouth, or partly in writing and partly by words of mouth or may be implied by conduct of the parties. Thus a contract of sale may be express or implied.
3. Mode of Formation of Contract of Sale. Sec. 5 of the Act provides the following modes of formation of contract of sale :
(i) The delivery of goods may be made immediately but the price of goods may be paid at a future date.
(ii) The delivery of goods may be made at some future date but the price of the goods is paid immediately.
(iii) There may be immediate delivery of the goods and payment of price.
(iv) There may be delivery of goods or payment of price or both to be made in instalments.
4. Transfer or Agreement to Transfer the Property in Goods. According to Sec. 2(11) of the Act, “Property means the general property in goods, and not merely a special property”.
General property must be distinguished from the special property. For instance in case of a pledge, pledgee gets a special property in the goods pledged but the general property (ownership) lies with the pledger. On pledger’s default regarding payment of loan, pledgee has special property in the goods pledged only to the extent of the amount of loan.
5. Subject Matter of a Contract of Sale Must be “Goods”. The subject matter of contract of sale should always be goods. The goods may be either existing goods or future goods. Money, actionable claims and immovable property fall outside the purview of goods as per definition contained under Sec. 2(7) which has been discussed latter in this chapter.
6. Price is the Consideration of The Contract of Sale. Transfer of property must take place for some consideration called ‘price’. If goods are exchanged for goods, the transaction would not become a sale but only a barter. Similarily, where the goods are exchanged for money, there is ‘sale’. However, if consideration for the transfer of property consists partly of payment of money and partly of goods, the transaction becomes a sale.
CASE LAW : Aldridge vs. Johnson (1857)
Facts : A agreed to exchange with B 100 quarters of barley at ` 300 per quarter for 52 bullocks valued at ` 1000 per bullock and pay the difference in cash. Held, the contract was a contract of sale as the consideration consisted partly of payment of money and partly of goods.
7. Essentials of a Valid Contract. To constitute a valid contract all the essential elements of a contract as per Sec. 10 of ICA, 1872 must be present in the contract of sale.
14.7 SOME DISTINCTIONS
14.7.1 Distinction between sale and an agreement to sell
BasisSaleAn agreement to sell
1. Transfer of property (ownership)
Property is transferred from the seller to the buyer immediately. Property is transferred from seller to the buyer at a future date.
2. Nature of contract It is an executed contract.It is an executory or future contract.
3. Subject matter
Specific goods as well as ascertained goods constitute the subject matter of sale.
4. Nature of rights
Buyer acquires jus in rem, i.e., rights against the whole world.
5. Risk of loss ‘Risk prima facie passes with property’. The buyer has to bear the risk of loss even if the goods may be in the possession of the seller.
6. Buyer’s failure to pay the price
7. Seller’s failure to deliver the goods
In case of buyer’s failure to pay price seller is entitled to sue the buyer for the recovery of price.
In case of seller’s failure to deliver the goods, the buyer can recover the goods through the court of law.
Specific goods, ascertained goods and unascertained goods constitute the subject matter of an agreement to sell.
Buyer acquires jus in personam i.e., rights against an individual.
Seller has to bear the risk of loss even if the goods may be in the possession of the buyer.
In case of buyer’s failure to pay the price seller is entitled only for damages and not for price.
In case of seller’s failure to deliver the goods, the buyer can only recover damages through the court of law.
BasisSaleAn agreement to sell
8. Right to resell the goods
Seller has no right to resell the goods even if, where the goods are in his possession after sale.
9. Insolvency of seller Official receiver or assignee of the seller is under obligation to deliver the goods to the buyer because ownership lies with him.
Seller can resell the goods and convey a good title to a third party. The original buyer can recover the damages for breach.
The buyer cannot recover the goods from the official receiver of seller. But where he has paid the price, he can only get ratable dividend from the property of the seller.
10. Insolvency of buyer
Seller has to deliver the goods to the official receiver or assignee of the buyer where the goods are in his possession. Where buyer has not paid the price, seller is under no obligation to deliver the goods to the official receiver assignee of the buyer.
14.7.2 Sale and Hire Purchase
Hire purchase. It is an agreement in which the owner of the goods agrees to transfer the property in goods to the hire purchaser only when specified number of instalments of price are paid by the hirer. On payment of all instalments, the hire purchaser has the option to purchase them which he may or may not exercise. On default of payment of even a single instalment, the owner has a right to resume possession of goods and the hire purchaser will not be entitled to get any refund of the instalments paid by him [K.L. Johar vs. Dy. CTO AIR (1965)].
BasisSaleHire purchase
1. Governing lawSale of Goods Act, 1930Hire Purchase Act, 1972
2. Nature of contract Sale is a executed contractHire purchase is executory
3. Transfer of property in goods
4. Position of buyer
5. Option to terminate the contract
The property in goods passes to the buyer immediately at the time of formation of contract.
The property in goods passes to the hirer upon payment of last instalment.
The buyer becomes the owner of goods. The buyer enjoys the position of a bailee.
The buyer has no right to put an end to the contract. He is bound to pay the price.
The hirer may terminate the contract by returning the goods to the owner with-
BasisSaleHire purchase out paying the remaining instalments
6. Insolvency of buyer
7. Treatment of instalments paid
8. Transfer of title to a bona fide purchaser
9. Implied conditions and warranties
The seller is prepared to bear the risk of any loss resulting from the insolvency of the buyer.
Each instalment paid is regarded as a part payment of the price.
The buyer can pass a valid title to subsequent buyer who buys in good faith and for consideration.
There are implied conditions and warranties in a contract of sale
10. VatVat is payable at the time of the contract
The owner is entitled to re-possess the goods if the buyer fails to pay an instalment.
Each instalment paid is regarded as a part payment only when the hirer exercises his option to buy.
The hirer cannot pass any title even to a bona fide purchaser.
The hirer is not entitled to take the benefits of implied conditions and warranties.
Vat is not leviable until the hire purchase eventually ripens into a sale.
14.7.3 Sale and Contract for Work and Labour
Meaning. A contract for work and labour is a contract if it involves exercise of skill and labour by one party in respect of materials supplied by another party and delivery of goods is only subsidiary or incidental.
Thus the features of contract for work and labour are as follows :
(i) The main object of a contract is to exercise skill and labour.
(ii) The delivery of goods is only subsidiary or incidental.
(iii) The parties intend to transfer the goods, only after some labour or skill has been exercised.
The sale of goods act is not applicable to a contract for work and labour. The distinction between the two was explained in the famous case, Commissioner of M.P. vs. Purshottam Prem Ji (1970).
The distinction essentially rests on “whether the rendering of service and exercise of skill is the essence of the contract or delivery of goods is the essence of the contract”.
The distinction between the two contracts can be understood with the help of following examples and points.
EXAMPLE.
A delivered a piece of Gold to B (Jeweller) for its conversion into ornaments. B followed various steps and converted the gold into ornaments. This is a contract of work and labour because B has rendered the services in respect of material, which had been supplied by A. If A buys the ornaments from the jeweller then it will be termed as sale.
CASE LAW : Robinson vs. Graves (1935)
Facts : G engaged R, an artist, to paint a portrait. G supplied the necessary material such as canvas and paint etc. to R. Held, the contract was one for work and labour and not for sale because the essence of the contract was the artist’s skill and labour and supply of canvas and paint was only supportive or incidental.
BasisContract of saleContract for work and labour
1. Object The main object is the transfer of property and delivery of the possession of the property. The main object is the exercise of some skill or labour.
2. Subject matter of contract Only movable property is the subject matter of contract of sale. Movable as well as immovable property can be the subject matter of contract for work and labour.
3. Example Sale of car, computer, TV etc.Painting, Carpentary etc.
4. Tax Tax is levied upon sale under the sale of goods Act. Tax is levied upon the goods excluding the labour.
14.8 SUBJECT-MATTER OF THE CONTRACT OF SALE
Section 6 lays down that “Goods” form the subject matter of contract of sale. According to Sec. 2(7) : “The term ‘goods’ mean every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale.”
Based on the definition contained under Sec. 2(7) and the court judgments, the subject matter of the contract of sale includes the following : (a) The term goods include all kinds of movable properties.
Business Laws | B.Com. (Hons.)/
B.Com. | UGCF
AUTHOR : SUSHMA ARORA
PUBLISHER :
TAXMANN
DATE OF PUBLICATION : JUNE 2025
EDITION : 13TH EDITION
ISBN NO : 9789371263931
NO. OF PAGES : 540
BINDING TYPE : PAPERBACK
DESCRIPTION
Business Laws is a concise and comprehensive textbook that aligns with the National Education Policy (NEP) and the CBCS syllabus. It simplifies core legal frameworks—such as the Indian Contract Act 1872, the Sale of Goods Act 1930, and the Limited Liability Partnership (LLP) Act 2008—through clear explanations, practical examples, and key judicial rulings, making it ideal for students in Commerce and Business programs.
This book is intended for the following audience:
• Undergraduate Students:
o B.Com. (Hons.) and B.Com. (CBCS/NEP), including NCWEB and SOL, University of Delhi
o Students in other Central/State Universities with Business/Commercial Law courses
• Professional Aspirants
o Students preparing for BBA, MBA, CA-Intermediate (IPC), and CS
• Educators & Legal Practitioners
o Teachers seeking a classroom-friendly resource
o Legal professionals needing quick updates on legislative amendments
The Present Publication is the 13th Edition, authored by Dr Sushma Arora, with the following noteworthy features:
• [Latest Legislative Developments] Coverage of Indian Contract (Amendment) Bill 2024, Bharatiya Nyaya Sanhita (BNS) 2023, and updated LLP Rules (2022, 2023, 2024–25
• [Simple & Lucid] Complex legal provisions in straightforward language
• [Case Studies & Rulings] Summaries of landmark judgments
• [Student-oriented] End-of-chapter questions, practical problems, True/False exercises, and past Delhi University exam papers
• [Author’s Expertise] Forty years of teaching experience, adding credibility and academic rigour