Goods

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Introduction
Goods is a deceptively simple term that underpins a vast swathe of commercial litigation in India: sale, transfer, pledge, insurance claims, insolvency disputes, tax assessments, carriage of goods and securities enforcement all hinge on whether something is “goods,” what category of goods it falls into, how property and risk in goods pass, and what implied conditions and warranties attach. For practitioners the pivotal issues are classification (existing / future / contingent; specific / unascertained), timing of appropriation and passing of property, allocation of risk, and statutory implied terms. Mastery of these concepts turns routine commercial facts — a consignment of packaged food, a crop standing in the field, a consignment of shares in paper form — into clear legal positions.

Core Legal Framework
– Primary statute: The Sale of Goods Act, 1930 (as applicable in India).
– Section 2(7) — Definition of “goods”:
– “Goods means every kind of movable property other than actionable claim 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.”
– Other central provisions you must have at hand:
– Section 6 — classification: existing goods, future goods, contingent goods.
– Section 14 — conditions and warranties (definition and legal consequences).
– Section 15 — sale by description (implied condition goods correspond with description).
– Section 16 — sale by sample (implied condition that bulk corresponds with sample).
– Section 18 — rules for ascertaining when property (title) in goods passes from seller to buyer (the critical rules on appropriation and intention).
– Section 20 — risk and property (prima facie risk follows property unless otherwise agreed).
– Sections dealing with remedies, unpaid seller’s rights and delivery (scattered through the Act).
– Related provisions and statutes to bear in mind:
– Indian Contract Act, 1872 — general principles of formation, offer/acceptance, consideration, and breach apply to contracts of sale.
– Transfer of Property Act, 1882 — for distinguishing movable from immovable property and for matters where the line between goods and immovable property is in issue (e.g., things attached to land).
– Customs and tax statutes, Insolvency and Bankruptcy Code and negotiable instruments law often import the Sale of Goods Act definition when treating an item as ‘goods’ for other purposes.

Practical Application and Nuances
This section is practice-focused: how the statutory definition plays out daily in courts and transactional work.

  1. Classification: existing v. future v. contingent goods
  2. Existing goods: goods owned or possessed by the seller at the time of contract. Example: a ready parcel of coffee beans in the warehouse.
  3. Future goods: goods to be manufactured or acquired by the seller after the making of the contract. Example: a manufacturer’s next production batch.

  4. Contingent goods: future goods the acquisition of which by the seller depends upon a contingency (e.g., contingent on crop harvest, or on a third party’s performance).
    Practical effect: When goods are future or contingent, the property in goods cannot pass to the buyer until they come into existence and are ascertained. This matters for insolvency, risk allocation, and insurance.

  5. Specific / ascertained v. unascertained goods

  6. Specific goods: identified and agreed upon at the time the contract is made (e.g., “the consignment of 5,000 tins of Brand X, batch no. 1234”).
  7. Unascertained goods: goods not specifically identified at contracting (e.g., “100 tonnes of wheat from our next delivery”).
    Practical consequences:
  8. For specific goods, property can pass immediately if parties intend (see Section 18 rules). Once property passes, buyer bears risk—even if delivery is postponed.

  9. For unascertained goods, property does not pass until the goods are ascertained and appropriated to the contract. A common litigation fact pattern: seller’s warehouse burns down after contract but before appropriation — court must decide whether property had passed.

  10. Appropriation and the moment property passes (Section 18 rules)

  11. The Act provides rules to ascertain parties’ intention (and courts construe transaction documents, invoices, packing lists and correspondence for this).
  12. Practical proofs of appropriation:
  13. Deliveries made and buyer’s acceptance signatures on delivery challans or bills of lading;
  14. Specific marking, packing or segregation of the goods for the buyer;
  15. A seller’s written notice that goods have been set aside for buyer.

  16. Pitfall: invoice alone does not always evidence appropriation if the goods are still commingled, not segregated or delivery conditions remain. Document the intention to transfer title.

  17. Risk and insurance

  18. Prima facie rule: risk follows property. If property passed to buyer, risk of loss also passes, unless the contract provides otherwise.

  19. Practical tip: when goods are in transit, ensure contracts state whether the seller’s or buyer’s insurance is on risk, who must insure, and what warranties the carrier provides. In litigation, the exact clause allocation decides whether loss in transit is seller’s or buyer’s risk.

  20. Implied conditions and warranties — common litigation points

  21. Merchantable quality, fitness for purpose, correspondence with description or sample (Sections 14–16).
  22. Evidence: purchase orders, catalogues, sample retention, quality/inspection certificates, email exchanges about intended use.

  23. Example: FMCG dispute where buyer claims packaged juice was contaminated — claimant must show breach of implied condition of merchantable quality; seller will rely on third‑party lab tests, chain of custody and distribution records.

  24. Special categories that complicate “goods”

  25. Growing crops and things attached to land: included as goods when the contract contemplates severance before sale. Disputes arise whether an agreement to buy “paddy standing in field” is a sale of goods or a contract for transfer of immovable property (depends on intention and terms).
  26. Stocks and shares: defined as goods by the Act — but market practice (dematerialized shares, statutory securities regulation and depositories) adds overlay of corporate and securities law for transferability and delivery.

  27. Money and actionable claims excluded: money is not goods; this exclusion plays out in disputes over claimed sale of receivables vs assignment (assignment of actionable claims has different formalities).

  28. Sale by non-owner and good-faith purchasers

  29. Where a seller has no title but transfers to a bona fide purchaser for value in possession (e.g., sale under voidable title, sale by mercantile agent), nuances of Sections dealing with transfer by non-owner and estoppel apply. Practically: always examine chain of title and whether buyer had notice of seller’s lack of title.

Concrete examples (litigation scenarios)
– Warehouse fire after contract but before segregation: if seller had already appropriated specific crates and communicated appropriation to buyer, property (and risk) likely passed to buyer — buyer’s loss.
– Crop contracted as “sale of paddy” with clause “to be severed before delivery”: courts treat as goods once severed; parties should include severance schedule and proof of harvest and weighment.
– Packaged food sold by sample: buyer alleges bulk didn’t match sample — preserve sample, get contemporaneous inspection reports and lab tests; seller must show maintenance of the chain of custody.

Landmark Judgments
Practitioners should anchor statutory arguments with precedent. Below are high‑authority decisions and the principles they are commonly relied upon (seek the full text of the reported decisions for citation and nuance in your jurisdiction):

  • Principle on passing of property and appropriation: Indian courts have repeatedly held that the decisive enquiry is the parties’ intention as gathered from the contract and surrounding facts — e.g., whether goods were identified and appropriated, whether delivery and payment conditions were mere modes of payment or intended to withhold property. Look for Supreme Court and High Court rulings that apply Section 18 rules to your fact pattern; courts will analyse contemporaneous invoices, delivery orders and conduct of parties to infer intention.

  • Principle on implied conditions (description / sample / merchantable quality): Courts apply a fact-driven approach — if buyer relies on sample/description, the sample must be preserved and tested; for merchantable quality, the buyer must demonstrate lack of fitness for ordinary purpose. Indian High Courts and the Supreme Court have applied these principles in consumer product and large commercial disputes; cite the leading case law of your High Court that interprets Sections 14–16 in the context of manufactured goods and FMCG claims.

(When preparing pleadings or submissions, cite the exact reported judgments from your High Court or the Supreme Court that interpret Sections 2(7), 14–16 and 18. The principles above are staples of Indian jurisprudence; the specific facts in each reported decision determine its utility as precedent.)

Strategic Considerations for Practitioners
– Contract drafting: never leave the characterization of goods to inference. Clearly define:
– whether goods are specific, unascertained, future or contingent;
– when appropriation occurs (packing, marking, notification);
– who bears risk in transit (INCOTERMS-style clauses are useful);
– which party must insure and to what extent;
– inspection and acceptance procedures, retention of samples, dispute resolution.
– Evidence preservation:
– Retain delivery challans, bills of lading, packing lists, consignment notes, photographs of goods segregated/marked, lab reports, and any third-party inspection certificates.
– Preserve samples and chain of custody documentation immediately on dispute.
– Pleading and proof:
– If arguing property passed to your client, plead clear acts of appropriation and contemporaneous conduct (invoices, communications, delivery instructions).
– If arguing property did not pass (e.g., seller insolvent), focus on lack of segregation, continuing right of disposal retained by seller, reservation clauses in invoices.
– Commercial remedies vs. injunctive relief:
– For perishable goods, urgent interim relief (delivery, preservation) may be necessary; courts balance frustration and impossibility doctrines with contractual allocation of risk.
– Common pitfalls:
– Assuming invoice = transfer of property: courts look beyond invoices when goods are unascertained or conditions precedent exist.
– Failing to specify which law governs dematerialised securities and how transfer is to be effected — stock transfers follow separate statutory and regulatory regimes despite the Act’s wide definition.
– Overlooking actionable claim/money exclusion: attempts to characterize a debt or receivable as “goods” to shoehorn into sale law will fail; ensure correct procedural steps for assignment of actionable claims.
– Leverage in insolvency or recovery:
– In insolvency scenarios, whether property passed to the buyer before the insolvency commencement date determines whether the goods form part of the corporate debtor’s estate. Meticulous documentation of appropriation and transfer timing is essential.

Conclusion
“Goods” as defined in Section 2(7) of the Sale of Goods Act, 1930, is the pivot on which many commercial disputes turn. Practically, three yardsticks decide the outcome in most disputes: (1) whether the item is a “good” (not money or actionable claim), (2) whether it is specific/ascertained or future/contingent, and (3) the precise moment of appropriation and passing of property (and hence risk). For practitioners the remedy is simple: contract for clarity; document appropriation and delivery meticulously; preserve samples and evidence; and tailor pleadings to the statutory rules (especially Section 18 and the implied terms in Sections 14–16). Where statutory clarity meets disciplined factual proof, contested “goods” disputes are often resolved on ordinary commercial logic supported by the Act and settled authority.