Classification of Goods

Under the Sale of Goods Act, 1930, the term goods plays a central role in determining the applicability of the Act. Not all types of property are goods, and goods themselves are classified into various categories based on ownership, existence, identification, and nature. Proper classification of goods is essential because it affects the formation of contract, transfer of ownership, risk, and remedies available to buyer and seller.

Meaning of Goods

According to Section 2(7) of the Sale of Goods Act, 1930,

Goods mean every kind of movable property other than money and actionable claims. It includes stock, shares, growing crops, grass, and things attached to or forming part of the land, which are agreed to be severed before sale.

Goods do not include immovable property, money, or actionable claims such as debts.

Basis of Classification of Goods

Goods are classified under the Sale of Goods Act on the following bases:

• Ownership

• Existence

• Identification

• Nature

• Delivery status

Classification of Goods Based on Ownership

1. Goods Owned by the Seller

These are goods that are owned or possessed by the seller at the time of making the contract. Ownership implies that the seller has legal title over the goods and can lawfully transfer ownership to the buyer.

Such goods may be existing, specific, or unascertained. The seller can enter into a valid contract of sale only when he has the right to sell the goods. Ownership ensures that the buyer receives a good title and avoids disputes regarding transfer of property.

2. Goods Not Owned by the Seller

These goods are not owned by the seller at the time of making the contract, but the seller expects to acquire them later. Contracts involving such goods are valid only as agreements to sell.

If the seller fails to acquire ownership later, the buyer cannot claim the goods but may sue for damages. This classification is important in determining the enforceability of the contract.

Classification of Goods Based on Existence

1. Existing Goods

Existing goods are goods which are owned or possessed by the seller at the time of making the contract. These goods are already in existence and can be immediately sold or agreed to be sold.

Existing goods may be:

• Specific goods

• Ascertained goods

• Unascertained goods

Most commercial transactions involve existing goods, making this classification highly significant.

2. Future Goods

According to Section 2(6), future goods are goods which are to be manufactured, produced, or acquired by the seller after making the contract.

A contract for the sale of future goods cannot be a sale but only an agreement to sell, because ownership cannot be transferred until the goods come into existence.
Example: A agrees to sell furniture to be manufactured next month.

3. Contingent Goods

Contingent goods are a type of future goods whose acquisition depends upon the happening or non-happening of a contingent event.

Example: A agrees to sell B a cargo of goods only if the ship arrives safely.
If the contingency does not occur, the agreement becomes void. This classification helps determine the validity of the contract in uncertain situations.

Classification of Goods Based on Identification

1. Specific Goods

According to Section 2(14), specific goods are goods which are identified and agreed upon at the time the contract is made.

These goods are clearly identified by the parties and separated from other goods.
Example: Sale of a particular car with a specific registration number.

Ownership in specific goods can pass immediately or at a future time depending on the intention of the parties.

2. Ascertained Goods

Ascertained goods are goods that were initially unascertained but later identified and appropriated to the contract.

Once goods are ascertained, they become specific goods.
Example: Out of 100 bags of rice, 20 bags are separated and packed for a buyer.

This classification is important in determining when ownership and risk pass from seller to buyer.

3. Unascertained Goods

Unascertained goods are goods that are not identified at the time of making the contract.

Example: Sale of 50 quintals of wheat out of a large stock.
Ownership in unascertained goods does not pass until the goods are ascertained and appropriated. This protects buyers from loss before identification.

Classification of Goods Based on Nature

1. Movable Goods

Movable goods are goods that can be moved from one place to another without losing their identity.

Examples include furniture, vehicles, machinery, and electronic goods.
The Sale of Goods Act applies primarily to movable goods, making this classification central to the Act.

2. Immovable Goods (Excluded)

Immovable property such as land and buildings is excluded from the definition of goods.

However, things attached to land, like trees or crops, become goods if they are agreed to be severed before sale.
Example: Sale of standing timber to be cut and removed.

Classification of Goods Based on Delivery Status

1. Delivered Goods

Delivered goods are goods that have been actually delivered to the buyer or to his authorized agent.

Delivery may be actual, symbolic, or constructive. Once goods are delivered, the buyer usually bears the risk, subject to contract terms.

2. Undelivered Goods

Undelivered goods are goods that have not yet been delivered and remain in the possession of the seller.

The seller has a lien over undelivered goods for non-payment of price. This classification helps determine seller’s rights.

3. Rejected Goods

Rejected goods are goods that the buyer has refused to accept because they are defective or not according to contract.

Ownership in rejected goods generally reverts to the seller. This classification is important for remedies and risk allocation.

Importance of Classification of Goods

• Determines Transfer of Ownership

Classification helps determine when ownership passes from seller to buyer. Different rules apply to specific, unascertained, and future goods.

• Determines Risk and Liability

Risk usually follows ownership. Classification of goods helps identify who bears the risk of loss or damage at different stages.

• Affects Rights and Remedies

Rights of lien, stoppage in transit, and suit for price depend on the nature and classification of goods.

• Ensures Legal Certainty

Clear classification avoids ambiguity and reduces disputes related to delivery, payment, and ownership.