Section 2 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Six definitions in section 2 of the Sale of Goods Act, 1930 are about handing over goods and about the people who deal in them: "delivery", "deliverable state", "document of title to goods", "fault", "insolvent" and "mercantile agent". They look like background, but later sections on passing of property, transfer of title and the unpaid seller are built on them.
"Delivery" means voluntary transfer of possession from one person to another. Goods are in a "deliverable state" when the buyer would, under the contract, be bound to take delivery of them. A "document of title to goods" includes a bill of lading, dockwarrant, warehouse keeper's certificate, wharfingers' certificate, railway receipt, multimodal transport document and warrant or order for delivery, and any other document used in the ordinary course of business as proof of possession or control of goods. "Fault" is wrongful act or default. A mercantile agent and an insolvent person are defined by their own tests.
Reading these definitions
This article follows the consolidated text of the Act consulted (latest amendment shown: Act 28 of 1993); later amendments should be checked in the official text. The definitions begin with the words "unless there is anything repugnant in the subject or context". The first group of definitions (goods, buyer, seller, price, property, specific and future goods) is in the earlier article on section 2. If your contract involves a warehouse receipt, a bill of lading or an agent holding stock, a contract review against these definitions saves arguments later.
Section 2(2): "delivery"
"Delivery" means "voluntary transfer of possession from one person to another". There are two ideas in it: a transfer of possession, and the transfer must be voluntary. It is not the same as the passing of property, which is a separate subject in Chapter III. A seller can deliver goods without ownership passing, and ownership can pass before delivery. Chapter IV (sections 31 to 44) then sets out how delivery is made.
Section 2(3): "deliverable state"
Goods are said to be in a "deliverable state" "when they are in such state that the buyer would under the contract be bound to take delivery of them". The test is the contract: if the contract obliges the buyer to take them in their present condition, they are deliverable. Sections 20 to 22, on when property passes in specific goods, use the phrase "in a deliverable state".
Example (the writer's own): Sunrise Mills agrees to sell a lot of cloth bales to Gupta Garments, "after dyeing". Until the dyeing is done the bales are not in a deliverable state under that contract, because Gupta Garments is not bound under it to take them undyed.
Section 2(4): "document of title to goods"
The definition "includes" a long list: a bill of lading, dockwarrant, warehouse keeper's certificate, wharfingers' certificate, railway receipt, multimodal transport document, and a warrant or order for the delivery of goods. It then adds "any other document used in the ordinary course of business as proof of the possession or control of goods, or authorising or purporting to authorise, either by endorsement or by delivery, the possessor of the document to transfer or receive goods thereby represented".
The words "multimodal transport document," are shown in the copy consulted with a footnote: inserted by Act 28 of 1993, s. 31 and the Schedule, Part III. That is the latest amendment the footnotes show.
Two lessons for a buyer or lender. First, the list is not closed: the closing words pick up any document that is used in the ordinary course of business in the way described. Second, the test looks at what the document does: it proves possession or control, or lets its possessor transfer or receive the goods by endorsement or by delivery. For our post on one such document, see bill of lading as a receipt, contract and document of title. That post is on carriage documents generally; this Act's own definition is the list above.
Section 2(5): "fault"
"Fault" means "wrongful act or default". The word appears where the Act allocates a loss to the party who caused it, for example in the rule on goods that perish (section 8), and in the proviso on delayed delivery (section 26). The definition itself adds nothing about intention.
Section 2(8): "insolvent"
A person is "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". There are two tests, joined by "or": ceasing to pay debts in the ordinary course of business, and being unable to pay debts as they fall due. The closing words make clear that the definition does not depend on an act of insolvency having been committed. The term is used in Chapter V, where an unpaid seller's rights against the goods are set out.
Section 2(9): "mercantile agent"
A "mercantile agent" is one "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". The four powers are alternatives: selling, consigning for sale, buying, or raising money on the security of goods. Section 27 and section 30 deal with a mercantile agent who has possession of the goods or documents of title. For the law of agency as such, see agent and principal under Section 182 of the Indian Contract Act, 1872.
Example (the writer's own): Ravi Commission House regularly sells grain on behalf of farmers and is entitled in the customary course of business to do so. It fits the first alternative in the definition. A clerk with no such authority in the customary course of business does not.
Where each term is used later
| Term | Clause | Later sections that rely on it |
|---|---|---|
| delivery | 2(2) | Chapter IV, sections 31 to 44; also sections 23, 25 |
| deliverable state | 2(3) | sections 20 to 23 |
| document of title to goods | 2(4) | sections 27, 30 and the unpaid seller's rights in Chapter V |
| fault | 2(5) | sections 8, 10(2), 26 |
| insolvent | 2(8) | Chapter V (sections 45 to 54) |
| mercantile agent | 2(9) | sections 27 and 30 |
The table shows where the words are met first. It is not an exhaustive index. For the next topic in Chapter II, read section 4 (sale and agreement to sell), and for the way a mercantile agent's sale is treated, Section 27: sale by a person who is not the owner.
Need help with documents of title in a contract?
If your supply or trading contract depends on bills of lading, warehouse certificates or agency arrangements, we can review and vet the contract so that the definitions, rights and obligations line up before the goods move.
Key takeaways
- Delivery is voluntary transfer of possession; it is not the same as passing of property.
- Goods are in a deliverable state when the buyer is bound under the contract to take delivery of them.
- The document of title list is open-ended and includes a multimodal transport document (inserted by Act 28 of 1993).
- Fault is wrongful act or default; insolvency is tested by ceasing to pay debts or inability to pay as they fall due.
- A mercantile agent has authority, in the customary course of business, to sell, consign for sale, buy or raise money on the security of goods.
Read next
- Section 2 of the Sale of Goods Act, 1930: goods, buyer, seller, price and property
- Section 4 of the Sale of Goods Act, 1930: sale and agreement to sell
- Section 27 of the Sale of Goods Act, 1930: sale by a person who is not the owner
- Bill of lading as a document of title
Disclaimer: Based on the consolidated text of the Sale of Goods Act, 1930 consulted on 2 October 2026, whose latest amendment shown is Act 28 of 1993. It explains the words of the statute only; later amendments and the way courts apply these sections should be checked. This article is general information, not legal advice; check the official text before acting.