Section 38 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.
Section 38 deals with goods delivered in parts. Sub-section (1) says that, unless otherwise agreed, a buyer need not accept delivery by instalments. Sub-section (2) deals with a contract that does provide for stated instalments paid for separately, and says that whether a breach in one or more instalments ends the whole contract or only gives a claim for compensation depends on the terms and circumstances. This article follows the text of the Act consulted (latest amendment shown: Act 28 of 1993); amendments after that should be checked in the official text.
Unless otherwise agreed, a buyer is not bound to accept delivery by instalments. Where the contract calls for stated instalments to be separately paid for, and the seller makes no delivery or defective delivery of an instalment, or the buyer neglects or refuses to take or pay for one, the Act says it is a question in each case, depending on the terms of the contract and the circumstances, whether the breach repudiates the whole contract or is a severable breach giving only a claim for compensation.
Sub-section (1): no duty to accept delivery by instalments
"Unless otherwise agreed, the buyer of goods is not bound to accept delivery thereof by instalments." The default is a single delivery of the whole quantity. A seller who wants to ship in lots should have the buyer's agreement, and the clearest evidence of it is the contract itself, which a contract review can check for exactly this point. The sub-section opens with "Unless otherwise agreed", so the parties can displace it, and section 62 confirms that implied rights and duties may be varied by express agreement, course of dealing or binding usage.
The sub-section is about acceptance of delivery in parts. It does not state what the buyer must do to refuse, or whether a refusal is a breach; the text is silent on that. Read it with section 37 on the wrong quantity and with section 41 on the buyer's examination of goods delivered. See our articles on delivery of wrong quantity and on examination and acceptance.
Example (our own, not from the Act): Mehta Pumps contracts to sell 120 pumps to Gill Agro for one price, delivery on a single day. Mehta Pumps offers 40 pumps now and 80 next week. Unless otherwise agreed, Gill Agro is not bound to accept delivery by instalments.
Sub-section (2): contracts with stated instalments paid for separately
Sub-section (2) applies only where three things are present:
- a contract for the sale of goods "to be delivered by stated instalments";
- the instalments "are to be separately paid for"; and
- one of the listed defaults occurs: the seller "makes no delivery or defective delivery in respect of one or more instalments", or the buyer "neglects or refuses to take delivery of or pay for one or more instalments".
When these exist, "it is a question in each case depending on the terms of the contract and the circumstances of the case, whether the breach of contract is a repudiation of the whole contract, or whether it is a severable breach giving rise to a claim for compensation, but not to a right to treat the whole contract as repudiated."
The sub-section therefore gives two possible outcomes, and does not choose between them:
- Repudiation of the whole contract. The breach is so serious that the contract as a whole is treated as repudiated.
- Severable breach. The breach gives "a claim for compensation, but not ... a right to treat the whole contract as repudiated."
The Act offers no test beyond "the terms of the contract and the circumstances of the case". It does not say how many instalments, or what fraction of the goods, must be affected. It states no percentage and no rule of thumb; do not read one into it.
Example (our own): Kapoor Mills agrees to supply 12 monthly lots of yarn to Rao Weavers, each lot invoiced and paid for separately. In month 4 the lot is defective. Under sub-section (2), whether this is a repudiation of the whole contract or a severable breach giving only a claim for compensation turns on the contract's terms and the circumstances. A supply contract that says in words what happens on a defective lot makes the answer much clearer.
Both parties are covered
Notice that the sub-section lists defaults by the seller and by the buyer. A seller who delivers defectively and a buyer who refuses to pay for an instalment stand on the same footing: for both, the question is whether the breach is repudiatory or severable. The sub-section does not tell the innocent party how to elect, what notice to give or in what time. For repudiation before the date of delivery, section 60 has its own rule; see our article on repudiation before the due date.
Section 38 compared with its neighbours
| Section | Subject | Default or fixed rule | Opening words |
|---|---|---|---|
| 36(5) | Expenses of deliverable state | Seller bears | "Unless otherwise agreed" |
| 37 | Wrong quantity | Buyer may accept or reject | Subject to usage, special agreement or course of dealing (37(4)) |
| 38(1) | Instalments | Buyer not bound to accept | "Unless otherwise agreed" |
| 38(2) | Breach in a stated instalment | Question of fact for each case | None; depends on terms and circumstances |
| 39 | Carrier or wharfinger | Delivery to carrier prima facie delivery to buyer | Sub-section (3): "Unless otherwise agreed" |
Drafting around section 38
- Say that delivery will be by instalments, and state the schedule. Sub-section (2) speaks of "stated instalments", so the dates and quantities should be written.
- Say whether each instalment is invoiced and paid for separately. Sub-section (2) applies only where the instalments are "to be separately paid for".
- State what a defective or missed instalment means. The Act leaves it to the terms and circumstances, so put the intended consequence into the terms, for example whether the other party may end the contract or only claim compensation.
- Keep records per instalment. Delivery challans, inspection notes and payment dates for each lot are the circumstances the sub-section points to.
- Compensation. Sub-section (2) mentions "a claim for compensation" but gives no formula. Our articles on sections 73 to 75 of the Indian Contract Act, 1872 cover compensation under that Act, and section 3 of the Sale of Goods Act applies the unrepealed provisions of the Contract Act except where inconsistent with this Act.
Need help with a supply contract that delivers in instalments?
The result under sub-section (2) depends on the terms you write. We can check the instalment schedule, the payment terms and the default clauses before you sign; a contract review is the usual starting point.
Key takeaways
- Unless otherwise agreed, the buyer need not accept delivery by instalments.
- Sub-section (2) covers stated instalments that are separately paid for.
- A breach in one or more instalments may be repudiation of the whole contract or a severable breach giving only a claim for compensation; it depends on the terms of the contract and the circumstances.
- The Act states no percentage or test of seriousness.
- Both seller's and buyer's defaults are covered.
Read next
- Section 37 of the Sale of Goods Act, 1930: delivery of wrong quantity or mixed goods
- Sections 39-40 of the Sale of Goods Act, 1930: delivery to a carrier or wharfinger
- Section 60 of the Sale of Goods Act, 1930: repudiation before the due date
- Sections 63 to 65 of the Indian Contract Act, 1872: remission, rescission and restitution
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.