What Constitutes 'Goods' Under Section 2(7): Why Actionable Claims, Money, and Stock Are Excluded
- Umang
- 3 days ago
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Table of Contents
The Question That Opens Every Sales Law Course
Someone sells a debt owed to them. Someone else sells their electricity supply on a long-term contract. A third person sells the standing mango trees on their farmland. A fourth sells her old Mughal-era coin to a collector.
Which of these is a sale of goods under the Sale of Goods Act, 1930?
The answer is not self-evident. A debt is movable in a loose sense — it moves, after all, when assigned. Electricity cannot be touched. Mango trees are fixed in soil. And a coin is obviously physical. Yet each of these transactions invokes a different answer under Section 2(7) of the Sale of Goods Act, 1930, the provision that defines the central subject matter of the entire statute.
Getting the definition right matters because every right and obligation under the Act — implied conditions and warranties, transfer of property, risk allocation, the unpaid seller's remedies — flows from the single prior question: are the goods in question goods within Section 2(7)?
The Text of Section 2(7): Parsing the Definition
Section 2(7) of the Sale of Goods Act, 1930 provides:
"Goods means 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."
The definition has three distinct components, each doing specific legal work:
First, the positive core — goods means every kind of movable property. The reach of this phrase is deliberately wide. Movable property is the genus; goods is the species drawn from it, subject to the exclusions that follow.
Second, the express exclusions — actionable claims and money are carved out. These are items of movable property, technically speaking, but the legislature has decided they should not be treated as goods for purposes of this Act.
Third, the express inclusions — stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed. These are items that might otherwise cause doubt — whether because they are intangible (shares), or because they begin as part of the land (crops, grass, timber) — and the legislature has resolved that doubt by including them expressly.
The Positive Core: Every Kind of Movable Property
The phrase "every kind of movable property" is cast in the widest possible terms. It is not limited to physical or tangible objects. The legislature chose every kind, and the courts have given full effect to that choice.
Tangible and Intangible Property Both Qualify
The definition expressly encompasses both tangible goods — things you can physically touch, weigh, and deliver — and intangible goods — property rights that exist as legal constructs rather than physical objects. Things like goodwill, copyright, trademarks, patents, and ships are all goods within Section 2(7). A decree of a court has equally been recognised as goods. The common thread is not physicality but movability — the property must be capable of being transferred, delivered, or possessed in the manner appropriate to its nature.
Goodwill, Copyright, Trademarks, Patents
These are quintessentially intangible but entirely movable. Goodwill attached to a business can be sold. Copyright in a literary work can be assigned. A trademark, a patent, a registered design — all of these are transferable property rights, and the courts have consistently treated them as capable of forming the subject matter of a contract of sale of goods.
This position was affirmed in Rash Behari v Emperor [A.I.R. 1936 Cal. 753], which confirmed that items of intellectual property fall within the goods definition.
The practical consequence: a contract for the outright sale (as opposed to a licence) of a copyright or trademark is a contract of sale of goods governed by the Sale of Goods Act, 1930, attracting all the implied conditions and warranties the Act imposes.
Decrees of Courts
More unexpectedly, a decree of a civil court has been judicially recognised as goods. A decree is a judgment debt — it is property in the sense that it represents an enforceable claim against the judgment debtor. When it is transferred or assigned for a price, the transaction has the character of a sale of goods. This is a position unique to Indian law and reflects the breadth of the "every kind of movable property" formulation.
The Express Exclusions: Actionable Claims and Money
The exclusion of actionable claims and money from the definition of goods is not accidental or incidental. Each exclusion reflects a considered legal and structural rationale.
Actionable Claims: Things in Action, Not in Possession
An actionable claim is either an unsecured debt or a beneficial interest in movable property not in the possession of the claimant. The paradigm cases are: a claim for arrears of rent, a claim on an insurance policy, and any outstanding debt owed by one party to another. Money due from a party is, in the language of the common law, a thing in action — it can only be recovered by bringing an action or suit in court.
The distinction that drives the exclusion is the distinction between a thing in possession and a thing in action. Goods, in the commercial sense, are things that can be physically handed over — delivered from seller to buyer. An actionable claim cannot be delivered in that sense. It exists only as a legal right to sue. There is no object to hand over; there is only a cause of action to assign.
Since the entire machinery of the Sale of Goods Act — conditions as to title, description, merchantable quality, delivery, and acceptance — presupposes that something physical or at least identifiable is passing from seller to buyer, it would be inapt to apply that machinery to a bare claim for money. Hence the exclusion.
A claim for arrears of rent, for instance, is an actionable claim. It cannot be the subject matter of a contract of sale of goods. It can, however, be assigned under the Transfer of Property Act, 1882 — a different statutory regime altogether.
The Lottery Ticket Exception: H. Anraj v Govt. of Tamil Nadu
The courts have had to navigate a subtle but important boundary: when does a ticket or document representing a right straddle the line between an actionable claim and goods?
The answer was provided in H. Anraj v Govt. of Tamil Nadu (AIR 1986 SC 63). The Hon'ble Supreme Court held that a lottery ticket is goods and not an actionable claim.
The transfer of a lottery ticket involves the transfer of the right to participate in the draw — which is a transfer of a beneficial interest in movable property to the purchaser, and therefore a sale of goods. The ticket itself is a physical document; the right it embodies is immediate and present, not merely a future right to sue.
However, the same judgment draws a sharp and important distinction: a claim in respect of a prize on a lottery ticket — that is, the right to collect the prize after the draw has been held — is an actionable claim. At that point, the holder has nothing physical left; they have only a debt owed by the lottery authority, recoverable by action. The ticket has served its function; what remains is a chose in action, not goods.
This distinction — between a document that confers a present, transferable beneficial interest (goods) and a bare right to sue for money owed (actionable claim) — is one that courts apply across a range of instruments.
Money: The Structural Reason for Exclusion
Money, meaning current money in circulation — legal tender — is excluded from the definition of goods for a reason rooted in the structure of the Act itself.
In every contract of sale of goods, money is the consideration — the price paid by the buyer for the goods. If money were itself goods, the entire conceptual framework of the Act would collapse into circularity: the Act would have to govern a contract in which the "price" was being paid in "goods" (money) for other "goods" (money). The exchange rate between one denomination and another would have to be treated as a "price", which makes no commercial sense.
Moreover, in an exchange of one form of legal tender for another — say, the conversion of small denomination notes into a higher denomination — it is not possible to say that one is the price of the other. There is no sale and no buyer in any commercially meaningful sense. Hence current money is excluded.
Cheques and credit cards, though functionally equivalent to money in commercial transactions, are not current money within the meaning of the exclusion. They are instruments, not legal tender in the strict sense. The exclusion is confined to legal tender — notes currently in circulation within the home country as valid currency.
Old Coins and Foreign Currency: Moss v Hancock
The exclusion of money covers only current legal tender — currency notes presently in circulation within India. Two important categories fall outside this exclusion and therefore qualify as goods.
Old and rare coins that have ceased to be current money or legal tender have lost their character as "money" and reverted to the character of movable property. They are collected, traded, and sold as objects of value in their own right — not as a medium of exchange. Their sale is therefore governed by the Sale of Goods Act, 1930.
This principle was established in Moss v Hancock [(1899) 1 Q.B. 111], where the court held that old and rare coins that had ceased to be current money could become goods and form the subject matter of a sale.
Foreign currency notes are similarly excluded from the "money" category. The exclusion of money under Section 2(7) refers only to legal tenders in circulation within the home country. Foreign currency notes are not legal tender in India; they are not an accepted medium of exchange for domestic transactions. They may, therefore, be bought and sold as goods, and their price in Indian rupees is the consideration for the sale.
Stock and Shares: The Express Inclusion
Stock and shares are expressly included within the definition of goods under Section 2(7), even though they are intangible instruments representing a shareholding or ownership interest in a company.
Why the Indian Act Differs from English Law
This inclusion is notable because under English law, stocks and shares are not expressly included in the definition of goods under the Sale of Goods Act. The Indian legislature made a deliberate choice in 1930 to include them. The practical consequence is that a contract for the sale of shares is, in principle, a contract of sale of goods under Indian law — though the manner of the sale must comply with the provisions of the Companies Act and SEBI regulations where applicable.
As the source material observes, where shares are sold from one person to another, the provisions of the relevant company law must be observed alongside the Sale of Goods Act — the Act sets the general framework but cannot override the specific statutory requirements for the transfer of shares.
Fixed Deposit Receipts
Fixed Deposit Receipts (FDRs) have also been recognised as goods under Section 2(7) of the Sale of Goods Act, 1930, read with Section 176 of the Indian Contract Act, 1872. A fixed deposit receipt is a document evidencing a deposit with a bank — it is a form of movable property capable of being pledged and transferred. Its recognition as goods brings it within the protection of the Sale of Goods Act framework, including the lien and pledge provisions.
Land-Attached Items: The Severance Test
Things attached to or forming part of land are, in their ordinary state, immovable property. Immovable property is not goods — it is governed by the Transfer of Property Act, 1882. Yet Section 2(7) expressly brings certain land-attached items within the definition of goods. The test is the agreement to sever.
The Agreement-to-Sever Requirement
Growing crops, grass, and things attached to or forming part of the land qualify as goods when they are agreed to be severed before sale or under the contract of sale. The act of severance — actual or agreed — converts what would otherwise be immovable property into movable property, and therefore into goods.
The agreement of severance is the decisive element. A crop still growing on the land, with no agreement about severing it, remains part of the land. The same crop, agreed to be harvested and delivered to the buyer, becomes goods. The legal character of the subject matter changes with the commercial intention of the parties.
This principle was confirmed in Singh v Saran [(1948) I.A. 396], which held that where standing trees were agreed to be cut and removed by the purchaser, the transaction was a sale of goods — the trees having become movable property by virtue of the agreement to sever.
Standing Timber vs Tree: Shantabai v State of Bombay
The courts have drawn a precise and important distinction between standing timber and a tree as such. The Hon'ble Supreme Court, in Shantabai v State of Bombay (AIR 1958 SC 532), held that standing timber — timber in a state ready to be cut — is movable property, while a living tree that continues to draw nourishment from the soil is immovable property.
The rationale is rooted in the physical reality of the two situations. A living tree is organically connected to the soil; it grows, draws sustenance, and is — in a functional sense — part of the land. Standing timber, on the other hand, has been prepared for cutting; its connection to the soil is mechanical rather than organic; it is ready for conversion into a movable commodity. That distinction in physical character justifies the distinction in legal classification.
The practical consequence is that a sale of standing timber agreed to be cut and taken away is a sale of goods; a sale of living trees without any agreed severance is a sale of immovable property within the Transfer of Property Act.
Buildings, Doors, Windows, Debris
The severance principle extends to built structures and their components. Doors and windows can be severed from a building and sold as goods. A building can be demolished and its debris sold as goods. In each case, the conversion from immovable to movable is effected — actually or by agreement — and the Sale of Goods Act takes over from the Transfer of Property Act.
Partnership Interests in Immovable Assets: Narayanappa v Bhasker
A further dimension of the land-and-goods question arises in partnership law. In Narayanappa v Bhasker [(1966) A.S.C. 1300], the court held that a partner's interest in the partnership assets — even where those assets include immovable property — is itself movable property. The partner does not own an undivided share in the immovable property as such; the partner owns a share in the partnership, which is a personal, movable interest. That interest can therefore be sold as goods.
Water, Air, Electricity, and Gas
These are not expressly listed in Section 2(7), but the courts have brought them within the definition on the basis that they are movable property — in a manner appropriate to their nature.
Commr. of Sales Tax v M.P. Electricity Board (AIR 1970 SC 732)
The most significant judicial pronouncement on the point came in Commissioner of Sales Tax v M.P. Electricity Board (AIR 1970 SC 732), where the Hon'ble Supreme Court addressed the question of whether electricity is "goods" for the purposes of sales tax.
The court rejected the argument that electricity falls outside the goods definition because it is intangible and cannot be touched or moved like a piece of wood or a book. The court reasoned that the term "movable property" in the context of goods "cannot be taken in a narrow sense".
Electric energy has all the attributes of movable property — it can be transmitted, transferred, delivered, stored, and possessed in the same manner as any other movable property. Accordingly, electricity is covered by the definition of goods.
The Calcutta High Court reached the same conclusion in Associated Power Co. Ltd. v Ram Taran Roy (AIR 1970 Cal 75). By the same chain of reasoning, water (including water flowing through pipelines), air, steam, and gas are all capable of being treated as goods within Section 2(7).
Their physical properties — the fact that they cannot be held in the hand the way a book can — does not deprive them of their character as movable property capable of delivery and possession.
Human Tissues and Organs: A Developing Area
The source material raises, with appropriate caution, the question of whether human tissues and organs can constitute goods. The traditional position of the common law is that there is no right of property in a dead body or any part thereof, and that human remains cannot be bought and sold. On that view, they cannot be goods.
However, the law has moved considerably from that position in recent decades. Human hair has been bought and sold for wig-making for centuries. Blood, urine, and other bodily products have been treated in American jurisprudence as capable of sale. In India, the Transplantation of Human Organs and Tissues Act, 1994 regulates and restricts commercial dealings in human organs — effectively prohibiting the sale of kidneys, livers, and similar organs for commercial purposes.
The practical position in India is therefore: while some human bodily products (such as hair, blood for transfusion in a blood bank context) may arguably fall within the goods definition as a matter of abstract legal analysis, commercial trafficking in human organs is prohibited by statute. The question is, for most purposes, academic — though it surfaces in medico-legal contexts involving blood banks, plasma, and donated tissue.
Applying the Definition: A Classification Test
The following items, routinely tested in examinations and in practice, can be classified using the Section 2(7) framework:
House property: Immovable — not goods. Governed by the Transfer of Property Act.
Land: Immovable — not goods.
Stocks and shares: Expressly included — goods.
Growing crops and grass agreed to be severed: Expressly included — goods.
Growing crops not agreed to be severed: Part of the land — not goods under this Act.
Standing teak trees agreed to be severed: Goods — movable once severance agreed (Singh v Saran).
Standing mango trees not agreed to be severed: Immovable — not goods.
Goodwill, copyright, trademark, patents: Intangible movable property — goods.
Water, gas, electricity: Movable property within Section 2(7) — goods (M.P. Electricity Board).
Old coins: No longer legal tender — goods (Moss v Hancock).
Foreign currency notes: Not legal tender in India — goods.
Debt or arrears of rent: Actionable claim — expressly excluded, not goods.
Lottery ticket (before draw): Goods — transfer of beneficial interest (H. Anraj).
Prize claim on lottery ticket (after draw): Actionable claim — not goods (H. Anraj).
Current Indian currency notes: Legal tender — money, excluded.
Conclusion
Section 2(7) of the Sale of Goods Act, 1930 is a provision whose apparent simplicity conceals considerable depth. The phrase "every kind of movable property" is genuinely expansive — it covers tangible objects, intangible intellectual property rights, decrees, stock and shares, electricity, and gas. The exclusions of actionable claims and money are not arbitrary; each reflects a structural reason why the Sale of Goods Act machinery — built around delivery, possession, and transfer of title in things — is inapt for rights (actionable claims) and the universal medium of exchange (money).
The severance rule for land-attached items — crops, grass, trees, buildings — answers a recurrent commercial question with a clean principle: if the parties have agreed to sever, the item becomes movable, and the Sale of Goods Act governs. The key judicial decisions — Shantabai on standing timber, M.P. Electricity Board on electricity, H. Anraj on lottery tickets, Moss v Hancock on old coins — each carve out a specific answer to a specific borderline question, and together they give the definition of goods both its outer limits and its internal texture.
For practitioners and students alike, the lesson is to approach Section 2(7) not as a static list to be memorised, but as a framework of principles — movability, transferability, possession, delivery — that courts apply purposively to new forms of property as commercial life generates them.
Frequently Asked Questions
Q: Why are actionable claims excluded from the definition of 'goods' under Section 2(7)?
Actionable claims — such as debts, claims for arrears of rent, and claims on insurance policies — are things in action, recoverable only by filing a suit. They cannot be physically delivered from seller to buyer in the manner that the Sale of Goods Act presupposes. Since the entire framework of the Act — conditions as to delivery, merchantable quality, transfer of title — assumes a tangible or at least transferable subject matter capable of possession, applying that framework to a bare legal right to sue would be structurally inapt. Hence, actionable claims are expressly excluded.
Q: Are lottery tickets goods or actionable claims?
The Hon'ble Supreme Court answered this in H. Anraj v Govt. of Tamil Nadu (AIR 1986 SC 63). A lottery ticket is goods — not an actionable claim — because its sale transfers the right to participate in the draw, which is a beneficial interest in movable property. However, a claim to a prize after the draw has been held is an actionable claim, because at that point, all that remains is a right to recover money by action against the lottery authority.
Q: Are old coins and foreign currency notes 'goods' under the Sale of Goods Act, 1930?
Yes. The exclusion of money from the definition of goods applies only to current legal tender — notes presently in circulation within India. Old and rare coins that have ceased to be legal tender are goods, as confirmed in Moss v Hancock [(1899) 1 Q.B. 111]. Foreign currency
notes are not legal tender in India and may therefore be bought and sold as goods.
Q: When do growing crops qualify as 'goods' under Section 2(7)?
Growing crops, grass, and things attached to or forming part of the land qualify as goods when the parties have agreed that they will be severed from the land before the sale or under the contract of sale. Absent such an agreement, they remain part of the land and are governed by the Transfer of Property Act, 1882, not the Sale of Goods Act, 1930.
Q: Is electricity 'goods' under the Sale of Goods Act, 1930?
Yes. The Hon'ble Supreme Court held in Commissioner of Sales Tax v M.P. Electricity Board (AIR 1970 SC 732) that electricity is movable property within the definition of goods under Section 2(7). The court reasoned that electric energy can be transmitted, transferred, delivered, stored, and possessed — it has all the attributes of movable property — and its intangibility does not take it outside the definition.
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