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, deals with the law relating to the buying and selling of goods (movable
only).

Or

Contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the
property in the goods to the buyer for a price.

The law relating to the sale of goods is contained in the Sale of Goods Act-1930.Prior to this Act
, the legal provisions relating to the contract of sale were contained in Section 76-123 of the
Indian Contract Act-1872.However , as a result of the development of modern commerce ,
certain amendments were required in these provisions and new act known as Sale of Goods
Act1930 was passed in 1930 for the exclusive contract dealing with the sale of only movable
goods. The transaction relating to immovable properties are governed by Transfer of Property
Act 1882.

The Sale of Goods Act came into force on 1st July 1930.

Following two parties are always involved in a contract of sale :

i. Seller ± A person who sells or agrees to sell the goods.


ii. Buyer ± A person who buys or agrees to buy the goods .

c  Ñhere under a contract the property in the goods (i.e the legal ownership of the goods ) is
immediately transferred to the buyer, the contract of sale is called a sale.

Eg A agreed to buy a hay stake from B lying on B¶s land .A was given the liberty to come on B¶s
land and to take away the hay stake. This is a sale.

  Ñhere the property in the goods (i.e. legal ownership of the goods) is to
be transferred to the buyer at some future date or on the fulfillment of a certain condition , the
contract of sale is called an agreement to sell.

Eg. A agreed to buy from B a certain quantity of Nitrate of Soda. The ship , carrying the Nitrate
of Soda, was yet to arrive .This is an agreement to sell. In this case, the ownership of Nitrate of
Soda is to be transferred to A on the arrival of the ship containing the specified good i.e. nitrate
of soda.

An agreement to sell becomes a sale only when the ownership of the goods is transferred to the
buyer.
Eg. On 1st March 1998 , A agreed to sell his car to B for Rs.80000/-.It was agreed between
themselves that the ownership of the car will transfer to B on 31st March 1998.Ñhen the car will
get registered in B¶s name. It is an agreement to sell , and it will become sale on 31st March 1998
when the car is registered in the B¶s name.

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i) The ownership of the goods is The ownership of the goods is


transferred to the buyer immediately. transferred to buyer at some future date.

ii) It is executed contract as all the It is executory contract as all the


Formalities of the contract are completed formalities of the contract are not & buyer
become the owner immediately. Completed but something remains to be

done.

iii) A sale can only be in case of existing It is mostly in case of future & contingent

and specific goods. goods although in some cases it may

refer to unascertained existing goods.

iv) It create jus in rem.(the right to enjoy It create jus in personam ( right against the

The goods as against the world at large particular person.This means the buyer gets

Including the seller.This means that the buyer the rights against the seller only.)

Gets the rights against anybody who disturbs

His right to use the goods )

v) The buyer is responsible for any loss The seller is responsible for the loss or
or destruction of the goods even destruction of goods even if the goods are
though the goods are in the possession in the possession of the buyer .The buyer
of the seller.The seller is not responsible is not responsible for such loss because
for such loss because he ceases to be the the seller remains the owner until the
owner immediately on the completion of agreement to sell become a sale.
the sale.
vi) If the seller refuses to deliver the goods , If the seller refuses to deliver the goods ,
the buyer may recover the goods from the buyer cannot recover the goods from the
the seller by filing a suit in the Court of Law. seller .He can only recover the damage
from the seller by filing a suit in the Court of Law.
vii) Sometimes the possession of the goods sold Generally the possession of the goods sold
remains with the seller.In this case, the seller remains with the seller.But in this case
cannot resell the goods to a third person . also , the seller cannot resell the goods to
If he do so he is guilty of breach of contract a third person .If he does so he is guilty of
and the original buyer can claim damage from breach of contract and the original buyer
the seller.Moreover the original buyer can also can claim damage from the seller.But the
recover the goods from the new buyer if he original buyer cannot recover the goods
does not act in good faith and know about from the new buyer even if he does not
the original sale. However if his act is in act in good faith and knew about the
good faith and without the original sale. If the new buyer acts in
knowledge of original sale, the original good faith and without knowledge of
buyer cannot recover the goods from him. original sale , then neither the original
buyer nor the seller can recover the goods
from him.

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i.         


 
      :A contract of sale must
fulfill all the requirements of a valid contract.(like free consent, consideration, lawful
object etc)

Eg An agreement to sell smuggled gold is not valid as its consideration is unlawful.

ii.   !    


 
  : one seller and the other buyer as the
ownership of the goods has to pass from one person to another. The seller and the buyer
must be different persons.

Eg. A,B &C were partners in a firm .After sometime, the firm was dissolved .And on the
dissolution, the surplus assets including some goods were divided among all the three
partners .It was held that the distribution of assets and goods among the partners was not
a sale .As partners were the joint owners of the goods and they could not be both the
seller and buyer.

iii.         "


  : Goods means every kind of movable
property and it includes stock and share, growing crops, grass, the things attached to or
forming part of the land which can be separated from the land. Goods does not include
immovable property also the money and actionable claims are also not included in the
term goods.
Eg. A agreed to sell to B his wheat crop which is grown in his (A¶s) field.They agreed
that upon the payment of the price,B may cut the crop and and take it away .It is a valid
contract of sale as the growing crop is included in the term µgood¶ and can be validly
sold.

iv.  !! #           # : Property in the goods
means the ownership of the goods .In every contract of sale , the ownership of the goods
must be transferred by the seller to the buyer , or there should be an agreement by the
seller to transfer the ownership to the buyer.

Eg A agreed to buy a new motor cycle from B, a dealer , for Rs 20000/- .A paid the price
and the motor cycle was got registered in his name .B delivered the registration book to A
.This is a valid contract of sale as the ownership of the motor cycle has been transferred
to the buyer (A).

v.  !
  :The goods must be sold for some price .Price
means the money consideration fro a sale of goods. It must be in terms of money .i.e. the
goods must be sold for a definite sum of money called the price.And it may be partly in
cash and partly in valued up goods(i.e. the goods , the price of which can be definitely
measured in terms of money.)

Eg. A delivered to B 52 bullocks valued at Rs 1000 per bullock. In exchange of it , B


delivered to A 100 quintals of barley valued at Rs 300 per quintal and paid the difference
in cash. This is a contract of sale.

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A hire purchase agreement is an agreement under which the owner deliver his goods on hire
basis to a person called , hirer, for his use. And the hirer has the option to purchase the goods by
paying the agreed amount in specified installments.

The hirer has the following two options :

— He may purchase the goods after paying all the agreed installments.
— He may return the goods at any time and stop further payment of the installments. The
installments already paid are treated as the hire charge for the use of goods hired.

Eg.A , a shopkeeper, delivered his new cycle to B.They agreed that B will pay Rs 50 on the
1st day of every month for 10 consecutive months .After making all payments regularly for
10 months ,he (B) will become the owner of the cycle.It was also agreed that B may return
the cycle at any time and stop the payment of payment of further instalments.This is a hire
purchase agreement.
!   c  $ %
   

SALEHIRE PURCHASE AGREEMENT

i) It may be made either orally or in writing. It must be in writing.

ii) The ownership of the goods is transferred The ownership of the goods is

from the seller to the buyer as soon as the transferred from the seller to the hirer

contract is made. only when all the agreed number of

installments are paid.

iii) The buyer has no option to return the goods The hirer has the an option to terminate

the agreement at any stage .He may or

may not buy the goods.

iv) The position of the buyer is that of the owner. The position of the hire-purchaser is

that of the bailee. He becomes the

owner , only when all the installments

are paid.

v) In case of payment of price in installments, The installment is regarded as the hire


each installment is regarded as part payment of charges for the use of the goods.
the price. However if the hirer exercises the option
to purchase the goods , then each
installment is regarded as the part payment.

vi) It is governed by Sale of Goods Act 1930 It is governed by the Hire Purchase Act

1972


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Auction sale may be defined as a public sale where different buyers come to purchase the goods,
and the goods are sold to the person who is ready to pay the highest price.

A person may himself sell his own goods by auction, or he may appoint an agent known as
auctioneer, to sell the goods by auction on his behalf.

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The auction sale is usually organized by giving advertisements about the goods to be sold along
with other terms and conditions of the sale by auction.On the appointed day and time , the
intending buyers , known as bidders , offer their respective prices for which they are willing to
purchase the goods. Every bid is an offer .The auctioneer loudly speaks the prices offered by the
bidder so that the other bidders may have an opportunity to offer higher price, if they want. The
highest bid is accepted by the auctioneer in a customary method i.e. by the fall of hammer or by
using the words µone , two , three¶ or µgoing, going, gone¶.

    


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The legal rules regarding the auction sale are contained in various provisions of Section 64 of the
Sale of Goods Act, which may be discussed under the following heads.

i) !   


   : The sale by auction is competed as soon as the
auctioneer announces its completion (acceptance of the bid) by the fall of the hammer
orin any other customary manner like shouting µone , two , three¶ or µgoing, going,
gone¶ etc.
Eg. A an auctioneer , offered to sell some furniture by auction. Various bidders
attended the auction and B¶s bid which was highest , was accepted by A by striking
down the hammer on the table .In this case, the sale is complete as soon as A strikes
down the hammer and thus B is entitled to the furniture on the payment of the price
which he offered to pay.
ii)  
    :Before the sale is completed by fall of hammer , any bidder can
withdraw his bid .This is based on the principle that a bid is an offer and it can be
revoked before it is accepted by the fall of the hammer.
iii)     ! : On the completion of sale by the fall of hammer , the
ownership of the goods is immediately transferred to the buyer , if the auction is of
specific goods in a deliverable state.
è. At an auction for the sale of a silver flower vase A , the auctioneer accepted the
highest bid of Rs 500 to B. A purported to accept this bid by striking the hammer .But
accidentally , he stroke the flower vase on the table .Immediately C another bidder ,
made a bid of Rs 525 for the same flower vase before the auctioneer could strike the
hammer .And A accepted C¶s bid by striking the hammer for the bid. In this case , C
is entitled to have the flower vase as the ownership is transferred to him by striking
the hammer for his bid. And B cannot claim the flower vase as in his case, the
striking of flower vase does not amount to the striking of hammer.

iv) c(    : Sometimes in an auction sale , the seller apprehends that the
bidder may enter into a knock-out agreement . In such cases , the seller has the right
to bid in the auction , or to appoint a person to bid on his behalf .However the seller
can do so only if he has expressly reserved his right to do so .The seller however, can
appoint only one one bidder to bid on his behalf.
)    c  :Ñhere seller¶s right to bid at the auction is not notified , the buyer
may treat the sale as fraudulent if the seller or any person on his behalf bids at the
auction .And the buyer may refuse to take the goods sold to him.
Eg A ,an auctioneer ,held a public auction for the sale of a horse.It was notified that the
seller or any one person on his behalf can not bid at the auction.B attended the auction
and made a highest bid of Rs 2000 which was accepted by A by the fall of hammer,
Subsequently B came to know that the seller had appointed person to bid on his behalf
with the interition of enhancing the price .In this case, the buyer B may treat the sale as
fraudulent and refuse to accept the horse sold to him.

) 
        !  !
 : Reserve or upset price is the minimum
price below which the auctioneer will not sell the goods put up for the auction sale.
Normally , the reserve price is fixed by the seller to protect himself against the
knockout agreement.
Auctioneer if by mistake completes the sale by striking of hammer or any other
customary manner of goods for less than the reserve price, he can refuse to deliver the
goods to the buyer. And the buyer will have no remedy against the auctioneer.

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