DISTINCTION BETWEEN SALE AND AGREEMENT TO

SELL

The sale of goods act 1930

Introduction:

Transactions in the nature of sale of goods form the subject matter of the Sale of
Goods Act, 1930.The Act came into force on 1 July, 1930.It extends to the whole of India,
except Jammu & Kashmir.

Definition:

According to Sec 4(1) of the Indian Sale of Goods Act, 1930 defines the contract of
sale of goods in the following manner:

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

Essentials of contract of sale of goods:

• From the definition, the following essentials of the contract emerge:

1) There must be at least two parties: a sale has to be bilateral because the property
in goods has to pass from one person to another. The seller and the buyer must be
different persons

• 2) Transfer or agreement to transfer the ownership of goods: In a contract of sale,

it is the ownership that is transferred (in the case of sale), or agreed to be transferred
(in the case of agreement to sell), as against transfer of mere possession

• 3) The subject matter of the contract must necessarily be goods: the sale of
immovable property is not covered under Sale of Goods Act.

• 4) Price is the consideration of the contract of sale: the consideration in a contract

of sale has necessarily to be ‘money’, (i.e. the legal tender money).

• 5) All other essentials of a valid contract as per the Indian Contract Act, 1872
must be present: the parties to the contract must be competent of contract, the
 consent of the parties must be free, the object of the contract must be lawful and so
on.

Goods

 ‘Goods’ means every kind of movable property, other than actionable claims and
money; and includes stocks 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

 Trademarks, patents, copyright, goodwill, water, gas, electricity are all goods

 In general, it is only the movables that form goods

 The term goods excludes money

 Money means legal tender and not the rare coins which can be sold and purchased as
goods

 Money itself cannot be subject of a sale

 The actionable claims are things which a person cannot make use of, but which can be
claimed by him by means of a legal action.

Types of goods: It is classified into 3 categories

 Existing goods
 Future goods
 Contingent goods
Existing goods: Goods which are physically in existence and which are in seller's
ownership and/or possession, at the time of entering the contract of sale are called
'existing goods.' Where seller is the owner, he has the general property in them.

Future goods: Future goods mean goods to be manufactured or produced or acquired

by the seller after making the contract of sale.

Contingent goods: Contingent goods are the goods the acquisition of which by the
seller depends upon a contingency which may or may not happen. Contingent goods are a
part of future goods.
 The term contract of sale of goods is generic term and it includes:

 Sale
 An agreement to sell
1. Sale: Where under a contract of sale, the property (ownership) in the goods is transferred
from the seller to the buyer, it is called a sale. Thus, sale takes place when there is a transfer
of ownership in goods from the seller to the buyer. A sale is an executed contract.

2. Agreement to sell: Agreement to sell means a contract of sale under which the transfer
of property in goods is to take place at a future date or subject to some conditions thereafter
to be fulfilled

Difference between sale and agreement to sell

Basis Sale Agreement to sale

1.Transfer of property
2.Type of goods
3. Risk of loss
4.consequences of the breach
The property of goods passes The transfer of property of the
from the seller to the buyer goods is to take place at a
immediately. So the seller is future time or subject to
no more owners of the goods certain conditions to be
sold. It is an executed contract. fulfilled. It is an executor
contract.
A sale can only be in case of An agreement to sell is mostly
existing goods and specific in case of future and
goods only. contingent goods (associated
or dependent). Although it
may refer to uncertain existing
goods
In a sale if the goods are In an agreement to sell if the
destroyed, the loss falls on the goods are destroyed the loss
buyer even though the goods falls on the seller even though
are in the possession of the the goods are in the possession
seller. of the buyer.
In a sale the buyer fails to pay If there is a breach of contract
the price of goods or if there is by the buyer the seller can
 a breach of contract by the only sue for the damages and
buyer the seller can sue for the not for the price.
price even though the goods
are still in his possession.
5.Right to resell In a sale the seller cannot The buyer who takes the
resell the goods goods for consideration and
without notice of the prior
agreement gets him a good
title. The original buyer can
only sue the seller for damages
6.General and particular The sale of contract plus An agreement to sell is merely
property conveyance and creates ‘jus in a contract pure and simple and
rem’ i.e., gives right to the creates ‘jus in personam’ i.e.,
buyer to enjoy the goods as gives a right to the buyer
against the word and large against the seller to sue for the
including the seller. damages.
7. Insolvency of buyer In a sale if the buyer becomes In an agreement to sell, if the
insolvent before he pays for buyer becomes insolvent and
goods, the seller in the absence has not yet paid the price the
of the lien over the goods must seller is not bound to part with
return them to the official the goods until he is paid for.
receiver or assignee. He can
only claim the rateable
dividend for the price of the
goods.
8. Insolvency of the seller In a sale the seller becomes If the buyer, who has paid the
insolvent, the buyer being the price, finds that the seller
owner is entitled to recover the become insolvent he can only
goods from the official claim a rateable dividend and
receiver of the assignee. not the goods because property
in them has not yet passed to
him.