NATIONAL LAW INSTITUTE UNIVERSITY,

BHOPAL

THIRD TRIMESTER
LAW OF CONTRACTS-II
TOPIC: CONTRACT OF SALE AND AGREEMENT TO SELL

SUBMITTED TO: SUBMITTED BY:

MISS NEHA SHARMA AJIT JAISWAL
2019BALLB83
 ACKNOWLEDGMENT

I have taken efforts in this project. However, it would not have been possible without the kind support
and help of many individuals. We would like to extend our sincere thanks to all of them.

I am highly indebted to Miss Neha Sharma for her guidance and constant supervision as well as for
providing necessary information regarding the project & also for her support in completing the
project.

I would like to express our gratitude towards our parents & seniors for their kind co-operation and
encouragement which help us in completion of this project.
We would like to express our special gratitude and thanks to the Vice-Chancellor of National Law
Institute University, Bhopal for giving us such ample time and opportunity.

My cheers and appreciations also go to our colleagues in developing the project and people who have
willingly helped us out with their abilities.
 TABLE OF CONTENTS
1.INTRODUCTION
2.CONTRACT OF SALE HOW MADE
3.CONTRACT OF SALE AND ITS MEANING
4.ESSENTIALS OF CONTRACT OF SALE
5.DIFFERENCE BETWEEN CONTRACT OF SALE AND AGREEMENT OF SELL
6.LEGAL INCIDENTS REFERRED
7.CONCLUSION
 INTRODUCTION
“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. There may be a contract of sale between one partowner and another.”

“A contract of sale may be absolute or conditional. Where under a contract of sale the property in the goods
is transferred from the seller to the buyer, the contract is called a sale, but where the transfer of the property
in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the
contract is called an agreement to sell.”

An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which
the property in the goods is to be transferred.
 CONTRACTS OF SALE HOW MADE.
“(1) A contract of sale is made by an offer to buy or sell goods for a price and the acceptance of such offer.
The contract may provide for the immediate delivery of the goods or immediate payment of the price or
both, or for the delivery or payment by installments, or that the delivery or payment or both shall be
postponed.”

“(2) Subject to the provisions of any law for the time being in force, a contract of sale may be made in
writing or by word of mouth, or partly in writing and partly by word of mouth or may be implied from the
conduct of the parties.”

CONTRACTS OF SALE AND MEANING OF SALE

“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. There may be a contract of sale between one partowner and another.”

It is a contract where the ownership in the goods is transferred by the Seller to the Buyer Immediately at the
conclusion contract.

“AGREEMENT TO SELL: It is a contract of sale where the transfer of property in goods is to take place
at a future date or subject to some condition thereafter to be fulfilled. “
 ESSENTIALS OF A CONTRACT OF SALE
• “There must be at-least Two Parties. “
• “The Subject Matter of the Contract Must be Goods. “
• Price.
• Transfer of Property in Goods.
• Absolute or Conditional.
• “All Other Essentials of a Valid Contract. “

DIFFERENCE BETWEEN SALE & AGREEMENT TO SELL

• “TRANSFER OF PROPERTY- The Property of Goods Passes from the seller to the Buyer
immediately. So the seller is no more owner of the Goods sold. It is an Executed Contract. The
transfer of property of the Goods is to take place at a future time or subject to certain conditions to be
fulfilled. It is an executory contract.”
• TYPE OF GOODS- “A sale can only be in-case of existing and specific Goods only. An Agreement
to sell is mostly in-case of future and contingent goods. Although it may refer to uncertain existing
goods. “
• “RISK OF LOSS-“ In a Sale, If the Goods Are Destroyed, the loss falls on the buyer even though
the goods are in the possession of the seller. In an agreement to sell, if the goods are destroyed, the
loss falls on the seller even though the goods are in the possession of the buyer.”
• “CONSEQUENCES OF THE BREACH- “In a sale, if the buyer fails to pay the price of goods or
if there is a breach in the contract, the seller can sue for the price even though the goods are still in
 his possession. If there is a breach of contract by the buyer, the seller can only sue for the damages
and not for the price.”“

• “RIGHT TO RE-SELL- “The seller cannot resell the goods. The buyer who takes the goods for
consideration and without notice of the prior agreement gets him a good title. The original buyer can
only sue he seller for damages”
• “GENERAL AND PARTICULAR PROPERTY- “The sale of contract plus conveyance,
creates”“Jus in Rem”, i.e: Give right to the buyer to enjoy the goods as against the word and large
including the seller. “An agreement to sell is merely a contract, pure and simple and creates” “jus in
personam”,i.e: Gives a right to the buyer against the seller to sue for the damages.”
• INSOLVENCY OF THE BUYER- In a sale, if the buyer becomes insolvent before he pays for
goods, the seller in the absence of the lien over the goods, must return them to the official receiver or
assignee. He can only claim the reasonable dividend for the price of the goods. If the buyer becomes
insolvent, and has not yet paid the price, the seller is not bound to part with the goods until he is paid
for.
• INSOLVENCY OF THE SELLER- “If the seller becomes insolvent, the buyer being the owner is
entitled to recover the goods from the official receiver of the assignee. If the buyer who has paid the
price, finds that the seller has become insolvent, he can only claim a reasonable dividend and not the
goods because property in them has not yet.”
 LEGAL INCIDENTS CASES REFFERED
• Cehave N.V. v. Bremer Handelsgesellschaft mbH; the Hansa Nord [1976] Q.B. 44.

“SUMMARY OF THE FACT- “A written contract to sell fruit pellets contained the express stipulation”,
“shipment to be made in good condition.” “In fact, some of the pellets were not in good condition when
shipped. However, they were, on arrival, still fit to be used for the purpose the buyer had intended and
although they were worth less than they should have been, they could still have been re- sold at a reduced
price.””

ISSUE-

▪ Whether there is a breach of condition?

▪ Whether the buyer is entitled to repudiate the contract and reject the goods?

DECISION-

“It was held that there was no breach of condition and the buyer was not entitled to repudiate the contract
and to reject the goods. But the buyer is entitled to damages.

“Reasoning: The sellers were not in breach of the implied conditions as to fitness for purpose and
merchantable quality. The express stipulation in the contract was not a condition and the sellers’ breach of it
had not been serious enough to go to the root of the contract. Therefore the buyers were entitled only to
damages.”

• Rowland v. Divall [1923] 2 K.B. 500.

Summary of the fact-“ Rowland bought a motor-car from Divall and used it for four months.
Divall had no title to the car, and consequently Rowland had to surrender it to the true owner.
Rowland sued to recover the total purchase price he had paid to Divall. “

ISSUE-

▪ “Whether there is a breach of condition? “

▪ “Whether the buyer is entitled to recover the total purchase price? “

DECISION-

“It was held that there is a breach of implied condition as to title by the seller and therefore the buyer is
entitled to recover the purchase price in full, notwithstanding that he used the car for four months. “

Reasoning: There was a breach of condition. Consequently the buyer can repudiate the contract and reject
the goods. But in this case the car was already taken by the real owner; hence no question of rejection of
goods arises. Therefore, the buyer can repudiate the contract by taking back the full purchase money as
damages due to the breach of condition. The consideration had totally failed on the part of the seller. The use
of the car that he had had was no part of the consideration that he had contracted for, which was the property
in and lawful possession of the car, whereas what he got was an unlawful which exposed him to the risk of
an action at the suit of the true owner.”
 • Beale v. Taylor [1967] 1 W.L.R. 1193.

Summary of the fact- “A buyer responded to an advertisement describing a car for sale as a
“1961” model. He inspected the car before buying it. After buying it he discovered that the car was not
unroadworthy. “

ISSUE-

▪ “Whether consisted of half a 1961 model and half of an earlier car.there was a breach of implied
condition as to description?”
▪ “Whether the buyer was entitled to reject the car.”

DECISION-

“:It was held that the seller was liable for breach of condition as to description and the buyer is entitled to
reject the goods thereby.

Reasoning: “The buyer had relied at least to some extent on the description of the goods which becomes a
condition. Therefore dissimilarity with the description of the delivered goods caused the breach of such
condition.”

• Nichol v. Godts (1854) 10 Ex. 191

Summary of the fact- “Nichol agreed to sell to Godts some oil described as” “foreign refined rape oil,
warranted only equal to sample.” Nichol delivered oil equal to the quality of the samples, but which was not
“foreign refined rape oil.”
ISSUE-

▪ .”Whether a breach of condition has occurred? “

▪ “Whether the buyer is entitled to refuse the goods?”

DECISION-

“ It was held that breach of condition occurred and Godts could refuse to accept the goods. Reasoning:
Where there is a sale of goods by sample as well as by description, the goods must correspond with the
description as well as sample. Here the goods corresponded with the sample but not with the description.”

• Re Moore & Co. v. Landauer & Co. [1921] 2 K.B. 519

“Summary of the fact- Moore sold to Landauer 3,100 cases of Australian canned fruits, the cases to contain
30 tins each. Moore delivered the total quantity, but about half the cases contained 24 tins, and the remainder
30 tins. Landauer rejected the goods. There was no difference in market value between goods packed 24 tins
and goods packed 30 tins to the case.”

ISSUE-

▪ “Whether a breach of condition has occurred?”

▪ “whether the buyer is entitled to reject the goods?”

DECISION-

“” It was held that Landauer could reject the whole goods as there was a breach of condition.
Reasoning: As the goods delivered did not correspond with the description of those ordered.””
 • Brown (B.S.) & Son Ltd. V. Craiks Ltd. [1970] 1 W.L.R. 752

Summary of the fact-“ The buyer of ““industrial fabric”” found that it was unsuitable for making into
dresses but that it was suitable for other industrial purposes; as such it was commercially saleable, though at
a slightly reduced price.”

ISSUE-

“Whether the goods were of merchantable quality?”

DECISION-

It was held that the goods were of merchantable quality.

“Reasoning: The goods could be used for some other purposes and it had commercial value. Therefore it
meets the demand of merchantable quality. If the goods supplied are useless for any purpose for which
goods of that description are usually used then they are probably not of merchantable quality. On the other
hand, if they are still suitable for some of the purposes for which goods of that description are usually used
and could be re-sold for the same or very nearly the same price as if they were suitable for every purpose,
they will remain of merchantable quality.”
CONCLUSION
“A contract is a legally enforceable agreement between two or more parties with mutual obligations. The
Indian contract Act 1872, Section 2(h) defines the term contract as an agreement legally enforceable by law,
for the formation of a contract there must be an agreement, the agreement should be enforceable by law. “

There must be a "lawful offer" and a "lawful acceptance" of the offer, thus resulting in an agreement.

But there are some differences in sale of goods act. It is known to everyone that for a contract there must be
two parties. In sale of goods act 1930, one party is buyer and the other is seller. When seller wants to sell
something, he/she should describe the such true things about the product or he/she advertise something,
afterwards if buyer founds anything towards wrong on that product then there is a breach of condition which
seller prescribe. So the buyer have a right to reject the goods and seller have to take back the goods.