Sale of goods act

Essentials of Contract of Sale

All requirements of a valid contract must be fulfilled
If any elements of valid contract are not met, the sales contract is not valid. For example, Party A agreed
to sell her car to Party B. Party B forced Party A to sell her car through excessive persuasion. Therefore,
the contract is invalid because there is no free consent by the transferor.

Two Different Parties

The ownership of the goods is transferred from one of the two parties to the other. The buyer and
the seller have to be different people. Otherwise, it's not possible to create a contract.

For example, Parties A and B both own a TV. Party A can transfer complete ownership to Party
B because they are partners in business, and Party B becomes the sole owner of the TV.

Goods

The subject matter of a contract of sale of goods is goods. According to Sec 2(7) “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 contract of sale. Goodwill, Trade Mark, Copyright, Patent
right, Water, Gas & Electricity, are all example of goods.

For example, Party A agrees to sell wheat crops to Party B. Both parties agree that Party B can
cut the crops and take them, once he pays the agreed price. Since wheat crops are considered a
good, this is a valid contract of sale. Every kind of movable property is a good except for cash
and actionable claims. Contracts for services are not contracts of sale. Sale of immovable
property and book debt are dealt with differently.

Transfer of property

In every contract of sale, the transfer of ownership has to be agreed upon. General property is
transferred in a contract of sale. Special property is transferred in a pledge of goods. In a contract
of sale, the transfer of ownership is final.
Price

Price is the money consideration for a sale of goods. Consideration in a contract of sale has to be
in the form of money. Barter of exchange is used when the consideration is in the form of goods.
This method was used before the prevalence of currency.

For a sale to exist, goods have to be sold for a given amount of money, or price. The
consideration can consist partly of money and partly of goods that have been assigned a value.
Payment is not needed at the time of creating the sales contract.

Sale & Agreement to sale

SALE: It is a contract where the ownership in the goods is transferred by seller to the buyer
immediately at the conclusion contract.A sale is an absolute contract, while an agreement to sell
is an executory contract that suggests a conditional sale. A sales contract consists of an offer to
sell or buy goods for a price and acceptance of that offer. The payment or delivery of goods is
not necessary at the time of creating the sales contract unless it's agreed to.

A contract can be made in the following ways:

 Orally
 In writing
 Partly in writing and partly orally
 Through actions, and implied by those actions

EXAMPLE: A sells his house to B for Rs. 10,00,000. It is a sale since the ownership of the
house has been transferred from A to B.

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.
Classification of Goods
Exiting Goods : Which are owned or possessed by the seller at the time of making of contract. For
example Mr. Y have 1ton onions in his godown.

Specific Goods: These are goods which are identified by buyer at the time of contract of sale. For
example, you want to sell your mobile phone online. You put an advertisement with its picture and
information. A buyer agrees to the sale and a contract is formed. The mobile, in this case, is specific
good.

Unascertained goods: Unascertained goods are the goods which are not identified or ascertained at the
time of making of the contract. They are indicated or de fined only by description or sample.

For example, If A agrees to sell to B one packet of salt out of the lot of one hundred packets lying in his
shop, it is a sale of unascertained goods because it is not known which packet is to be delivered. As soon
as a particular packet is separated from the lot, it becomes ascertained or specific goods.

Future goods have been defined as the goods that will either be manufactured or produced or
acquired by the seller at the time the contract of sale is made. The contract for the sale of future
goods will never have the actual sale in it, it will always be an agreement to sell.

For example, MR.X have an apple orchard with apples in it.he agree to sell 1000 apples to a
buyer after the apples ripe. This is a sale that has to occur in the future but the goods have been
identified already and the agreement made. Such goods are known as future goods.

Contingent goods

Contingent goods are a type of future goods, the acquisition of which by the seller is dependent
on a contingency which may or may not happen. For example, if the seller promises to the buyer
that he will sell him the goods on a certain date if he receives the goods from the manufacturer
before that date, the agreement is conditional and can only be practical on the happening or non-
happening of an event. The goods, in this case, are called contingent goods’ because the sale of
goods depends on the seller receiving the goods by a certain date. A contract to sell such goods is
not a sale; it is an agreement to sell.
Classification of implied conditions
implied conditions are those which have not been expressly stated but which the law presumes to
be so inherently a part of the contract that it need not be laid down in clear and written terms but
are to be understood by the parties.

Condition as to title as mentioned in Sec. 14(a) : There is a implied condition on the part of the
seller that (i) in case of sale, he has a right to sale the goods, and in case of an agreement to sell,
he will have a right to sell the goods at the time when the property is passing. Example : X buys
a stolen car from Y, a thief, without knowing its nature. Afterwards A demanded the same from
X. X had to return the goods. X can demand the full amount from Y as he had no right to sell the
goods when the property is passing.

Condition as to description as mentioned in Sec. 15: Where there is a contract of sale of goods by
description, there is an implied condition that the goods shall correspond with description. The
main idea is that the goods supplied must be same as were described by the seller.

Example : X bought a reaping machine from Y who described it to be one year old and but X
found that the machine extremely old. X was entitled to reject the machine because machine did
not correspond with the description given by the seller.

Condition as to Sample:- In a sale by sample there is a implied condition that the goods shall
correspond with the sample in quality, and the goods shall be free from the defects which makes
the goods un-merchantable .

Sale by sample has following three conditions:

(i) Correspondence of Goods with sample in quality [sec17(2)(a)]

(ii) Reasonable opportunity of comparing goods with the sample [Sec 17(2)(b)](iii)
Merchantability of Goods [Sec 17(2)(c)]

Example, a company sells certain belts made up of a special material by sample for the Indian
Army. The belts are found to be made up of plastic of cheaper quality, not discoverable by
ordinary inspection. In this case, the buyer is entitled to the refund of the price plus damages.

Condition as to Sample as well as Description[Sec 15]:- Sometimes, the seller shows sample to
the buyer and also gives him description. In such case, the implied condition is that the goods
shall correspond with both, the sample as well description.

Example : X bought from Y foreign refined rapeseed oil which was warranted to be equal to
sample. The oil supplied was equal to the sample. The sample was actually a mixture of rapeseed
oil and hemp oil. X was entitled to reject the goods because the goods supplied did not
correspond with the description

Condition as to Merchantability [Section 16(2)]:-The term merchantability means two things:

(i) If goods are purchased for resale, they should be immediately re-saleable; &

(ii) If goods are purchased for self use then they should be reasonably fit for the purpose for
which they are generally used.

Example: X bought a bottle of wine. While opening its cork in the normal manner, the bottle
broke off and injured X’s hands. X was entitled to claim damages because the bottle was not of
merchantable quality.

Mr.XYZ bought a cocacola. While opening it in the normal manner, the bottle broke off and
injured XYZ’s hands. XYZ was entitled to claim damages because the bottle was not of
merchantable quality.
Essential elements of a valid contract
A valid contract is enforceable by law, An agreement becomes enforceable by law when all the
essentials of a valid contract are present. In a valid contract, all parties are legally responsible for
the performance of the contract, if one of the parties breaches the contract, the other party can
enforce it through court of law.

Offer+acceptance=promise

Promise+consideration=agreement

And an agreement enforce by law in contract.

So we can say that “An agreement enforceable by law” is Contract. There must be legal
relationship. Agreements of social or domestic nature are not contracts. A contract is valid and
legally binding so long as the following six essential elements are present: offer, acceptance,
consideration, intention to create legal relations ,legality and capacity, certainty.

Basically, a contract unfolds when an offer by one party is accepted by the other party . The
accepted offer should be without any qualification and be definite. An offer needs to be clear,
definite, complete and final. It should be communicated to the offeree. A proposal when accepted
becomes a promise or agreement. The offer and acceptance must be happened when both the
parties must agree on the same thing in the same sense . Example: If “Mr.X” wants to sell his
house. Mr.Y accept his proposal.Mr. X agrees to sell a house to “Mr. Y”, if it fulfills all the
essentials of a contract, it is a valid contract.

Consideration can be something of benefit to the person who has the obligation or who makes a
promise to do something (the promisor). It can also be something detrimental to the person who
wants to enforce the obligation, or who has the benefit of the promise (the promisee). Example,
if Mr.X signs a contract to buy a car from Mr.Y for 500000tk, Mr.X's consideration is the
500000, and Mr. Y's consideration is the car.

There must be an intention among the parties that the agreement should be attached by legal
consequences and create legal obligations. E.g. XYZ company entered into an agreement with
“R” company by means of which former was appointed as the agent of the latter. But one of the
clause is as follows: “This arrangement is not entered into as a formal or legal agreement, and
shall not be subject to legal jurisdiction in the law courts”. So, it shows that there was no
intention to create legal relations.

Capacity in a contract is the parties to the contract must have the legal capacity to do so. 18 years
old is stated as the age of a major. Minors who are people below the age of eighteen have no
capacity to enter into contracts. Therefore, insane people or people with unsound minds also
cannot enter into any valid contracts. For example, a person who is at the age of sixteen years old
could not stay at a hotel. The hotel staff would not allow having the person who is sixteen years
old to stay at the hotel since that person is not eighteen years old or above. For the person to stay
at the hotel, he or she must have a guardian who is above eighteen years old or a parent to
accompany him or her to stay in the hotel.

Therefore it is important to have the main elements in a contract. Only if there are all the main
elements in a contract then it would be legally valid to make a contract. People should take
precaution in making a contract to make sure that the parties would be in agreement with the
terms made in a contract.

There are also some other elements of a contract, such as:

1. Proper offer and its acceptance

2. Lawful object

3. Agreement not expressly declared void

4. Intention to create legal relationship.

5. Free Consent

6. Capacity of parties to contract

7. Certainty of meaning.

8. Possibility of performance.

9. Lawful consideration

10. Legal formalities

Offer & acceptance
When an offer comes to an end
1. By communication of notice of revocation by the offeror at any time before its acceptance is
complete as against him. It may be noted that an offer can be revoked only before its acceptance
is complete for the offeror

2.By lapse of time if not accepted within the prescribed time. Sometimes, the time is fixed for the
acceptance of the offer, and it is not accepted within the fixed time. In such cases, the offer comes
to an end automatically on the expiry of fixed time.

3.By non fulfillment by the offeree of a condition precedent to acceptance. Sometimes, the offer
requires that some condition must be fulfilled before the acceptance of the offer. In such cases,
the offer lapses, if it is accepted without fulfilling the condition

4.By death or insanity of the offeror provided the offeree comes to know of it before acceptance.
Sometimes, the offeror dies or becomes insane. In such cases, the offer comes to an end if the fact
of his death or insanity comes to the knowledge of the acceptor before he makes his acceptance.
But if the offer is accepted in ignorance of the fact of death or insanity of the offeror, the
acceptance is valid.

5.If a counter offer is made to it. A counter-offer is made by the offeree. In such cases, the
original offer automatically comes to an end, as the counter-offer amounts to rejections of the
original offer.

6.If an offer is not accepted according to the prescribed or usual mode. some manner of
acceptance is prescribed in the offer. In such cases, the offeror can revoke the offer if it is not
accepted according to the prescribed manner. It may be noted that within a reasonable time
offeror should give notice to the offeree that the offer should be accepted in the prescribed
manner, and not otherwise.

7. If the law is changed. There is a change in law which makes the offer illegal or incapable of
performance. In such cases also, the offer comes to an end.

8. If offeree accept the offer

9. By rejection of offer by the offeree. Sometimes, the offeree rejects the offer. In such cases, the
offer comes to an end. Once the offeree rejects the offer, he cannot revive the offer by
subsequently attempting to accept it.
When communication is complete
 Communication of offer: (sec 4 para 1)- the communication of offer is complete when it comes to
the knowledge of the person to whom it is made.

A proposes, by letter, to sell a house to B at a certain price.The communication of the

proposal is complete when B receives the letter

 Communication of acceptance( sec 4 para2)- As against the proposer-when it is put into course of
transmission to him so as to be out of the power of the acceptor .As against the acceptor- when it
comes to the knowledge of the proposer. B accepts A's proposal by a letter sent by post.

The communication of the acceptance is complete,–as against A, when the letter is

posted, as against B, when the letter is received by A.

Revocation of the offer by the offeror

The offeror can revoke his offer before it is accepted “the bidder at an auction sale may withdraw
(revoke) his bid (offer) before it is accepted by the auctioneer by using any of the customary
method.

A offered to sell a house at a certain price and promised to keep it open for acceptance by B till 4
PM of that day .Before that time A sold them to C ,B accepted before 4PM but after the
revocation by A .it was held that the offer was already revoked.