WEEK

LECTURE 10

The law relating to the sale of goods is guided by The Sale of Goods Act, 1930

• BUYER: “A person who buys or agrees to buy goods” — section 2(1)

• SELLER: “A person who sells or agrees to sell goods” — section 2(13)
• GOODS: Every kind of movable property except — section 2(7)
• MOVABLE PROPERTY: furniture, clothing, and share
• Things attached to the Earth are NOT movable
• However, crops and grass (and fruits), because they can easily be separated from
the Earth before sale, are movable goods

KINDS OF GOODS

1. EXISTING GOODS

• DEFINITION: Goods that are already in existence and are in the seller’s ownership and
possession at the time of entering into the contract
• Existing goods can either be (a) Speci c Goods, or (b) Generic Goods

i. SPECIFIC GOODS

• Goods that are clearly identi ed at the time of the sale (a picture by a painter, a
ring with a person’s initials)
• FOR EXAMPLE: Even if you point to a painting that is mounted on a wall, that is
a speci c good because you have pointed to it and have identi ed that, that is
the painting you want.

ii. GENERIC GOODS

• These goods are indicated by description, but are not clearly identi ed.
• FOR EXAMPLE: In a contract of sale for 100 chairs among the 1,000 chairs
available at the seller’s warehouse, the seller can deliver any 100 chairs.
However, as soon as the seller separates the 100 chairs out of the 1,000, then it
becomes a sale of speci c goods.

2. FUTURE GOODS

• Goods that will be manufactured or produced or acquired by the seller after a contract
of sale has been forme
• It is important to remember that there is no sale in the “sale of a future good” because
property has not passed over to the buyer. Thus, the law views this as an agreement to
sell.
• FOR EXAMPLE: Heather agrees to sell to Tania all of the mangoes that Heather’s
garden will provide next year.

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 • As in, you have agreed to sell products that will be produced at a future date.

3. CONTINGENT GOODS

• Goods, the acquisition of which by the seller depends upon an uncertain contingency,
are contingent goods.
• This is a type of future good; thus, it is not a “sale,” but it is an “agreement to sell.”
• Like a future good, property does not pass to the buyer at the time of making the
contract.
• FOR EXAMPLE: John agrees to sell a ring to Taylor provided John can rst buy the ring
from its present owner (buying from present owner is the contingency).

FUTURE GOODS CONTINGENT GOODS

1. They do not exist at the time of making 1.
the agreement to sell (e.g. Agreeing to sell
mangos from one’s mango garden, but the
mangos have not yet been produced)
2.
2. They come into existence at a future date
when the manufacturer produces it (e.g.
iPhone XI will be produced in September
2018; thus, an agreement to sell the
product in February 2018 is an agreement
to sell a future good.
These goods exist at the time of making
the agreement to sell. However, it is just
that the seller is not in possession of the
good in question
The product will be given to the buyer
provided the seller can rst acquire them
(e.g. If Keith agrees to sell an iPhone X to
Charles, but the product is not owned by
Keith when making the agreement. Thus,
he agrees to sell the product to Charles
only if he can rst acquire it from its true
owner)

SALE

• Where, under a contract, the property in the goods is transferred from the seller to the
buyer

AGREEMENT TO SELL

• When the transfer of ownership is to take place at a future time or subject to some
condition to be ful lled later, the contract is an agreement to sel
• An agreement to sell becomes a sale when the prescribed time (if any) lapses or the
conditions are ful lled

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 ESSENTIAL ELEMENTS OF A CONTRACT OF SALE OF GOODS

SECTION 4(1) of The Sale of Goods Act, 1930:

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 part-owner and anothe

FROM THE DEFINITION OF “SALE OF GOODS” CONTAINED IN THE SALE OF GOODS ACT,
1930, THE FOLLOWING ESSENTIAL ELEMENTS ARE ADUMBRATED:

1. TWO PARTIES

Agricultural Market Committee v Shalimar Chemical Works Ltd (SCI, 1997)

• HELD: A contract of sale is a consensual contract in as much as the parties are at

liberty to settle for themselves the terms of their bargain.

• As is known in contracts, a party cannot contract with him/herself. Thus, for the sale of
goods (since this is also a contract), there must be two distinct parties — a buyer and
seller for the property must pass from the seller to the buyer
• That is, a person cannot buy or sell to him/herself

2. TRANSFER OF PROPERTY

• The seller must either (a) transfer, or (b) agree to transfer, the property in the goods to
the buyer.

SECTION 2(11) of The Sale of Goods Act, 1930

Property means the general property in goods, and not merely […] special propert

• FOR EXAMPLE: John owns a car. He promises to sell his car to Jane for $1,000. In this
scenario, John has ‘general property’ in the car; whereas, Jane has ‘special property.
• That is, John is still the owner, has title, and is in possession of the car; thus, he has
general property of the car.
• Since John promised to sell the car to Jane for $1,000, Jane has special property.
That is, her right to the car is superseded by John’s (who is the owner, has title,
and is in possession).
• Therefore, overall, for the sale of goods, general property (from the scenario above,
the car) must be transferred to the transferee (Jane)

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 3. GOODS

• The subject-matter of the contract must be goods

SECTION 2(7) of The Sale of Goods Act, 1930:

Goods means every kind of movable property other than actionable claims and
money; and includes electricity, water, gas, 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 sal

• As in, every kind of movable property — except actionable claim and money — is
regarded as goods (including shares, motor vehicles, goodwill, trademarks, copyright,
patent rights, water, oil gas, and electricity).
• Grass and crops are also considered goods as soon as they are agreed to be separated
from lan
• As in, potatoes would be considered goods because they will be detached from lan

Kursell v Timber Operators & Contractors Ltd (KB, 1927)

• HELD: Where trees (remember that trees form part of the land) were sold so that
they could be cut and separated from the land and then taken away by the buyer, it
is a contract for the sale of goods (movable property)

• ACTIONABLE CLAIM: It is a legal claim that can be enforced by a legal action.

• FOR EXAMPLE: A promissory note represents a debt. That is, it implies that the
creditor has the right to recover money from the debtor. However, a promissory
note can be transferred to someone else (pursuant to The Negotiable Instruments
Act, 1881) — who (the person to whom the promissory note is transferred), in turn,
would then be required to pay money to the payee (creditor; the one who is to
receive money).
• These instruments cannot be sold. Thus, they are not considered “goods.”

• MONEY: Money is not considered goods because it is the medium of exchange.

• However, old coins can be considered goods if they are sold with the intention
of receiving mone

4. PRICE

• If goods are sold, or exchanged, for other goods, then it is known as barter and it will
be governed by the Transfer of Property Act, 1882 — and NOT under The Sale of
Goods Act, 1930
• Therefore, in order for the transaction to be sale, there must be money consideration

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 Milangas v Frank Textiles Ltd (HL, 1975)

• HELD: The currency in which payment is to be made is a matter for the parties to
decide

Aldridge v Johnson (1857)

• HELD: If goods are sold partly for goods (barter) and partly for money, then it is a
contract for the sale of goods (which will, in Bangladesh, be governed by The Sale
of Goods Act, 1930)

S Australian Insurance Co v Randell (JCPC, 1869)

• HELD: Where an old car is returned to the car dealer for a new one and the
difference is to be paid in cash, it is a sale.

ESSO Petroleum Co v Commissioners of Customs and Excise (HL, 1975)

• HELD: Where a petroleum company distributed coins of special curiosity, but with
no money or intrinsic value, free with every four gallons of oil, it was not a contract
of sale, since the consideration for the transfer of the coins was not money
payment; rather, it was the undertaking of the customer to enter into a contract to
purchase petroleum.

P zer Corporation v Ministry of Health (HL, 1965)

• HELD: Where drugs or appliances were supplied to a member of the public under
the national health service scheme — whether by a hospital or a pharmacist — and
although for a charge, this is NOT a sale.
• “Sale is a consensual contract requiring agreement, express or implied. In the
present case, there appears to me to be no need for any agreement. The patient
has a statutory right to demand the drug on payment of two shillings. The
hospital has a statutory obligation to supply it on such payment. And if the
prescription is presented to a chemist, he appears to be bound by his contract
with the appropriate authority to supply the drug on receipt of such payment.
There is no need for an agreement between the patient and either the hospital or
the chemist and there is certainly no room for bargaining.”

5. SALE AND AGREEMENT TO SELL

SALE

• DEFINITION: Where, under a contract of sale, the property in the goods is

immediately transferred at the time of making the contract from the seller to the
buyer, the contract is called “sale.”
• As in, it is an absolute sale

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 • FOR EXAMPLE: When you go to North End and wish to buy a coffee. You
express to the barista that you want a coffee. Then, the barista hands you over
the cup of coffee, and in exchange, you hand over to the barista the cash
amount. This is a “sale.”
• This is an executed contrac
• That is, the obligations of both parties are discharged simultaneousl
• Furthermore, this means that there is a contract and a conveyance of property

AGREEMENT TO SELL

• DEFINITION: Where, under a contract of sale, the transfer of property in the goods is
to take place at a future time, or subject to the ful llment of some condition, the
contract is called an “Agreement to Sell.”
• It is an executory contract
• FOR EXAMPLE: On 1 January, John agrees to sell his iPhone to Tom on 15
January for $200. This is an agreement to sell since John agrees to transfer
ownership of the iPhone to Tom on 15 January
• FOR EXAMPLE: David agrees to buy Catherine’s car for $1,000 provided
Catherine changes the tires and provides new ones.
• This is an agreement to sell. It will become a sale when Catherine actually
changes the tires.
• FOR EXAMPLE: Kristine agrees to buy furniture — worth $2,000 — in two
monthly installments.
• This is an agreement to sell, as ownership in the furniture will pass to
Kristine with the payment of the second installment
• An agreement to sell becomes a sale when (a) time elapses, or (b) the conditions to
be ful lled have indeed been ful lled.

6. NO FORMALITIES TO BE OBSERVED

• The Sale of Goods Act, 1930 does not simulate any particular formality that must be
observed for the sale of the object in question. In fact, a contract for the sale of goods is
made simply by an offer and an acceptance of that offer
• The offer can be made by either the buyer or the seller
• Neither payment, nor delivery, is necessary at the time for forming the contract
• These contracts can be made (1) viva voce, (2) writing, (3) partly viva voce and partly
in writing, or (4) conduct
• FOR EXAMPLE (CONDUCT): If one goes to a store and picks something off the shelf,
then hands it to the cashier, the person who is buying the goods does not have to say
anything to the cashier, but the cashier will sell the item to the buyer in exchange
for money.

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 DIFFERENCE BETWEEN SALE AND AGREEMENT TO SELL

1. TRANSFER OF PROPERTY (OWNERSHIP)

SALE

• Property is transferred immediately to the buyer

• As in, a sale implies the immediate conveyancing of property so that the seller
is no longer considered the owner of the object in question (making the buyer
the new owner)
• The new owner enjoys jus in rem right (as in, a right enforceable against anyone
in the world interfering with the owner’s right)

AGREEMENT TO SELL

• There is no transfer of property to the buyer at the time of making the contract
• The conveyancing of property takes place later so that the seller continues to be the
owner until the agreement to sell becomes a sale either, (a) by expiry of a certain
time, or (b) ful llment of some condition
• FOR EXAMPLE: If John agrees to sell to Robert 10 kgs of rice, but has yet to weigh
the bag of rice in John’s possession, it is an agreement to sell.
• Why? Because Section 22 of The Sale of Goods Act, 1930 requires such goods
to rst be measured and the buyer to be noti ed of the weight. Otherwise, the
property in the goods does not pass to the buyer
• An agreement to sell creates a jus in personam right. That is, a right to legal action
against the other person should they not ful ll their obligation

2. RISK OF LOSS

SECTION 26 of The Sale of Goods Act, 1930

Unless otherwise agreed, the goods remain at the seller's risk until the property
therein is transferred to the buyer, but when the property therein is transferred to the
buyer, the goods are at the buyer's risk whether delivery has been made or no

• Therefore, in the case of a SALE, if the good are destroyed, the loss falls on the buyer
because the property in the goods has already passed to him/her.

SECTION 8 of The Sale of Goods Act, 1930

Where there is an agreement to sell speci c goods, and subsequently the goods
without any fault on the part of the seller or buyer perish or become so damaged as no
longer to answer to their description in the agreement before the risk passes to the
buyer, the agreement is thereby avoided

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 • In the case of the AGREEMENT TO SELL, where the ownership of the goods is yet to
pass to the buyer, the loss from the destruction of goods will be borne by the seller even
if the goods are in the possession of the buyer
• As in, an agreement to sell speci c goods becomes void if subsequently the goods —
without the fault of the seller or buyer — have perished or become so damaged as no
longer to being able to answer to their description

3. CONSEQUENCES OF BREACH

• In the case of a SALE, if the buyer wrongfully neglects — or refuses to pay the price of
the goods — the seller can sue for the price EVEN THOUGH the goods are in the
seller’s possession
• In the case of an AGREEMENT TO SELL, if the buyer fails to accept and pay for the
goods, the seller can only sue for damages (and NOT for the price) even though the
goods are in the possession of the buyer

4. RIGHT OF RESALE

• In the case of a SALE, the property is with the buyer. Thus, even if the seller is in
possession of the goods, he/she cannot sell the goods to someone else.
• If the seller sells the goods to someone else, the subsequent buyer having
knowledge of the previous sale does not acquire title to the goods. Thus, the
original buyer can (1) sue and recover the goods from the third person (because the
original buyer is the owner), and (2) sue the seller for breach of contract OR for the
tort of conversion
• However, the right to recover the goods from a subsequent buyer is lost if the said
subsequent buyer was a bona de buyer (as in, the subsequent buyer did not know
that the goods that he/she bought was already bought by someone else)
• Nonetheless, the original buyer is still entitled to the goods since the seller had a
defective title (as in, the seller was not allowed to then sell the goods)
• In the case of an AGREEMENT TO SELL, the property in the goods remains with the
seller, and as such, the seller can dispose of goods as he/she likes and the original buyer
can ONLY sue him/her for breach of contract
• In this case, a subsequent buyer will have good title to the goods — regardless of
his knowledge of whether the item in question was agreed to be sold to someone
else.

5. INSOLVENCY OF THE BUYER BEFORE PAYING FOR GOODS

• In the case of a SALE, if the buyer is adjudged insolvent before he/she pays for the
goods, the seller (in the absence of a right of lien over the goods) must deliver the
goods to the Of cial Receiver, or Assignee
• The seller is entitled to a ratable dividend on the goods
• In the case of an AGREEMENT TO SELL, the seller may refuse to deliver the goods to
the Of cial Receiver, or Assignee, unless paid for, as ownership has not passed to the
buyer

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 6. INSOLVENCY OF SELLER IF BUYER HAS ALREADY PAID THE PRICE FOR GOODS

• In the case of a SALE, if the seller is adjudged insolvent, the buyer is entitled to recover
the goods from the Of cial Receiver (or Assignee), as the property in the goods rests
with the buyer
• In the case of an AGREEMENT TO SELL, if the buyer has already paid the price and the
seller is adjudged insolvent, the buyer can only claim a stable dividend (as creditor) and
not the goods because property in them still rests with the selle

CONTRACT OF SALE v CONTRACT FOR WORK AND LABOR

• There is no clear distinction as to what constitutes a contract of sale and contract of labor
• The test to determine whether it is a contract of sale or a contract of labor seems to be the
following: whether the work and labor bestowed end in anything that can properly become
the subject of sale.

CONTRACT OF SALE

• If the article is not made upon a special order, but made for the general market, or is
merchandise (such as the seller ordinarily sells), the transaction is then regarded as a
contract for the sale of goods, wares, and merchandise.
• FOR EXAMPLE: Apple manufacturing iPhones is a contract of sale
• contract of sale contemplates the delivery of movable goods
A

Lee v Grif n (QB, 1861

• FACTS: A dentist agreed to make a set of arti cial teeth to t the mouth of a
customer. However, before the work was completed, the lady died.
• HELD: It is a contract for the sale of goods on the grounds that at the end of the day
there was a discernible article which was to be transferred from the dentist to the
patient

• Think of it this way: The rule established in Lee v Grif n is that, if the contract is
intended to result in transferring for a price from Person A to Person B a chattel in
which Person B previously held no property interest, then it is a contract for the sale of
a chattel.

Newman v Lipman (KB, 1951)

• HELD: A contract to take and supply a photograph is a contract of sal

Locket v A & M Charles Ltd (HL, 1938)

• HELD: Providing food at a restaurant is a contract of sal

• However, food furnished to a hotel guest (or lodger) is part of a contract of
service

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 J Marcel (Furriers) Ltd v Tapper (HL, 1953)

• HELD: A contract to make a mink jacket is a contract of sale

CONTRACT OF WORK AND LABOR

• A service should be intangible, instantly perishable, and should not be storable or

transferable
• A contract of labor is one whose substance is one for the exercise of skill
• If the article is made especially for the buyer, the transaction is one for labor and material
• FOR EXAMPLE: If Apple manufactures an iPhone especially for a buyer (with diamond
studs), then it is a contract for work and labor
• FOR EXAMPLE: If a lawyer provides legal advice, he will charge you for the
consultation. However, this would not be a contract for the sale of goods, as there is no
property moving from one person to the other. Rather, this would be a contract of work
and labor.

Robinson v Graves (KB, 1935)

• FACTS: Graves engaged an artist to paint a portrait and supplied the canvas and paint.
• HELD: It is a contract for work and labor as, “The substance of the contract is the skill
and experience of the artist in producing a picture.
• “If the substance of the contract is that skill and labor have to be exercised for the
production of the article and it is only ancillary to that there will pass from the artist
to his client or customer some materials in addition to the skill involved in the
production of the portrait, that does not make any difference to the result, because
the substance of the contract is the skill and experience of the artist in producing the
picture”
• As in, where the application of “skill and labor is of the highest description,” it will
be considered a contract for work and labor

State of Rajasthan v Man Industrial Corporation (SCI, 1969)

• HELD: A contract for providing and xing four different types of windows of certain
size according to, “Speci cations, designs, drawings, and instructions” set out in the
contract is a contract for work and labor — not for sale.

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