1

PRETIM!NARY

INTRODUCTION
The law as to the sale of goods was originally embodied in sections 7 6 to 123 of the Indian Contract
Act,1872. However, as the provisions of the sections 76 to 123 were found inadequate to meet the complexities
of growing mercantile transactions, the said sections were repealed and the Sale of Goods Act, 1930 took
birth. It is well-known that our Sale of Goods Act, 1930 is based upon and is largely a re-production of
the English Sale of Goods Act, 1893 and in principle the law of sale of goods in both the countries is now
the same and, therefore, English authorities on interpretation of different sections although not technically
binding in India, would have great persuasive vab,rc fConsolidated Coffne Ltd., etc. v. MSP Exports (p)
Ltd. ArR 1980 SC 14681.
Law relating to sale of goods is a branch of Contract Law as the general principles of contracts are
appficable to contracts for sale of goods such as offer and its acceptance, capacity of parties, free consent,
consideration and legality of the object. Sale of goods has two elements, one is the sale and the other is
delivery of goods fBharat Sanchar Nigam Ltd. v. union of India AIR 2006 SC 13831.

SCOPE OF THE ACT

The Sale of Goods Act applies only to movables other than actionable claims and money and not to
immovables which are governed by the Transfer of Property Act, 1882. Actionable claims mean'chose in
action' or 'thing in action'. It means the person has a right to recover a thing by suit but does not have
the enjoyment of the thing.

GooDS [Sec.2 (7)]

Goods means every kind of movable property other than actionable claims and money; and includes
stock and shares, gowing crops, grass and things attached, to or forming part of the land which are agreed
to be severed before sale or under the conkact of sale. Timber is therefore goods fState of Maharashtra
v. Champalal AIR 1971 SC 9081. Plant and machinery fixed to the floor in a building are immovable property
and not goods.
Goods may be (i) Existing, or (li) Future.
-
{i) Existing goods are firther classified into
-
(a) Specific goods;
(b) Un-ascertained or Generic goods.
(a) Specfic goods mean goods identified and agreed upon at the time a contract of sale is made
[Sec.2
(14)]. These goods are already in existence and are physically present in some person's possession and
ownership, for example contract for the sale of a specific watch or specific car.

171
 Business Law for Management
172

identified, /or
(b) Generic or un-ascertained goods are indicated by description and not separately
is a of un-ascertained goods'
,*r*)ir, sale of one kg. of oil from 100 kgs. of oil with the merchant sale
When one kg. is separut.d fro* 100 kgs. of oil, the sale is of specific
goods'

(ii) Future goods mean goods to be manufactured or purchased or acquired by the seller after the Unde
at the time of contract of sale, but
making of the contract of salJfSec.z (6)]. These goods do not exist the A

subsequently come into existence. not n

of rir
ILLUSTMTION:
goods'
A agreesto sell B a sofa-cum-bed which he would manufacture. It is a case of sale of future fiLUl

Shares and stock are goods. The definition of the word "goods" is wider than that contained in English
in the
intangible, such things as stocks
Act, for it includes all typls of movable properties, whether tangible or
movable property is goods lTata Consultancy
and shares, which in nngliih law are not goods. Every kind of
pradesh (2005) 1 scc 3081. However, debenture being an instrument of debt
services ,j. sut, of Anihra
does not come within the purview of the definition of
goods [R.D. Goyal v. Reliance Industries Ltd. (2003)
patent, etc., are all goods. Gas and electricity
1 SCC g1]. Even things like goodwill, copy-right, trade mark,
though not governed U-y tt. Sale of Goods Act, has been held
to be goods by Calcutta and Madhya Pradesh
SC 666 has observed that electricity
High Courts. supreme'Court in Avtarsingh v. State of Puniab AIR 1965
Jabalpur AIR 1970 SC 7321'
is not movable property. Electricity is goods lS.T. Commr., Indore v. WEB,
money. Current rnoney is not goods'
Money is the only consideration in sale of goods. Money means current
Act, 1882'
If goods are sold for goods the ffansaction is 'exchange' governed by the Jlansfer of Propert-v
pr[e, therefore, undei the Act means 'money consideration' for sale of goods. Sale of old coins or notes
for money is sale of goods'
providing SIM cards to distributors who in turn supply them to customers is not one of sale of goods
lvodafone Esiar Cellular Ltd. v. Asstt.
clr Q0l0) Tax LR 618 (Ker)1. Electromagnetic waves are not
Airtel Ltd'
gooarwhorot sanchar Nigam Ltd. v. {Inion of India (2006) 3 sCC 11. However,rnBharati
data through optic fibre cables
v. State of Karnataka it is held that artificialy treated light energy carrying
is distinct from electromagnetic waves and falls within the definition of
goods.

DOCIIMENT OF TITLE TO GOODS [Sec'2(a)]

warehouse keeper's certificate.
Document of title to goods includes a bill of lading, dock warrant,
delivery of goods and any other document
wharfinger,s certificate, rail,ray receipt, warrant or order for the
used in the ordinary course of business as proof of the possession or control of goods or authorising or
possessor of the document to ftansfer
purporting to authoiise, either by endorsement or by delivery, the
or receive goods thereby presented.
the goods. The holder
In short, a document of title to goods is a proof of possession or control over
He is also authorised to transfer the
of the document of title to goods is authorised to receive the goods.

possession of the goods eiGr by endorsement or by delivery. A delivery

order is a document of title to
goods and its possessor has the right not only to receive the goods but also
to transfer it to another by
Indorsement oi d.lir.ry lB. Bhimayya v. Govt. of A.P. AIR 1961 SC 10651.
dock warrant, warehouse keeper's certificate, wharfinger's certificate, railway
receipt,
Bill of lading,
Any used in the ordinary course
delivery warrant are some of the documents of title to goods. document
is a document
of business,which entitles the possessor of the document to receive the goods unconditionally
of title to goods.
goods are embarked,
A bill of lading is a writing signed on behalf of the owner of the ship in which
acknowledging the r-eceip of the goods, and undertaking to deliver them
at the end of the voyage subject
to such conditions u, 11uy be meitioned in the bill of lading. It is well settled in commercial
world that
a bill of lading represents the goods and the transfer of it operates as
a transfer of the goods IJ.Y. Gokal
receipt is a document
& Co. (pvt; ila. i. The A.C. Siles Tax Inspection AIR 1960 SC 595 (599)1. A railway
goods. When the railway receipt is handed over
of title to the goods and for all purposes, represents the
to the consignee on payment, the property in the goods is transferredllr
v. Gopal Textiles Ltd. AE 196l
SC 426; Bharat & Co. vt. Trade Tax Officer (2005) 6 SCC 7961'
 t73

PRoPERTY [Sec.2 (11)]

Property means general property in goods and not merely a special property.
General property means ownership of the goods. Special property means special interest
in the goods.
lJndet the Sale of Goods Act, property means general property and not special property. property under
the Ac., therefore, means 'ownership'. Transfer of propertyis thus transfer of ownership in the gotds and
pot merely specific interest in the goods. The term is inrportant as transfer of property determines transfer
of risk from seller to the buyer. (Discussed under 'Effects of the Contract'in iltapte, lS.
LLUSTMTION:
I who owns the goods pledges thern to 8. I has the genoal property in the goods while B has a special property, i.e., special interest
ia them.

ooa
 the sa
v. Va

AGR
2
date r

CONTRACT OF SAIE _
TORMATION OI THE CONTRACT
l. to sel
SALE in tht
Where under a contract of sale the property in the goods is transferred from seller to the bu1,er, the ,
contract is called a 'sale'. In a sale, immediate payment or delivery is not necessarv. Pavrnent and deliverv amou
may be done at a future date. But the ownership of goods, for example, the properry' in the goods must of In,
be transferred immediately from the seller to the buyer. It is immaterial that actual sale does not take place
at the time of movement of goods and takes place later on lstate of Maharashtra v. Embee Corporarion SAL
(tee7) 7 scc 1e01.

Re-sale of goods is also sale of goods. A second sale is a re-sale. Re-sale may be to a third person ,, Tg:
or to the original seller fGopalakrishna Pillai v, K.M. Mani AIR 1984 sc 2161. .15Wl
i subse
Essentials of a valid sale: ,,,r the cr

1. Property: There must be a transfer ofgeneral property in the goods, for example, tansfer ofownership :. of a
in the goods, and not merely special properly or special interest, from the seller to the buyer. Right, title ', seller
and interest in a movable property can pass by delivery of possession and upon paytng of consideration.
Passing up of a title in favour of the transferee would not be illegal, unless it is forbiddenby law,for may
example, where transaction attracts Sec.23 of the Indian Contract Act, 1872 lCanbank Financial Services Thou
Ltd. v. Custodian {2004) 8 SCC 3551. it tei
2. Movable goods: Transfer of goods must be that of movable goods only. is tra
Pilib,
3. Price: Price means the money consideration for sale of goods [Sec.2(10)]. The price or consideration
. anac
of goods rnust be money. Where goods are exchanged for goods, it is not a sale. When consideration for
of In
transfer consists of other goods, it may be an exchange or barter fDhampur Sugar Mills v. Commissioner
trans
of Trade Tax (2006) 5 SCC 6241. (For detailed discussion on price, please see "Formalities of the Contract" , ofAr
discussed below).
4' Parties: There must be two parties, for example, buyer and seller. The parties must be conrpetent SAL
:
to contract as under the Indian Contract Act, 1872. The seller and buyer must be two different persons.,
5. Form: No particular form is necessary to constitute a conhact of sale. A contract of sale may be ': Coll.tl
made in writing or by word of mouth, for example, may be express or it may be implied from the conduct the c
of the parties, or from the course of dealings between the parties [Sec.5 (2)]. It may also be made partly
in writing or partly by word of mouth. Proposal and acceptance must be made.
the c
The essential elements of sale org to
- se

(i) goods, Sale

an el
(ii) seller and purchaser,
(iii) agreement for sale and purchase, fi4
 -ontract of Sale - Formation of the Contract
175

(iv) transfer of property in the goods,

(v) price being the consideration
lNew India Sugar Mills Ltd. v. Commr. of Sales Tar AIR 1963 SC 1207). Both the agreement and
the sale should relate to the same subject matter
lstate of Gujarat (Commissioner of Sates Tax, Ahmedabad)
v. VarieQ Body Builders AIR 1976 SC 2l0gl.

AGREEMENT TO SELL
Where the transfer of the property,for example, ownership in the goods is
to take place at a future
date or subject to some condition to be fulfilled the contract is called u, ugr..rn rt
to sell. Where by a
contract of sale the seller purports to effect the present sale of future goods, th. ugrr.*ent
operates as an
agreement to sell.
When agreement to sell becomes agreement of sale?
An agreement to sell does not involve any immediate hansfer of property in
the goods. An agreement
to sell becomes a sale when the time lapses or the conditions are nrrnrreo subject
tJwhich the-property
in the goods is to be transferred.
Agreement defening payment of part of price and also deferring delivery
till the payment of balance
amount, held, was nevertheless an agreement of sale
fTravancore Rubber & Tea Co. Lrd. v. Commissioner
of Income Tax, Trivandrum (2000) 3 SCC 7151.

SALE AND AGREEMENT TO SELL [Sec.4]

A contract of sale of goods is a contract whereby the seller transfers or agrees to
transfer the properfy
in goods to the buyer for a price' Such a contract of sale may be absolute
or conditional. Absolute contract
is without any conditions' Conditional contract may be a conhact with condition precedent
or condition
subsequent' \\'hen a condrtion is to be first performed before an agreement
to sell would become a sale,
the condition is a condition precedent where there is sale but subject to performance
or non-performance
of a condition, the condition is a condition subsequent. The conditions may have to
be fulfi1ed by the
seller or by the buyer.
There may be a contract of sale between one part-owner and another.
A contract of sale of goods
may be either a 'sale' or an 'agreement to sell'. Contract of sale includes
sale and uo ugr..r.nt to sell.
Though section 4 groups both sale and agreement to sell under single generic ,contracts
name of of sale,,
it reats them as separate categories, vital point of distinction between them being that
whereas in sale there
is transfer of property in goods from seller to buyer, there is none in ugr..ro.nt'to
sell Tax officer
Pilibhit v- Budh Prakash Jai Prakash AIR 1954 SC 4591. The definition of contract [,Sales
of sale covers both
an actual sale and an agreement to sell
fAssociation af Leasing & Financial Service Companies v. (Jnion
of India (2011) 2 SCC 3521. A contract of sale becomes u.-ut. only when
the property in the goods is
transfened to the buyer under the terms of the contract itself
lHyderiboa Engine)ring Industries v. State
of Andhra Pradesh (2011) 4 SCC 7051.

SALE AND AGREEMENT TO SELL DISTINGUISHEI)

1. Nature of contract: Sale is an 'executed contract'while an agreement
to sell is an 'executory
contract'. In an executed contract, one ofthe parties has already performed
his part of the contract. On
the other hand, in an executory contract, both the parties ,r" yit to perform
their mutual promises.
An agreement to sell becomes a sale when, (i) agreed time of the fulfillrnent
of the performance of
the conhact lapses, or (ii) the conditions of the sale uri filrrl.d. Till
then the hansaction is an agreement
to sell and not a sale. on the other hand in a sale, there is an immediate
transfer of ownership in the goods.
Sale is a contract plus a conveyance, while an agreement to sell is only pure
a contract. A sale is therefore,
an executed contract while an agreement to sell is an executory contract.
t76
Business Law for

2. Creation of right: Sale creates a jus_-in-rem' , for example, a right on the goods against the whole
world, while an agreement to sell creates a ius-in-personam', jo, exaiple, perional
a rilht only 0rl
the person for any default in fulfilling his part of the agreement. "g.il; 'tt
un,
3' Passing of property: In a sale, the property in the goods passes to the buyer with the risk while Ass
in an agreement to sell, risk and property does noi pass to the-buyer
immediately. Essence of sale is transfer
ofproperty in a thing, from one person to another, for a price.
Contract of sale includes agreement to sell.
It is not necessary that contract of sale must be absolute. It may be conditional ' ther

that distinguishes conkact of sale from agreement to

as well. Essential feafure 'soI
sell is that in contract of sale, property in goods is , circ
transferred from seller to buyer immediaiely, whereas
in agreement to sell, property is transferred on a '; fiad
future date. Agreement to sell becomes sale on fulfillment
of conditions provi,rled therein or when time payl
provided in agreement elapses
fState of (Jttaranchal v. Khurana Bros. (2010) 14 SCC 334]. cont
4' Remedies in ease of breach of contract: In a sale, the (20c
seller is entitled to sue for the price of
the goods and also has a right of lien, stoppage in
&ansit and re-sale. In an agreement to sell, the seller IM.t
has the right only to sue for damages for non-performance
of the contract.
Pric
5' Risk of loss: In gase of loss to goods, in sale, the loss
will be borne by the buyer even if the
possession of goods is with the seller whili
in an agreement to sell the seller will ilave to pay for the loss
since the ownership in the goods has not passed valur
to the buyer.
6' Insolvencyz (1) Insolvency of buyer: In a sale, the by tl
seller must deliver the goods to official fusignee a val
or Receiver and can claim rateable dividend for the price
of the goods, while in an agreement to sell, the by tl
seller may refuse to deliver the goods unless paid
6r.
(ii) Insolvency of seller: In a sale, the buyer is entitled
to receive the goods from the official Assignee duy
or Receiver, while in an agreement to sell, thabuyer
has to prove the he has paid to the seller and decre
he can only claim a rateable dividend. He cannot
compel the Receiver ".oi-t
to sell and deliver the goods. such
contract of sale of Goods and contract of work and of thr
Labour:
The contract of sale contemplates the sale and
delivery of goods while contract of work and labour
involves exercise ofskill and labour by one parry in
respect lfrrt .iul, supplied by another. In a contract
of work and labour, detivery of goods is incidental. conract
for manufacture and supply of wagons is a
contract of sale and not a work contract
ftJnion of India v. sarkaria & Jaswant
The nature of hansaction, whether it is a 'sale' ^slrgft AIR 1977 sc 1537).
or a 'works-conhact,, is to be ascertained on facts of each
case' on proper conskuction of terms and conditions
of contract between the parties lState of Andhra pradesh
v' Kone Elevatore (India) Ltd. (2005) 3 sCC 389; Hindustan
Shipyard v. State of A.p.(2000) 6 sCC 5791.
In Robinson v' Graves.lvhele G engage{ an artist
R, to paint a porhait for 250 guineas and R srpplied
the canvas and other rnaterials, it was hefi that ttre
contaci was for work and materials and not for sale I
of goods.
or inc
The Sale of Goods Act applies to the contact of such ir
sale of goods and not to the contract of work and
labour. be ma
fSram,
FORMATION OF TIIE CONTRACT
A

Contract of sale how made? Chaptt

(Sec.S)
(
A contract of sale may be rnade in unitin-s or b^y-word
of mouth or partly in writing and partly by
word of mouth or may be irylied from the conduct
the parties. A contract of sale is made in any
of the parties or from ih" .;;r"
;f dealings between HIRE
of the following tt'ee ways:
1
1' offer and acceptance: An offer to buy or sell goods
by one party for a price and acceptance of instalh
such an offer by another party is necessary.
It is b,
2' Delivery: The contract may provide for immediate
delivery of the goods or delivery by installments T
or delivery at a future date.
pays al
the hir
 alract of Sale Formation of the Contract
- 177

3. Price (Sec.9): The contract may provide for immediate payment of the price or payment by installment
or payment may be postponed. Price must be money consideration for sale of goods
[Sec.2(10)].
price is
an essential element of sale of goods [U.P. Cooperative Cang (Jnions Federations v. West U.p. Sugar Mills
Association (2004) 5 SCC 4301.
In the conhact of sale, the price may be fixed by the conhact or may be left to be fixed in a manner
thereby agreed or may be determined by the course of dealings between the parties. Where the price is not
so fixe4 the buyer shall pay a reasonable price. Reasonable price is a question of fact depending on the
circurstances of each particular case. In case of conhact for sale of shares, on pre-emptive offer of shares
made where price of shares is to be determined by a third party valuer, acceptance of said offer without
payment of price (which was yet to be determined), it was held by the Apex Court that in such a case a
contract for pwchase of the shares is concluded,fClaude-Lila Parulekar (Smt.) v. Sakal papers (p) Ltd.
(2005) 1 I SCC 731. lt cannot be said that a contract is void for uncertainty because the price was not fixed
[M.5. Madhusoodhanan v. Kerala Kaumudi (P) Ltd. (2004) 9 SCC 204].
Price to be fixed when agreement is to sell at valuation (Sec.l0):
Where the price is to be fxed by the valuation of a third parfy and such party fails to make such
valuation, the agreement becomes void. If, however, the buyer has taken delivery, or the goods are appropriated
by the buyer, he shall pay a reasonable price therefor. Where such third party is prevented from making
a valuatioq by the fault of the seller or buyer, the party who so prevents is liable to be sued for damages
by the party who is not in fault.
Amount ofincreased or decreased taxes to be added or deducted (Sec.64-A): In the event ofany
duty ofcustoms or excise on goods and any tax on the sale or purchase of goods being irrposed, increased,
decreased or remitted in respect of any goods after the rnaking of any contract for the sale or purchase of
such goods without stipulation as to the payment of tax, where tax was not chargeable at the time of making
of the conhact, or for the sale or purchase of such goods, tax pai( where tax was chargeable at that time-
(a) if such imposition or increase so takes effect that the tax or increased tax, as the case may be,
or any part of such tax is paid or is payable, the seller may add so much to the contract price
as will be equivalent to the amount paid or payable in respect of such tax or increase of tax.
Seller shall be entitled to be paid and to sue for and recover such addition.
O) if such decrease or remission so takes effect that the decreased tax only, or no tax, as the case
may be, is paid or is payable, the buyer may, deduct so much from the contract price as will be
equivalent to the decrease oftax or remitted tax. Buyer shall not be liable to pay, or be sued for,
or in respect of such deduction.
Parties to the contract may express different intentions in the terms of contract. In case of irposition
or increase in the tax after the making of the contract, the party shall be entitled to be paid ,u.h tu* o,
such increase lNumaligarh Refinery Ltd. v. Daelim Industrial Co. Ltd. (2007) 8 SCC 4661. No party shall
be made to unnecessarily gain or suffer on account of the State action in increasing or decreasing duty
fSramajibi Stores v. Union of India AIR 1982 Del. 76].
4. Goods: The contract of sale of goods may be for existing or future goods (discussed in
Chapter l).
5. Contract: Contact of sale of goods must possess all the essentials of an ordinary contract.

HIRE.PURCHASE AGREEMENT
The possession of the goods passes to the buyer who promises to pay the price of the goods in certain
installments. Unless full price of ttre goods is paid, the ownership of the goods remains with the seller.
It is both a contract of bailment and an agreement to sell.
The purchaser has an option to buy goods by way of paymsnts in stipulated installments. After he
pays all the installments with hire charges, he becomes the owner of the goods. In a hire purchase agreement,
the hirer becomes the possessor or bailee of the goods immediately and at the same time has a right to
178
Business Law for Managemenl

terminate the agreement at his pleasure, for example, he has an option to return the goods. If there
is n6
such option existing, the agreement would be an agreement to sell and not a hire-purchase agreement
even i,$[ire P,
though pagnents are to be made by installments. Mere payments by installments would therefore, not
make
a transaction a hire-purchase one. The hirer,
if he chooses not to make any further installments, may discontinu; :;.9IIBJI
the payments and in such a case, possession of the goods passes back to the seller. The sellemuy
,.ir. S(
the property and also sue for arrears of installments due. The installments paid by the hirer to thi
sellei
are not returnable. These installments are adjusted towards the hire charges. At the same time, the (i
hirer
has an option to pay the full amount at any time and purchase the goods hired. (ii.
Supreme Court has laid down that the sum and substance of hire-purchase agreement is twofold.
One,
(r
the owner under the hire-purchase agreement enters into a transactio, of tiring ort th. goods on the tenns Th
and conditions mentioned in the agreement and second, the option to purchase, exercisable by the hirer contin
on payment of all the installments of hire, arises when the installments are paid and not until then. There the
is no agreement to buy goods. The hirer is under no obligation to buy but has an option to return the goods ppens,
or to become its owner by payment in full of the ageed hire installments and the price for exercising ,:,:POntraCtt
the
option fsundaram Finance Ltd. v. The state of Kerala AIR 1966 sc l17gl. j:,soods c(

A hire purchase agreement as its very nafure implies has two aspects. There is first an aspect of bailment ,. Wl
of the goods subjected to the hire purchase agreement and there is next an element of sale qfuch fructifies :OOerateS
when the option to purchase, which is usually a term of hire-purchase agreement, is exercised :.h sell o
by the intending
purchaser. The distinguishing feature of a typical hire-purchase agreement therefore is that
the propery;
does not pass when the agreement is made out but only passes when the option is finall1, exercised after .GOODS
conplying with all the terms of the agreementfK.L. Joher & Co. v. Depue Comierciot Tm Oficer, Cointbatore
Ina
ArR 1965 SC 10821. :sar- aris,
ILLUSTRATION:
(i)
I sells a refrigerator to B with a stipulation that B shall pay A a fixed sum every month by way of installments till the full price
n=
*oecific g
,

of the refrigerator is paid.

;{hrc contri
Now till B pays the full amount to A by way of installments, he does not become the owner of the
refrigerator. He can discontinue payments of further installments. In such a case,l takes back the refrigerator.
B has no right to recover installments already paid by him to I because the amount paid by him is adjusted ' Ino
towards the hire charges of refrigerator. this is cailed a hire-purchase agreement. ',. (a)'
In an agteement of hire pwchase, the purchaser renrains merely a trustee/bailee on behalf of the furancier/ , (b)t
financial institution and ownership remains with the latter. Clause of resumption of possession is ahvays iontract.
with the financer even if the clause is not in the agreement. Thus, in case the vehicle is seized by the , (c)1
ftnancier, no criminal action can be taken against him as he is repossessing the goods owned by him
Sarmah v. Bhola Nath Sharma IT 20lZ (11) SC 791.
lAnup ' (d)1
are damag
.AGREEMENT TO SELL'
AND'HIRE.PTIRCIIASE AGREEMENT' DISTINGUISHED (ii) (
Io sell sper
(i) Conhact of sale includes both sale and agreement to sell. Hire-purchase agreement is bailment
plus agreement to sell. 0r become
lo the buy,
(ii) Agreement to sell is a step to the conhact of sale. Hire-purchase agreement becomes a sale only
: Good
,'.but after a1
(iii) In
an agreement to sell conveyance of goods may take place subsequently. ln a hire-purchase ii void. The
agreement conveyance is immediately transferred while ownership remains
wiih tne seller. l 0an be avo
(t ) In an agreement to sell, the buyer
can sell or pledge the goods but in a hire-purchase agreement;'. (a) th
the buyer cannot exercise any ownership rights on the goods and, therefore, he cannot sell or ple'clge ttrese:
goods. (b) th

(v) In an agreement to sell the buyer can take advantage of implied conditions and warranties undei
! the agrer

the Act' In a hire-purchase agreement the hirer cannot so claim the benefits (.) tt.
of implied conditions and warranties
unless it becomes a sale. \n Elp
before the r
 of Sale Formation of the Conrract
- t79

(vi) Agreement to sell is regulated by Sale of Goods Act, 1930, while hire purchase is regulated by
flire Purchase Act, 1972.

SUBJECT MATTER OF CONTRACT (Sec.6)

Section 6 provides that the goods which form the subject
of a contract of sale may be either:
(i) existing goods owned or possessed by the seller, or
(ii) future goods.
(The term 'goods' is explained under 'scope of the Act'in chapter I).
There may be a contract for the sale of goods the acquisition of which by the seller depends upon
a contingency which may or may not happen. If a condition is to be complied
with before the seller comes
into the possession of the goods, then the contract of sale of goods is performed
only when the condition
happens' For example. if I
agrees to sell the goods to B, if ...tuin ship arrives with
the particular goods
contracted to be sol4 then A will be liable to deliver goods only when
ihe particular ship arrives with the
goods contracted to be sold. i

where by a contract of sale the seller purports to effect a present

sale of future goods, the conhact
operates as an agreement to sell. Future goods are goods which
have to come into existence. A contract
to sell or assign the future goods is an agreement to sell. It creates only a personal obligation at law.
i cooDs PERTSITING
- EFTECT oF DESTRUCTION oF GooDS (Secs.7 & 8)
In a confact for saleof specific goods, goods nr,ay perish before
sale is gone tkough. Such a contingency
may arise in any of the following two stages:
(i) Goods perishing before making of contract (Sec.7): where there
is a contract for the sale of
specific goods, the contract is void if the goods without the loiwledge
of the seller have, at the time when
the contract is nrade. perished or become so damaged as no longer to
answer to their description in the
contract.
ln order the contract may be void the following conditions should be complied
with
(a) The goods must be specified goods. This section does -
not apply to unascertained goods.
(b) The goods nnrst have perished or so damaged as no longer
to answer to their descripti in the
confuact.

(c) The goods must have been so perished or damaged without the
knowledge of the seller.
(d) The goods must have been so perished or damaged before the
rnaking ofthe contract. Ifthe goods
are danraged but they answer to the description, the contract is valid
and the buyer must pay the price.
(ii) Goods perishing before sale but after agreement to selt (sec.8):
where there is an agreement
to sell specific goods, and subsequently the goods without any fault
onthe part ofthe seller or buyer perish
or become so damaged as no longer to answer to their descr-iption in
the agreement b"yorc the risk passes
to the bayer, the agreement is thereby avoided.
Goods may perish before sale (for example, before the property
in the goods has passed to the buyer),
but after agreement to sell. Under section 8, the agreement is avoided,
whereas under sectionT thecontract
is void' The contact can be avoided on the ground of impossibility
of perforrnance. In order that an agreement
can be avoided, the following essentials must be present:
(a) the goods must be specified goods.
(b) the goods must have perished or become so damaged as
no longer to answer to their description
in the agreement before the property or risk passes to theluyer.
(c) the goods must so perish or be damaged without any fault
on the part of the seller or the buyer.
In Elphick v' Barnes (1880 5 CPD 321), where the agreement
was to sell a horse, and the horse died
before the sale was completed, it was held ttrat the agreetent was
void.
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