02/03/2022

The Sale of Goods Act, 1930

Rehan Waheed

The Sale of Goods Act, 1930

The Sale of Goods Act, 1930

• Contract of Sale
• Essentials of Contract
• Difference between Sale and Agreement to Sell
• Kinds of Goods
• Destruction of Goods

Rehan Waheed

1
 02/03/2022

The Sale of Goods Act, 1930

The Sale of Goods Act, 1930

1. The Sale of Goods Act
• The law relating to sale of goods is contained in the Sale of Goods Act 1930
• It came in to force on 1st July, 1930
• It extends to the whole of Pakistan

2. Contract of Sale
• It is contract where the ownership of moveable goods is transferred from a seller to buyer
• As per Section 4 (1) of the Act:
• A contract whereby the seller transfers or agrees to transfer the property in goods to the
buyer for a price

Rehan Waheed

The Sale of Goods Act, 1930

Essentials of a Contract
3. Essentials of a Contract of Sale
3.1 Contract
3.2 Seller and Buyer
3.3 Transfer of Property
3.4 Subject Matter
3.5 Price
3.6 Sale and Agreement to Sell
3.7 Other formalities

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The Sale of Goods Act, 1930

Essentials of a Contract
3. Essentials of a Contract of Sale
3.1 Contract
• A contract of sales relates to moveable goods
• All essentials of a valid contract must be present in a contract of sale like capacity of parties,
free consent, legality of object etc.
• It may be verbal or in writing
• It may be express or implied

Rehan Waheed

The Sale of Goods Act, 1930

Essentials of a Contract
3. Essentials of a Contract of Sale
3.2 Seller and Buyer
• There must be a seller and a buyer
• A seller means a person who sells or agrees to sell goods
• A buyer means a person who buys or agrees to buy goods
• A person cannot be both a seller as well as buyer because one cannot buy his own goods and
similarly, one cannot sell his own goods to himself
• However, the owner of one part can sell his share to the owner of other part
• Similarly, a partner may buy the goods from a firm in which he is a partner and vice-versa
Examples
• X sells his computer to B for Rs 40,000. X is seller and B is buyer
• X and B jointly own a computer. X sells his share to B. B becomes sole owner of the computer
Rehan Waheed

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The Sale of Goods Act, 1930

Essentials of a Contract
3. Essentials of a Contract of Sale
3.3 Transfer of Property (ownership)
• Transfer of property is an essential element of contract of sale
• Here, property means transfer of ownership
• Mere transfer of possession of the goods cannot be termed as sale
• In a contract of sale, a seller transfers or agrees to transfer ownership in goods to the buyer
Example
• X sells his car toY for Rs 500,000. Ownership and possession of the car transfers from X toY

Rehan Waheed

The Sale of Goods Act, 1930

Essentials of a Contract
3. Essentials of a Contract of Sale
3.4 Subject Matter
• Subject matter means the things for which a contract of sale is made
• Only goods can be the subject matter in a contract of sale
• According to Section 2(7), ‘Goods means every kind of moveable property other than
actionable claims and money; and included electricity, water, gas, stock and shares, growing
crops, grass and things attached to or forming part of land which are agreed to be severed
before sale or under the contract of sale
• An actionable claim means a claim which can be enforced by court e.g. a debt due from
one person to another. Money is not regarded as goods. However, old coins are treated
as goods
Example
• X sells his car to M for Rs 300,000. Car is the subject matter i.e. moveable goods
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The Sale of Goods Act, 1930

Essentials of a Contract
3. Essentials of a Contract of Sale
3.5 Price
• The consideration in a contract of sale must be the price
• When goods are sold or exchanged for other goods, the transaction is barter and not a
contract of sale of goods
• If goods are sold partly for goods and partly for price, it is a contract of sale [Section 2(10)]
Example
• X sells his chair to B for Rs 2,000. It is a contract of sale.
• X sells his horse to B against B’s promise to give 100 ton of wheat. It is not a contract of sale

Rehan Waheed

The Sale of Goods Act, 1930

Essentials of a Contract
3. Essentials of a Contract of Sale
3.6 Sale and Agreement to Sell
• The term contract of sale includes both sale and an agreement to sell
• When ownership in goods is transferred from a seller to a buyer at the time of formation of
contract, the contract is called a sale
Examples
• X buys a book from Y and pays the whole price on a counter. It is a sale.
• X agrees to buy B’s car for Rs 500,000 if his mechanic approves the car. It is an agreement to
sell.

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The Sale of Goods Act, 1930

Difference between Sale and Agreement to Sell

4. Difference between Sale and Agreement to Sell
Difference Sale Agreement to Sell
Transfer of Ownership in goods transfers to the buyer at Ownership in goods is to be transferred to the
Property the time of contract. The seller ceases to be buyer at some future date
the owner
Type of A sale takes place if the goods exist An agreement to sell takes place if there are
Goods future goods
Recovery If seller refuses to deliver goods, buyer may If seller refuses to deliver the goods, the buyer
of Goods sue for recovery of goods cannot recover the goods but may sue for
damages
Risk of If goods are destroyed, buyer suffers loss If goods are destroyed, seller suffers loss even
Loss even though goods are in possession of seller though goods are in possession of the buyer
Right of A seller cannot resell the goods even though A seller can resell the goods to a new buyer. A
Resale goods are in possession of seller new buyer gets a good title to the goods

Rehan Waheed

The Sale of Goods Act, 1930

Difference between Sale and Agreement to Sell

4. Difference between Sale and Agreement to Sell
Difference Sale Agreement to Sell
Consequences If buyer fails to pay the price of goods, If buyer fails to pay the price, seller can sue
of Breach seller can sue for price, even though for damages and not for price, even though
goods are in possession of the seller goods are in possession of the buyer
Insolvency of If buyer becomes insolvent before If buyer becomes insolvent before payment,
Buyer payment, his legal representatives can seller can refuse to sell the goods until price
claim goods from the seller. If price of is paid by legal representative of the buyer
goods is still unpaid, the seller can claim
the price of goods proportionately
Insolvency of If seller becomes insolvent, buyer can If buyer has paid the price and seller
Seller recover the goods from official receiver becomes insolvent, he can recover the price
proportionately

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The Sale of Goods Act, 1930

Kinds of Goods
5. Kinds of Goods [Section 6]
5.1 Existing Goods
• The goods which are owned or possessed by the seller at the time of contract of sale are
called existing goods
• In other words, goods which are physically in existence and in seller’s ownership at the time
of contract are called existing goods
• These goods can be divided in three kinds

Rehan Waheed

The Sale of Goods Act, 1930

Kinds of Goods
5.1 Existing Goods
5.1.1 Specific Goods
• Goods identified and agreed upon at the time of contract of sale are called specific goods
• In other words, these goods can be clearly identified and recognized as separate things
Example
• X owns many cows and promise to sell one of them. When one cow is singled out, it is a
contract for specific good

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The Sale of Goods Act, 1930

Kinds of Goods
5.1 Existing Goods
5.1.2 Ascertained Goods
• Goods which are identified after the formation of contract of sale are called ascertained
goods
• When a part of goods are lying in bulk are identified and earmarked for sale, such goods are
termed as ascertained goods
Example
• X makes a contract with b to sell 10 bags of sugar. Later, X separates 10 bags from his stock of
sugar for B. These bags are ascertained goods

Rehan Waheed

The Sale of Goods Act, 1930

Kinds of Goods
5.1 Existing Goods
5.1.3 Unascertained Goods
• Goods which are not identified and agreed upon at the time of contract of sale are called
unascertained goods e.g. goods in stock or lying in lots
• These goods are described by description or sample only
Example
• X has 100 bags of sugar. X promises to sell 10 bags of sugar out of these. These are
unascertained goods

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The Sale of Goods Act, 1930

Kinds of Goods
5.2 Future Goods
• Goods which will be manufactured, produced or acquired by the seller after making the
contract of sale are called future goods
• Seller can only make an agreement to sell the future goods
Example
• X agrees to sell Y all the mangoes which will be produced in his farm next year.
5.3 Contingent Goods
• Goods, the acquisition of which by the seller, depend upon an uncertain event is called
contingent goods
• Performance of contract by seller depends upon uncertain events, which may or may not happen
Example
• X agrees to sell B a rare painting if he will be able to purchase from its present owner
Rehan Waheed

The Sale of Goods Act, 1930

Destruction of Goods
6.1 Perishing before Formation of Contract
• Where there is a contract for sale of specific goods, the contract is void if goods are perished
without the knowledge of seller at or before the making of contract
• However, if the seller has knowledge of the destruction of goods and he enters in to a
contract of sale with a buyer, the seller is bound to compensate the buyer
• If the buyer has the knowledge of destruction of goods, he has no right to claim
compensation
• If part of the goods perishes and the contract is divisible, buyer has to accept the goods
available in good condition. If contract is indivisible, contract becomes void
Example
• X agrees to sell 100 bags of sugar which are in transit by ship. On arrival of the ship, X discovers that the
sugar is spoiled. The contract becomes void
• X sold 10 bags of basmati rice to B. It was found, basmati rice was mixed with inferior quality rice.
Contract is void
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The Sale of Goods Act, 1930

Destruction of Goods
6.2 Perishing before Sale but after Agreement to Sell
• When there is an agreement to sell specific goods and the goods perish, the contract
becomes void and the parties are not liable for performance of contract
• If the contract is indivisible and part of goods to be sold is perished, the contract becomes
void
• If the contract is divisible, the contract remains valid for the part available in good condition
Example
• X took a horse for 8 days on a condition that if found suitable, the bargain would complete.
The horse died on 3rd day. Held, the contract became void and the seller would bear the loss
(Elphick vs Barnes)
• X agrees to sell B, 2 tons of rice and 3 tons of wheat which are to be produced in his field. The
crop of rice destroys. X can sell wheat to B as it is divisible part of the contract. B is bound to
accept wheat

Rehan Waheed

The Sale of Goods Act, 1930

Destruction of Goods
6.3 Perishing of Future and Contingent Goods
• A contract of sale of future and contingent goods is an agreement to sell
• The destruction of future and contingent goods makes the contract void
Example
• C agreed to sell H, 20 tons of potatoes to be grown on C’s land. C sowed potatoes but a
disease attacked the crop and he could deliver only 15 tons. The contract was held to be void
(Howell vs Couplan)

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The Sale of Goods Act, 1930

Fixation of Price
7. Fixation of Price
• Price is an essential element in a contract of sale of goods
• A valid sale cannot take place without a price
• Price may be fixed by the following modes [Section 9]
7.1 Parties
7.2 Agreed Method
7.3 Course of Dealings
7.4 Reasonable Prices
7.5 Third Party

Rehan Waheed

The Sale of Goods Act, 1930

Fixation of Price
7.1 Parties
• It is the most common mode of fixing the price
• Generally, the parties fix the price and mention the price to be paid in a contract
Example
• X agrees to sell his car to B for Rs. 500,000. Here, the price is fixed by the parties in the
contract itself
7.2 Agreed Method
• Price may be determined as per the method agreed
• Parties may decide the method of determining price i.e. price prevailing on a particular date
Example
• X agrees to sell 200 shares of W Company to B at the market rate prevailing on the 20th day
after deal. It is a valid contract of sale
Rehan Waheed

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The Sale of Goods Act, 1930

Fixation of Price
7.3 Course of Dealings
• Sometimes, price is determined during the course of dealings between the parties
• Price may be determined in accordance with the custom or usage of trade
• This mode is applicable where parties trade between them on regular basis
Example
• X agrees to buy 100 shares of W Company from B. In general course of dealings, the price of
shares is the price prevailing on the date of contract i.e. the price prevailing in the stock
market on the date of sale

Rehan Waheed

The Sale of Goods Act, 1930

Fixation of Price
7.4 Reasonable Prices
• If price is not fixed by any of the above modes, the buyer is bound to pay to the seller a
reasonable price. The amount of reasonable price depends up on the circumstances of each
case
Example
• X orders B to supply 100 kgs of sugar without fixing the price. The price of sugar in the market
on the day of order will be considered as a reasonable price. B must supply sugar to X at that
rate
7.5 Third Party
• The parties may agree to sell the goods on the terms that price shall be fixed by a third party
Example
• X agrees to sell 10 bags of rice to B at a price to be fixed by C. The price fixed by C will be the
price of goods
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Questions
&
Discussions

Best of luck!

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