Sale Of Goods Act 1930

Essentials Of A Contract Of Sale Of Goods

“A contract of sale of goods is a contract whereby the seller transfersor agrees to transfer the property in goods to the
buyer for a price.” [Sec. (4) 1].

Important features of a contract of sale

1. Two Parties:
2. Mutual Consent: Just the presence of two parties is not sufficient. The parties must agree on the transfer of
property.
3. Transfer of Property: What a contract of sale stipulates is thetransfer of property i.e. The ownership of the
goods and not thepossession of the goods.
4. Goods: Goods means every kind of movable property other thanactionable claims and money. But it includes
stock and shares, growing crops, grass and things attached to or forming part ofthe land which are agreed to be
severed before sale or underthe contract of sale. [Sec. 2(7)]. Since the price of the goods isexpressed in terms of
the money, money itself cannot be bought, and hence, money is not considered as goods.
5. Price: Under a contract of sale, property in the goods is transferredto the buyer for a price. Price is the money
consideration for thegoods.
6. Varied requirement as to delivery and payment:The contractmay provide for the immediate delivery of goods or
immediatepayment of the price or both.
7. Requires no formalities:
Distinction Between ‘Sale’ And ‘Agreement To Sell’

1. Ownership is transferred to buyer.

Ownership does not pass to the buyer. It remains with the seller.
2. It is an executed contract.
It is an executory contract.
3. It creates rights in rem.
It creates rights in personam.
4. The seller can sue the buyer for the price through the goods or in his possession.
The seller can sue for damages if the buyer refuses to take delivery and pay the price.
5. If the seller re-sells the goods,buyer can claim damages for convention and exercise right of recovery of goods
from the third party, who was aware about the prior sale.
In case of re-sale, the buyer canthe claim damages only
6. If the goods are destroyed by accident, buyer has to bear the loss even if the goods were in possession of the
seller.
Seller has to bear the loss of damages to goods, even if the goods are in possession of buyer.
7. If the buyer becomes insolvent, seller, in the absence of a lien, must deliver the goods to the official receiver and
recover the payment from the official receiver as ratable dividend for the price due.
If the buyer becomes insolvent before payment of price, Seller may refuse to deliver the goods unless paid for
since the ownership rest with the seller.
8. If the seller becomes insolvent, the buyer can recover the goods from the official receiver of seller since the
ownership has passed to him.
In such a case, the buyer who has paid the price, can only get ratable dividend from official receiver of seller.
Kinds Of Goods

The goods are classified by sec 6, as follows:

1. Existing goods
2. Future goods
3. Contingent goods
1. Existing goods: Existing goods are those which are owned or possessed by the seller at the time of the contract
of sale. Existing goods may be further classified into,
a. Specific goods: These are goods which are identified and agreedupon at the time of a contract of sale is
made. For example, aspecified watch or scooter.
b. Ascertained goods: These are the goods which become ascertained subsequent to the formation of a
contract of sale.
c. Unascertained goods: These are the goods which are notidentified and agreed upon at the time of the
contract of sale. They are defined only by description and may form part of alot.
2. Future Goods: Future goods means goods to be manufactured orproduced or acquired by the seller after the
making of the contractof sale.” [Sec.2(6)], Example: A agrees to sell to B the entire cropof Onion, that his land
would yield, at Rs.10,000 per ton. This is acontract for the sale of future goods because goods are still to be
produced.
3. Contingent goods: Contingent goods are those the acquisitionof which by the seller depends upon a contingency
which may ormay not happen [Sec. 6(2)]. Example: A agrees to sell the cow to B if A inherits C’s property
including the cow. C donates theentire property to a trust. The contract becomes void.
Perishing Of Goods

After a contract of sale is made the subject matter of the contractmay be destroyed or it may be found that the subject
matter had alreadybeen destroyed before the date of making the contract, the effect of the twocases would be
different.

1. Goods perishing before the contract of sale (Sec.7) provides,

“where there is a contract for the sale of specific goods, thecontract is void, if the goods without the knowledge of the
sellerhave, at the time when the contract was made, perished or becomeso damaged as no longer to answer to their
description in thecontract.”

2. Goods perishing after the contract of sale is made

a. Perishing before sale but after an agreement to sell: “unlessotherwise agreed, the goods remain at the seller’s risk,
untilthe property therein is transferred to the buyer…”

b. Goods perishing after sale: In sale, goods are destroyedafter sale. The loss arising from the destruction or damageof
the goods would be borne by the buyer.(Sec.26)
The Price

A.Meaning: “Price means the money consideration for a sale ofgoods” [Sec.2(10)].

How to fix the price?

1. By the contract: The price is a contract of sale may be fixedby the contract between the parties (Sec69).
2. In an agreement: The price may be left to be fixed in mannerthereby agreed (sec.9). Whatever manner of fixing
the pricehas been agreed upon by the parties to the contract, thatwould be recognized by law.
3. Valuation by third party: The price may be left to be fixedby a third party.
4. By the course of dealings: Where the price is neitherexpressed in the contract nor any manner of fixing the
priceis agreed, the price would be determined by the course ofdealings between the parties.
5. Reasonable price: What is a reasonable price is question offact depending on the circumstances of each case.
Generallythe market price on the date of supply is taken to be areasonable price.
Earnest or deposit: The money so paid is called earnest or deposit. If buyers commit a breach of the contract and
seller files a suit fordamages, the amount of damages shall be reduced by the amountof earnest money
forfeited.
Taxes imposed after the contract of sale[sec.64 (A)]: Any tax, isimposed or increased after making of the
contract of sale of suchgoods, then the seller can recover the same from the buyer.
Payment of price a concurrent condition with that of delivery(sec.32): The seller shall be ready, and willing to
give possessionof the goods to the buyer in exchange for the price, and thebuyer shall be ready and willing to
pay the price in exchange forpossession of the goods.”
Time As Essence Of Contract

A contract of sale of goods may stipulate the time for the paymentof the price and also the time for delivery of goods.

1. Regarding payment: “unless a different intention appears fromthe terms of the contract, stipulations as to time
of payment arenot deemed to be the essence of a contract of sale.”
2. Regarding delivery: as regards stipulation relating to the time ofdelivery of goods. (Sec.11).