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What do you understand by Contract of sales of goods? Ans. A contract

of Sales of Goods is a contract whereby transfer or agreement to transfer the
goods takes place from the seller to the buyer in lieu of price. Section 4(1).
4(2): It may be absolute or subject to some conditions.
4(3): A contract for sale of go ods is either Sale or Agreement to Sell. Sale is
an immediate transfer of property from seller to the buyer, while in agreement
to sell parties are just agreed to sell goods in future time.
4(4): Agreement to sell becomes Sale when time elapses of conditio n for
transfer of property is fulfilled.

How a contract of sales of goods is made?

Section 5(1): A contract of sale of goods is made by an offer to buy or sell
the goods for a price and such offer is accepted. The Contract may provide
for immediate delivery of goods or immediate payment or both at the same
time, or both or one of them in installments, or both or one of them in future
time.
A contract of sale of goods may be made in writing or by the word of
mouth, or partly in writing and partly by the wo rd of mouth, or may be implied
from the conduct of the parties.

What are the essentials of contract of sale?

Following are the essentials of contract of sale of goods:
1) Two Parties: There must be two parties, one as a seller (who sells the
goods) and second as a buyer (who buys the goods).
2) Mutual Consent: Just presence of two parties is not sufficient, the
parties must agree on the transfer of property.
3) Goods: The subject matter must be goods as defined in section 2(7).
4) Price: The consideration for goods must be some price. In other words,
goods must be delivered against the price.
5) Transfer of Property: The property in goods must be transferred from
seller to the buyer. The transfer of property is immediate in Sale, while
in agreement to sell it takes place in future.
6) Absolute or Conditional: A contract of Sales of Goods may be
absolute or subject to some conditions as defined in section 4(2).
Generally, Sale is absolute, while agreement to sale subject to some
conditions.
7) Transfer of ownership: Alongwith delivery or transfer of possession,
ownership of goods from seller to the buyer must take place.
8) And other elements of valid contract.

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Define Section 6, Existing or Future Goods.
Section 6 (1) of this act explains that, the goods forming the subject of a
contract of sale of goods may either be existing goods, which are owned or in
possessed by the seller, or may be future goods, which are to be manufacture
after the contract of sal e of goods is made.
Section 6(2) explains that, there may be a contract of sales of goods the
acquiring of which by the seller depends upon a contingency, which may or
may not happen.
Explanation: A ship carrying cargo is to reach on 1 s t January, A the owner of
goods agrees to sell specified goods to be if the ship reaches safe, hence
there is a contingency of acquiring goods by the seller, which may or may not
happen.
Section 6(3) explains that, where the seller effect a present sale of
future goods, the contract shall be deemed as agreement to sell, as it cannot
be called Sale because the subject matter of contract is future goods.
Explanation: A contract with B, to deliver him specified goods on 1 s t January.
At the time of formation of contract goods a re not in the possession of A but it
will be acquired or manufactured by A in future, this is a contract of sale of
future goods hence it is called agreement to sell instead of sale.
What if goods perish before making of contract?
Section 7 explains that, if there is a contract of sale of specific goods, the
contract is void of the goods without the knowledge of seller have perished or
damaged at or before the time when the contract was made, as no longer to
answer their description in the contract.
Illustration: A agrees to sell specified goods to B, to be carried by ship
which on its way, the ship had been cast away and the goods lost. Neither
party was aware of the facts. The contract is void.
It is only void if goods were specified, if incase goo ds were
unascertained the contract is void and the seller shall have to procure the
goods or pay damages for the breach.
Illustration: A agrees to deliver 50 bales of cotton to B out of 100 bales of
cotton stored in a godown. The godown has been destroyed by fire at the
time of contract being unknown to A. Here the sale is not of specified goods
but an unascertained quantity of goods. The contract is void, and A shall
procure the goods elsewhere, or pay damages for breach.
What if the goods are perished before Sale and after Agreement of Sale?
Section 8 explains that, if there is an agreement to sell specific goods, and
thereafter the goods without any fault of seller or buyer perish or become so

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damaged, as no longer to answer to their description in the agreement,
before the risk passes to the buyer, the agreement is thereby avoided.
If the sale is of a certain quantity of unascertained good, the perishing
of the whole quantity of such goods in the possession of the seller will not
relieve him of his obligation to relieve him.
Define ascertainment of price in a contract of sale of goods?
Section 9 explains that, the price in a contract of sale of goods may be fixed
by the contract, or maybe left to be fixed in manner thereby agreed or may be
determined by the course of dealing between the parties.
If the price is not fixed from the above provisions, the buyer shall pay a
reasonable price to the seller. W hat is a reasonable price is a question of fact
dependent on the circumstances of each particular case.
Explain agreement to sell at valuation.
Section 10 explains that, if there is an agreement to sell goods on the terms
that the price is to be fixed by the valuation of the third party, and if such
party does not or cannot make such valuation, the agreement is thereby
avoided.
Explanation: If the goods or part thereof were already delivered to the buyer,
and appropriated by the buyer, he shall pay a reasonable price to the seller.
Illustration: A agrees to sell goods to B at a price to be fixed by C. the
agreement is thereby avoided.
Section 9 (2) explains that, where such a third party is prevented from
making valuation by the fault of the seller or buyer, the party not in fault may
maintain a suit for damages against the party not in fault.
Illustration: If C refuses to value the goods and fix the price, the agreement
is thereby avoided. But if C is willing to value the goods, but cannot value the
goods due to default or mistake of either party, the party in default shall pay
damages to the other party.
Explain stipulation as to time.
Section 11 explains that, unless a different intention appears from the terms
of the contract, stipulation as to time of payment are not deemed to be the
essence of the contract of sale of goods. W hether any other stipulation as to
time is of the essence of the contract or not depends on the terms of the
contract.
In contract of sales of goods time is regards essential except time of
payment. Therefore, if the time is specified for the delivery of goods or for
doing any other act, delivery must be made or the act done at the specified
time.

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Illustration: A agrees to deliver goods to B on a certain day, he must deliver
them on that day. If A fails to do so, B is entitled to put an end to the
contract.
Define Condition & Warranty.
Stipulations in a contract of sales of goods is either a condition or a
warranty.
Condition 12(2) : Certain terms, obligations, and provisions are imposed by
the buyer and seller while entering into a contract of sale, which needs to be
satisfied are known as condition.
In other words, a condition is a stipulation essential to the main purpose
of the contract, its breach gives right to treat the contract as repudiated.
WARRANTY 12(3): A warranty is a guarantee given by the seller to the buyer
about the quality, fitness and performance of the product.
In other words, a warranty is a stipulation collater al to the main purpose
of the contract, its breach gives right to claim damages but not a right to
reject the goods and treat the contract as repudiated.
When condition to be treated as warranty?
Section 13(1) explains that, where a contract of sale is s ubject to any
condition to be fulfilled by the seller, the buyer may waive the condition or
elect to treat the breach of condition as a breach of warranty and not as a
ground for treating the contract as repudiated.
Explanation: In case of breach of condition by the seller, the buyer may
waive the condition and stick to the bargain in spite of such breach, or he
may treat the breach of condition as a breach of warranty and stick to the
bargain with a right to claim damages to cla im damages for breach of
warranty.
Section 13(2) explains that, where a contract of sale is not severable
and the buyer has accepted the goods or part thereof, the breach of any
condition to be fulfilled by the seller can only be treated as breach of
warranty and not as a ground for rejecting the goods and treating the contract
as repudiated, unless there is a term of the contract, express or implied, to
that effect.
Explanation: If the buyer has accepted the goods or part thereof inspite of
breach of a condition to be fulfilled by the seller, the buyer will preclude
himself from repudiating the contract and he can only treat the breach of
condition as a breach of warranty.
Section 13(3) explains that, any condition or warranty fulfillment of
which is excused by law by reason of impossibility or otherwise, is not
included in this section.
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Define implied conditions. What are they?
Implied Conditions: Those conditions which are not included in the contract
or expressed by the parties, but the law presumes their existence in the
contract are called implied conditions, i.e. Condition as to title 14(1), Sale by
sample 17, Sale by description 15-Sale by sample and description 15,
Condition as to quality or fitness 16(1), Condition as to merchantability 1 6(2).
1. Condition as to title: Section 14(a) explains that, there is an implied
condition on the part of the seller that in the case of a sale, he has a
right to sale the goods and that, in case of agreement to sell, he will
have the right to sell the goods at the time when the property is to pass.
2. Sale by Description: Section 15 explains that, if there is a contract of
sale of goods by description, there is an implied condition that the
goods shall correspond with the description.
3. Sale by Sample and Description: Section 15 explains that, if there is a
contract of sale of goods by sample as well as description, it is not
sufficient that the bulk of the goods corresponds with the sample if the
goods do not also correspond with the description. In other words, the
bulk of the goods shall correspond with sample and description, both.
4. Sale by Sample: Section 17 explains that, in case of a contract of sale
of goods by sample there is an implied condition:
a. the bulk shall correspond with the sample in quality,
b. that the buyer shall have the reasonable opportunity of comparing
the bulk with the sample,
c. that the goods shall be free from any defect, render ing them
unmerchantable, which would not be apparent on the reasonable
examination of the sample.
5. Condition as to Quality or Fitness: Section 16(1) explains that, in a
contract of sale of goods, where the buyer, expressly or by implication,
a. makes known to the seller the particular purpose for which the
goods are required
b. and the buyer relies on the seller’s skill or judgme nt,
c. and the goods are of the description dealt in by the seller,
there is an implied condition that the goods shall be reasonable fit for
such purpose.
Exception: If there is a contract of sale of a specified article under its
patent or other trade name, there is no implied condition as to its fitness
for any particular purpose.
6. Condition as to Merchantability: Section 16(2) explains that, if the
goods are bought by description f rom the seller who deals in the goods
of that description (whether he is manufacturer, or producer, or not)

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there is an implied condition that the goods shall be of a merchantable
quality.
Exception: If the buyer has examined the goods which ought to have
revealed the defects, there shall be no such implied condition.
Define implied warranties. What are they?
Implied Warranties: Those warranties which are not included in the contract
or expressed by the parties, but the law presumes their existence in the
contract are called implied conditions, i.e. Quiet possession of the goods
14(2), Freedom from any charge or encumbrances 14(3 ), Disclose dangerous
nature of goods 16-A.
1. Quiet possession of the Goods: Section 14(2) explains that, in a
contract of sale of goods where the goods have been delivered to the
buyer, in such a case, there is an implied warranty that the buyer shall
have and enjoy quiet possession of the goods.
2. Freedom from any charge or encumbrances: Section 14(3) explains
that, the goods making the subject matter of the contract of sale of
goods shall be free from any charge or encumbrance in favour of any
third party, not declared or known to the buyer before or at the time
when the contract is made.
3. Disclosure of dangerous nature of goods: Section 16-A explains that,
the seller would be under obligation to inform the buyer of any defect in
the goods sold at the time of the contract, except in a case where the
defect is obviously known to the buyer.
What is Caveat Emptor?
It is a latin term which means “let the buyer beware”. It explains that the
buyer should physically examine the goods in order to determine the defects
which ought to have been revealed by physical examination. If the buyer has
selected a wrong thing, the seller is not bound to disclose defects in goods
which could be revealed by physical examination. The buyer must purchase
the goods with sound mind, open eyes and not to take things casually. Many
times its buyer’s mistake that he selects the wrong thing, in such the seller is
given relief by law.
For Example: The buyer wanted to buy a bathing soap, but he purchases a
soap used for washing utensil s, it was not the mistake of the seller but the
buyer and the seller is not bound to such selection of buyer but the buyer is
liable for his wrong selection.
Exception: There are some exception to Caveat Emptor, which again put the
responsibility upon the shoulder of the seller, these are: -
a. Buyer relies of seller’s judgment,

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b. Sale by Sample,
c. Sale by Description,
d. Sale by Sample and Description,
e. Quality or fitness of goods,
Explain passing risk to the buyer.
Passing of risk means passing of liability of loss and damage of goods from
seller to the buyer, irrespective of the fact that the title or possession of
goods has yet passed or not. Parties to a contract of sale of goods can agree
upon different points of time for transfer of property and risk. Risk may pass
to the buyer at any time or at the time of execution of contract but the
possession in actual sense may never come with the buyer, if according to
the contract the goods are transshipped to another des tination.
W hen the risk has been passed to the buyer, he shall suffer any lose or
damage thereby caused to the goods.
How a price in a contract of sale of goods is ascertained?
Price in a contract of sale of goods: -
a. may be fixed by the contract itself,
b. maybe left to be fixed in an agreed manner,
c. may be determined from the course of dealing between the parties.
d. May be fixed by the valuation of the third party if so agreed.
If price is not determined from the above, a reasonable price has to be paid.
In how many ways a condition is waived?
A condition may be waived in the following cases: -
a. W here the buyer waives the condition expressly,
b. W here buyer elects to treat its breach as breach of warranty,
c. W here the contract is not severable and the buyer has acc epted the
goods or part thereof.
Define actual and constructive delivery.
In a contract of sales of goods, the delivery may be actual or constructive. It
is actual when the goods themselves are delivered to the buyer or a key of a
warehouse containing the goods is handed over to him. It is constructive
when before sale the goods are in possession of a warehouseman or any
other person as a bailee for the seller, and after sale he agrees to hold them
as bailee for the buyer.
Define actionable claim.
An actionable claim is a claim of debts, other than a debt secured by
mortgage or by any other manner. It means a claim which can be enforced

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through the court of law, e.g. debt due from one person to another is an
actionable claim.
What are the rules governing Sale by Auction (sec:64)?
1. If the goods are put up for sale in lots, each lot is prima facie deemed to
be a subject of a separate contract of sale.
2. W hen the auctioneer announces its completion by the fall of the hammer
or in some other customary m anner, the sale is considered complete.
Until such an announcement, any bidder may revoke his bid.
3. In an Auction sale, a right to sell may be reserved expressly by the
seller. In such a case, the seller or any one person on his behalf may
bid at the auction.
4. W here a sale is not notified to be subject to a right to bid on behalf of
the seller, it shall not be lawful for the seller to bid himself or to employ
any person to bid on his behalf, or for the auctioneer knowingly to take
any bid from the seller or a ny such person. Any sale contravening this
rule may be treated as fraudulent by the buyer.
5. The sale may be notified to be subject to a ‘reserve‘ or ‘upset‘ price. It
is a price below which the auctioneer will not sell in the Auction.
In an Auction sale, if the seller makes use of pretended bidding to raise the
price, the sale is voidable at the option of the buyer (he may avoid it).

DIFFERENCES

Specific Goods Ascertained Goods

1. Goods identified or individualized Goods identified or individualized
before or at the time of making after the formation of contract of
contract of sales of goods. sales of goods.
2. Goods are simply identified. Goods are identified or marked from
a bulk.
3. The Buy may or may not have The buyer has definitely seen the
seen the goods. goods.
4. Ali agrees to buy a car of specific Ali goes to showroom and selects a
model. car out of 20 cars.

Sale Agreement to sell

1. It is an executed contract. It is an executor contract.
2. Transfer of goods against some Transfer of goods against some price
price takes place immediately. is to take place at future time.

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3. It is absolute. It may subject to some condition(s).
4. Goods may be ascertained or Goods are unascertained.
specific.
4. The buyer bears the losses as The seller bears the losses as the risk
risk is passed to him by the is not yet transferred to the buyer.
seller.
5. The buyer has right to sell. The seller has the right to sell.
6. In case of non-payment, the The seller has the right to sue for
seller has right to sue against damages only.
buyer for recovery of price of
goods.
7. In case of breach by seller, the In case of breach by seller, the buyer
buyer can claim damages from can claim damages only.
seller and property from the
third party to whom the goods
are sold.

Condition Warranty
1. It is essential to the main purpose It is collateral to the main purpose
of contract of sale of goods. of the contract of sales of goods.
2. Contract in not fulfilled unless The main purpose of contract can
condition is not fulfilled. be fulfilled even the warranty is not
fulfilled.
3. Breach of condition gives right to Breach of warranty gives right to
the aggrieved party to repudiate aggrieved party to claim damages.
the contract as well as to claim
damages.

4. Breach of condition can be treated Breach of warranty cannot be

as breach of warranty. treated as breach of condition.

Sale by Sample Sale by Description

1. Goods are seen and examined. Goods are just described.
2. The bulk must correspond with The goods must correspond with the
sample. description.
3. The buyer has right to compare The buyer buys the goods on the basis
the sample with the bulk. of description given by seller.

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