Sales of goods 01.

The Sale of Goods Ordinance No. 11 of 1896

THE SALE OF GOODS ORDINANCE NO. 11 OF 1896

• The Sale of Goods Ordinance No. 11 of 1896 is the statute which amends and codifies the law relating to
the “Sale of Goods” in Sri Lanka.

• It is based on the English Law. (Sale of Goods Act of 1893 drafted by Sir Mackenzie Chalmers)

• Unlike the English Act, this Sri Lankan Ordinance has not been amended since 1896 and still remains
static without any reforms.

FORMATION OF THE CONTRACT

• Section 2 (1)

A Contract of Sale “A Contract whereby the seller transfers or agrees to transfer the property in goods to the
buyer, for a money consideration called the price. ”

Section 2 (3)

When property of the good transferred from the seller to the buyer, such contract is called a “Sale” But,
when transfer of such property in the goods’ - is to take place at a future time

-Or some condition to be fulfilled later, the contract is called “Agreement to Sell”

(Also a present sale of future goods also operates as an “Agreement to Sell”-Section (6 (3))

Section 2 (4)

An agreement to sell becomes a sale when

-the time elapses

Or

-The conditions are fulfilled subject to which the property in the goods is to be transferred

The most important elements of “Sale of Goods” contract are;

1. Existence of two persons (Buyer and Seller)

2. Price-The Consideration

3. Goods-Subject matter of contract

4. Transfer of Property-Ownership

5. Contract with all essentials

The word “Contract” is an agreement enforceable at law. If any element of a valid contract is missing, then
the contract of sale will not be valid.
 1. Existence of two persons (Buyer and Seller)

Section 59 (1)

• Seller means a person sells or agrees to sell goods

• Buyer means a person who buys or agrees to buy foods (Two different parties. A man cannot purchase his
own goods)

2. Price-The Consideration Price

Sec 2(1)

specifies that transfer of goods to the buyer is for a monetary consideration called the price.

If goods are transferred without money, then those transactions are called gifts.

If goods are sold of exchanged for other goods then that transactions are called “barter” and not sale of
goods

Aldrige Vs. Jhonson 1857

When a new bike is purchased by returning the old bike and paying the difference in cash, that would also
be a sale. As a matter of fact, the requirement is that the goods must be sold for a definite sum of money and
it may be partly in cash and partly in valued up goods.

Section 9

The Price of a contract may be

• fixed by the contract or

• may be left to be fixed in a manner thereby agreed or

• be determined by the course of dealing between the parties.

(If the price is not determined, the buyer must pay a reasonable price-But, how this is going to be
determined is a question of fact depend on the circumstances of each case.)

Price may be fixed by the contract-

The parties may fix such price for the goods as they may please. The price may be expressly stated in
the contract

Price may be fixed in a manner agreed upon-

The contract of sale may provide for manner in which price is to be fixed. In such cases, the price
may be fixed in a manner provided in the contract.

The fixation of price by course of dealings-

When the price is not fixed, it can be determined in the course of dealings between the parties
(Market Price etc)

Fixation of reasonable price-

In the absence of the above modes, the buyer shall pay to the seller a reasonable price
Section 10-

Agreement to sell at valuation

Sec 10(1) and (2)

Where there is an agreement to sell goods on the terms that the price is to be fixed by the valuation of a third
party and such third party cannot or does not make such valuation, the agreement is avoided.” If such third
part cannot make the valuation, then the agreement/contract becomes void.

• If goods (or any part) have been delivered to and appropriated by the buyer, then he must pay a reasonable
price for that.

• However, sometimes the party is influenced/prevented by the buyer or seller from fixing the price. In such
instances, innocent party may recover damages from the defaulting party.

3. Goods-Subject matter of contract

According to Section 59 (1) goods include;

“All movables except money” (This terms includes growing crops and things attached to or forming part of
the land which are agreed to be served before sale or under the contract of sale.)

Sale of immovable property is governed under different statues .

Goods

Existing Goods Future Goods Contingent Goods

Specific Goods

ascertained Goods

Unascertained Goods

Section 6

-Exsisitng or Future Goods

Existing Goods
Goods owned or possessed by the seller.

Future Goods

Goods to be manufactured or acquired by the seller after making the contract of sale.

Contingent Goods Are also future goods.

It is also operates as an agreement to sell and not as a sale.

(Contract for sale of “Contingent Goods” is enforceable only if the event on the happening of which the
performance of the contract is dependent happens. Otherwise, the contract becomes void.)
 Existing Goods

Specific Goods Specific Goods-

Goods identified and agreed upon at the time a contract of sale is made

(Sec. 59 (1) )

Eg: Where there is a contract for specific goods, the seller would not fulfill his contract by delivering any
goods other than those agreed upon.

Ascertained Goods

• Not defined in the act.

• These are the goods which are ascertained subsequent to the formation of the contract

Unascertained Goods

• Not defined in the act.

• These goods are not specifically identified at the time of the contract of sale.

• Unascertained goods never become specific goods. It will only become ascertained

Future Goods

“Goods to be manufactured/produced or acquired by the seller after the making of the contract of sale.(Sec.
59(1))”

These goods are not in existence at the time of contract of sale. § When an individual purports to make a
present sale of future goods, the contract operates as an agreement to sell and not as a sale

Future goods are;

• Not in existence

• Not in the possession of the seller

……….at the time of the contract of sale