Legal Environment for Business in Nepal

1 January 2017

Saroj Shrestha 1
 “Sale of Goods” refers to ‘transfer of ownership
of goods” against a price from seller to the
buyer.
The business of selling and buying of ‘movable
goods’ is regulated by the Contract of Sale of
goods. It does not deal with ‘mortgage’ and
‘pledge’ of immovable properties and all the
movable properties (actionable claim and
money).
The Contract of Sale of goods is provided in
Chapter 7 of Contract Act, 2056 which is
influenced by the Indian Contract Act, 1930 and
English Sale of Goods Act, 1893
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Sec. 40 of Contract Act, 2056 states “A contract of
Sales of goods shall be deemed to have been
concluded, in case a seller agrees to handover
may goods to the buyer immediately of in future
by receiving the price of that goods.” The
section further explain that, the term ‘goods’
refers to any types of movable properties which
can be sold and bought.
The contract of Sale of goods may be either
conditional or unconditional and the contract
may be concluded with the provision to sale
goods owned or possessed by the Seller or those
to be produced or acquired by him in future.

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The Indian Sale of Goods Act, 1930 defines it as
‘A contract whereby the seller transfers or
agrees to transfer the property in goods to the
buyer for price.’
Contract of Sale of Goods
1. Sale: A sale is an executed contract. ‘Sale’
means ‘a transfer of property in goods (the
ownership) from the setter to the buyers.
2. Agreement to sell: Agreement to sell is an
executor contract. It is a contract of sale, under
which the transfer of property is to take place in
the future or is subject to some condition to be
fulfilled.
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It is only an agreement to transfer the goods
later, not an actual transfer of goods.

In this regard, the SC has established a principle

that ‘the agreement concluded with the
condition that ‘the land and building will be sold
according to the deed after certain time’, and
the deed itself is not a contract of sale (sale
deed), it is an agreement to sale’. (Titha Kumari
Rana Vs. Ram Shanker Shrestha NLJ 2049 pg. 1)

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Differs in Sale Agreement to Sale
1. Nature of Contract This is current selling This is the agreement
contract (executed) to sell the goods in
future (executory)
2. Transfer of Ownership of the goods Ownership of the goods
ownership is transferred at the will be transferred in
time of contract future in certain
circumstances.
3. Transfer of risk When goods are sold Ownership lies with the
the risk of the goods seller, risk remains on
shifts with ownership to the seller not to the
buyer buyer.
4. Right against each The seller may file a The buyer may file a
other suit against the buyer suit against the seller
for price for indemnity.
5. Right of seller to re- After payment the The seller can sell the
sale goods in possession of same goods again to
the seller can not be another buyer.
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6. In case of The buyer has a right The buyer has a right
insolvency of seller to acquire the goods to refund the price
7. In case of In case of insolvency An unpaid seller may
insolvency of buyer of buyer, the seller can have the goods, In
have the price only case of insolvency of
buyer
8. Responsibility of The buyer will be The Seller will be
loss responsible for the responsible in case of
loss of the goods after loss of the goods
the sale
9. Types of goods The Seller can sell The seller can sell
specific and existing future, contingent and
goods unascertained goods.

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1. Goods/ Movable property:
2. Price
3. Two Parties
4. Transfer of ownership
5. Terms of a contractz
6. Essential of valid contract
7. Includes ‘sale’ and ‘agreement to sale’

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Contractual terms are the provisions forming
part of the contract. There are contained
various types of terms and stipulations
regarding the quality, quantity, price, goods,
modes of its payment, time, place of delivery
of goods etc. But all of them are not equal
importance. Some of the terms and
stipulations are major terms, called
‘conditions’ and some of them may be minor
terms, called ‘warranties’.

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1. Conditions: The conditions are the factors or
stipulations of the contract of sale, which are
essential for the main purpose of the contract. In
case of breach of the conditions, the aggrieved
party has the right to repudiate the contract.
2. Warranties: Warranty is the stipulation which is
collateral or auxiliary or a relating factor for the
main purpose of the contract. But it is not such a
vital factor as a condition is. In case of the breach
of warranty, the aggrieved party can only claim
damage and can not be treated as a repudiated
contract.

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If you have any questions or concerns, please discuss ..

Thank you !

Saroj Shrestha 11