(i) Definition

(ii) Applicability
(iii) Essentials of a Contract of Sale
 Definition
It is a contract by which the ownership of movable
goods is transferred from the seller to the buyer.
The term ‘contract of sale’ is defined in Section 4(1)
of the Sale of Goods Act as-
“A contract of sale of goods is a contract
whereby the seller transfers or agrees to
transfer the property in goods to the buyer for a
price”

The Sale of Goods Act extends to whole of

Bangladesh.
Essentials of a Contract of Sale
(i) All requirements of a valid contract must be
fulfilled
(ii) Two Parties –
(iii) Goods
(iv) Transfer of Property
(v) Price
(vi) Includes both a ‘sale’ and ‘agreement to sale’
(vii) No formalities are required
Price

Exchange, sale

Mode of determining of price [ section 9(1)]

Fixed by contract
By third parties
 Sale & Agreement to sell
Sale:
 It is a contract where the ownership in the
goods is transferred by seller to the buyer
immediately at the conclusion contract. Thus,
strictly speaking, sale takes place when there
is a transfer of property in goods from the
seller to the buyer. A sale is an executed
contract.
 It must be noted here that the payment of
price is immaterial to the transfer of property
in goods.
Ex -
 A sells his Yamaha Motor Bicycle to B for Rs.
10,000. It is a sale since the ownership of the
motorcycle has been transferred from A to B.
 It is a contract of sale where the transfer of
property in goods is to take place at a future
date or subject to some condition thereafter
to be fulfilled.
Ex-
 A agreed to buy from B a certain quantity of
nitrate of soda. The ship carrying the nitrate
of soda was yet to arrive. This is `an
agreement to sale`. In this case, the
ownership of nitrate of soda is to be to
transferred to A on the arrival of the ship
containing the specified goods (i.e. nitrate of
soda) [Johnson V Mcdonald (1842) 9 M & W
600, 60 RR 838]
 On 1st March 1998, A agreed to sell his car to B
for Rs. 80,000. It was agreed between
themselves that the ownership of the car will
transfer to B on 31st March 1998 when the car
is got registered in B`s name. It is an
agreement to sell and it will become sale on
31st March when the car is registered in the
name of B.
 Other points of distinction between a sale and
an agreement to sell are:
 Sale
1. A sale is an executed contract.
2. In a sale, since the property has passed to
the buyer, the seller can sue the buyer for
the price of the goods.
3. A sale creates a right in rem.
4. In case of loss of goods, the loss will fall
on the buyer, even though the goods are in
the pos­session of the seller. It is because
'Risk' is as­sociated with ownership.
4. In case buyer pays the price and the seller
thereafter becomes an insolvent, the buyer
can claim the goods from the Official
Receiver or Assignee.
6. If the buyer becomes an insolvent without
paying the price, the ownership having
passed to the buyer, the seller shall have to
deliver the goods to the Official Assignee or
Receiver ex­cept where he has a lien over
the goods.
­ greement to sell
A
1. An Agreement to sell is an executory
contract.
2. In an agreement to sell, in case of
breach, the seller can only sue for
damages, unless the price was payable
at a stated date.
3. An agreement to sell creates a right in
personam.
4. The loss in this case shall be borne by
the seller, even though the goods are in
the pos­session of the buyer.
5. In these circumstances, the buyer cannot
claim the goods but only a rateable
dividend for the money paid.
6. In these circumstances, the seller can
refuse to deliver the goods to the Official
Assignee or Re­ceiver.
DEFINITION OF TERM:

A term is a factual statement provided by a party of

the contract which may be express or implied. A
contractual term is "Any provision forming part of a
contract” (Martin, E [ed] & Law, J [ed], Oxford
Dictionary of Law, ed6 (2006, London: OUP). Each term
gives rise to a contractual obligation, breach of which
can give rise to litigation (Wikipedia).
HOW TO DIFFERENTIATE TERMS FROM OTHER STATEMENTS:

Any statement of fact by any party does not become a term of the
contract. Only those statements which the parties intended to be a term
are treated as terms (Heilbut, Symons & Co v Buckleton [1913] AC 30).
Those statements are terms, the truth of which is guaranteed by the
person who made the statement therefore giving rise to a contractual
obligation (Wikipedia). For the purposes of Breach of Contract, a term
may further be categorized as a condition, warranty or innominate
term.
 Types of Terms
Terms can be classified into two types

EXPRESS: Terms those can be found in the contract itself.

IMPLIED: Terms which cannot be found in the contract.
 
According to the importance of the terms, there are 3 types of Terms
Condition: The most important terms are called as conditions. For the breach of
Conditions, innocent party may remain in the contract with damage for breach or he may
avoid the contract. “The word 'condition' also has another meaning. It may mean a
stipulation that a contract should not be enforceable except on the happening of a given
event, or should be brought to an end on the happening of a given event. The condition is
then properly called a 'condition precedent', or a 'condition subsequent' respectively”.

Warranty: Less important terms than Condition. For the breach, the party cannot avoid
contract but can claim damages.

Intermediate terms: If the impact of breach is big, the breach will be treated like breach
of condition but otherwise the breach will be treated as warranty.
CASE STUDIES:
Poussard v Spiers (1876) 1 QBD 410
Poussard was engaged to appear in an
operetta from the start of its London run for
three months. The plaintiff fell ill and the
producers were forced to engage a substitute.
A week later Poussard recovered and offered
to take her place, but the defendants refused
to take her back.
The court held that the defendant's refusal
was justified and that they were not liable in
damages. What chiefly influenced the court
was that Poussard's illness was a serious one
of uncertain duration and the defendants
could not put off the opening night until she
recovered. The obligation to perform from
the first night was a condition of the
contract. Failure to carry out this term
entitled the producers to repudiate
Poussard's contract. The court treated it as
breach of condition.
 
Bettini v Gye (1876) 1 QBD 183
Bettini, an opera singer, was engaged by
Gye to appear in a season of concerts. He
undertook to be in London at least six days
before the first concert for the purpose of
rehearsals. He arrived three days late
because of a temporary illness. He gave no
advance notice and Gye refused to accept
his services.
It was held that the plaintiff had been
engaged to perform for a 15-week season
and the failure to attend rehearsals could
only affect a small part of this period. The
promise to appear for rehearsals was a less
important term of the contract. The
defendant could claim compensation for a
breach of warranty but he could not
repudiate Bettini's contract.
Stipulation, Condition & Warranty
A representation which forms part of the contract of
sale and affects the contract, is called a stipulation.

A stipulation which is most important for

formation of the contract of sale is known as a
‘condition’.

A stipulation which is collateral or of least

importance for the formation of the contract of sale,
is known as a ‘warranty’.
Conditions
Section 12(2) of the Sale of Goods Act, 1930 defines
condition as, “a condition is a stipulation essential
to the main purpose of the contract, the breach of
which gives rise to right to treat the contract as
repudiated.”

Example: Buyer wanted a horse which could run at a

speed of 45 m.p.h.
Implied Conditions

(i) Condition as to Title [Sec 14(a)]

(ii) Condition as to Description [Sec 15]
(iii) Condition as to Sample [Sec 17(2)]
(iv) Condition as to Sample as well as Description
[Sec 15]
(v) Condition as to Quality or Fitness for Buyer’s
purpose [Section 16(1)]
(vi) Condition as to Merchantability
[Section 16(2)]
(vii)Condition as to Wholesomeness
Condition as to Title [Sec 14(a)]
It is the most important implied condition in a
contract of sale that seller has the right to sell the
goods.
Condition as to Description [Sec 15]

Whenever the goods are sold by description, the

implied condition is that the goods shall correspond
with the description.
Condition as to Sample
In a sale by sample there is a implied condition
that the goods shall correspond with the sample in
quality, and the goods shall be free from the
defects which render them unmerchantable.
Sale by sample has following three conditions:
(i) Correspondence of Goods with sample in
quality [sec 17(2)(a)]
(ii) Reasonable opportunity of comparing goods
with the sample [Sec 17(2)(b)]
(iii) Merchantability of Goods [Sec 17(2)(c)]
Condition as to Sample as well as Description
[Sec 15]
Sometimes, the seller shows sample to the buyer and
also gives him description. In such case, the implied
condition is that the goods shall correspond with
both, the sample as well description.
Condition as to Merchantability
[Section 16(2)]

The term merchantability means two things:

(i) If goods are purchased for resale, they should be
immediately re-saleable; &
(ii) If goods are purchased for self use then they should
be reasonably fit for the purpose for which they
are generally used.
.
 DISTINCTION BETWEEN 'CONDITION' AND 'WARRANTY'

Condition Warranty
1. A condition is a stipulation (in 1. A warranty is a stipulation,
a contract), which is essential which is only collateral or
to the main purpose of the subsidiary to the main
contract. purpose of the contract.
2. A breach of condition gives 2. A breach of warranty gives
the aggrieved party a right to only the right to sue for
sue for damages as well as damages. The contract
the right to repudiate the cannot be repudiated.
contract.
3. A breach of condition may be 3. A breach of warranty cannot
treated as a breach of be treated as a breach of
warranty in certain condition.
circumstances.
Condition & Warranties
In case of breach of In case of breach of
condition, the buyer warranty, the buyer cannot
may put an end to the put an end to the contract.
contract. He can only claim
damages from the seller.
A breach of condition A breach of warranty
may be treated as a cannot be treated as a
breach of warranty. breach of condition.
Doctrine of Caveat Emptor
[Sec 16]
The doctrine of caveat emptor is a fundamental
principle of law of sale of goods. It means ‘Caution
Buyer’ i.e. ‘let the buyer beware’. In other words, it is
no part of the seller’s duty to point out defects in his
own goods. The buyer must inspect the goods to find
out if they will suit his purpose e.g. certain pigs are
sold ‘subject to all faults’. These pigs being infected
cause typhoid to the other healthy pigs of the buyer.
The rule of caveat emptor would apply.