Contract of sale of goods

• Sale of Goods Act

A contract to transfer the ownership of goods
from the seller to the buyer against a certain
price
 Essentials of a Contract of Sale
• Contract
• Two Parties (Buyer and Seller)
• Transfer of Property
• Goods or Subject Matter
• Price
• Sale and agreement to sale
• Other Formalities
 Contract
• An agreement enforceable by law. All the essential s
of a valid contract like capacity of parties, free
consent, legality of object etc. should also be present
in a contract of sale.
 Two Parties (Buyer and Seller)
• There should be two parties i.e. Buyer and
Seller.
• A sells his computer to B for Rs 40,000. A is a
seller and B is a buyer.
 Transfer of Property
• Here, property means the ownership of goods. A mere
transfer of possession of the goods cannot be termed as sale.
In contract of sale, a seller transfer or agree to transfer the
property in the goods to the buyer.

• A sells his car to B for Rs 4 Lac. The ownership and possession

of the car transfer from Ato B.
 Goods or Subject Matter
• Every kind of movable property other than auctionable
claims. It includes: Electricity, water, gas, shares, crops, trees,
fruits etc.
 Price
• The consideration in a contract of sale is the
price. When goods are sold or exchanged for
other goods, the transaction is barter and not
a contract of sale. If goods are sold partly for
money and party for goods, the contract is
sale.
• A sells his chair to B for Rs. 2,000. it is a
contract of sale.
 Sale and agreement to sale
The contract of sale of goods includes both
sale and agreement to sell.
– When the ownership is transferred from
seller to buyer at the time of contract, the
contract is called a sale.
– Where the ownership of goods is to be
transferred at some future date, the
contract is called an agreement to sale.
 Other Formalities
• There is no specific procedure to make a
contract of sale.
 DIFFERENCE BETWEEN SALE AND
AGREEMENT TO SELL
SALE
Ownership passes at the time of contract
A sale can only be in case of existing and
specified goods.
Buyer becomes owner and gets right
against the goods. He can sue for recovery
of goods
In case the goods destroy, the buyer
suffers the loss even though the goods are
in the possession of seller
If the buyer fails to pay price of the goods,
seller can sue for the price even though
the goods are in the possession of seller.
AGREEMENT TO SALE
Ownership transfers at a future date
An agreement to sell is mostly in case of
future and contingent goods
Buyer does not get the rights against the
goods. He can sue for damages and not
for recovery of goods.
If the goods destroy the seller suffers a
loss even though the goods are in the
possession of the buyer
If the buyer fails to pay price of the goods,
seller can sue for damages and not the
price even though the goods are in the
possession of the buyer
 Kinds of Goods
• 1. Existing Goods - Goods physically in existence and in seller’s possession.
– Specific Goods – Identified and agreed upon at the time of contract.
– Ascertained Goods
– Unascertained Goods – Not identified and agreed
• 2. Future Goods – Not in possession at the time of contract
but will be managed
• 3. Contingent Goods –
– Not in existence at the time of contract. Existence of goods depends on the
happening of events. If the event happened, the contingent contract is
enforceable however it the event does not happen, it become void.
 Destruction of Goods: Causes
• Damage to goods which reduce the
commercial value
• Loss of goods by theft
• Goods are lawfully confiscated
 Destruction of Goods: Effects
• Perishing of goods before formation of contract
– Without the knowledge of seller, the contract is void.

• Perishing of goods before sale but after agreement to sale

• Perishing of future and contingent goods

– Without any fault of buyer and seller, the goods perish, the
contract become void
 Fixation of Price
The monetary consideration for a sale of goods

Mode of Fixation of price

• Parties – Free to fix price
• Agreed Manner – The manner agreed upon in contract
• Price prevailing in the market.
• Reasonable Price
• Third party
Conditions and Warranties
 Condition
Essential for the main purpose of contract.
Violation of Condition give right to the
aggrieved party to cancel the contract
 Warranty
Collateral (connected or secondary) to the main
purpose of contract. Breach of warranty give
right to the aggrieved party to a claim for
damages and not to cancel
CONDITION WARRANTY
A condition is a stipulation essential A condition is a stipulation not
to the main purpose of contract essential to the main purpose of
contract
It forms the basis of a contract and It does not forms the basis of a
goes to the root of the contract. contract

The breach of a condition gives right The breach of warranty does not give
to the aggrieved party to reject the right to the aggrieved party to reject
contract the contract.
 Condition Treated as Warranty
• Option of Buyer
– The breach of condition by seller gives right to the
buyer to reject the goods. However buyer is not
bound to reject, he may treat the breach of
condition as breach of warranty and accept the
goods and claim damages.
• Acceptance of Goods by Buyer
– Where buyer accept the goods, he cannot reject
them but can claim damages.
 Express and Implied Conditions
• The conditions and warranties which are
included in contract are called express.
• The conditions and warranties which are not
included in contract but the law presumes
their existence in the contract are called
implied.
 Implied Conditions
• Condition to the Title
• Sale by description
• Sale by Sample
• Sale by Sample as well as Description
• Condition as to Fitness or Quality
• Condition as to Merchantability
• Condition by Custom
• Condition as to Wholesomeness – Food
 Implied Warranties
• Law includes the following Warranties in a
contract of sale of goods.
– Quiet Possession – Defective Title
– Freedom from Encumbrances – Tenant court case
– Usage of Trade – Quality of goods
– Disclosure of dangerous Goods – Warns about danger
DOCTORINE OF CAVEAT EMPTOR