10-Apr-09

Why: To provide safety, security, legal value, and to help public in

making contracts so that the objectives of the contract are achieved
effectively and efficiently, learning of its legalities is really important.

What: Before we go ahead with technicalities of sale of goods act, we

need to clearly define this type of contract, as it states : “a contract
whereby seller transfers or agrees to transfer the property in goods to
the buyer for a price.”

Interpretation of Definition:
Goods1

Looses ownership of goods Gains ownership of

goods
SELLER BUYER
Receives Price Pays Price

Price2

Formation of Contract of Sale

It’s mandatory for you to follow the following points while forming a
contract and also when it’s being executed
o Buyer and Seller can’t be one person; These two different roles,
buyer and seller, are to be performed by two separate parties
because a person can’t buy his own goods or sell goods to
himself.
o Property here means ownership; A mere transfer of possession of
the goods can’t be termed as sale. Seller must transfer or agree
to transfer the property(ownership) in the goods to the buyer .
 o Personal as opposed to real property; any tangible movable
property (furniture or domestic animals or a car etc) : is referred
to as goods.1
o Consideration = Price2 ; If goods are sold partly for goods and
partly for money, the contract is sale. Typical bartering not a
contract of sale of goods.
o Sale and Agreement, both permissible; Sale- when the goods are
transferred from the seller to the buyer. Agreement to sell-
transfer of good to take place in the future or when conditions
are fulfilled.
o Others; Capacity of parties, free consent, legality of object, could
be oral or in writing.

Subject Matter of Contract

o Goods , are the subject matter of a contract of sale
o Personal as opposed to real property; any tangible movable
property (furniture or domestic animals or a car etc) : is referred
to as goods.
o Classification of Goods
o Existing goods - owned or possessed by the seller
o No discretion for seller; Specific goods or
Ascertained goods - good identified and
agreed upon at time of contract.

o Discretion for seller; Unascertained or

generic goods – Those which are not
identified and agreed upon at the time of
contract.

o Future goods - goods that the seller does not possess

at the time of contract but will manufacture or acquire in
future.

o Contingent goods - acquisition of good may depend

on the contingency that may or may not happen

o Effect of Destruction of Goods

o Goods perishing before making of contract- the
contract will become void if the seller didn’t have
knowledge about the state of the goods
o Goods perishing after the agreement to sell but
before the sale is effected- contract will be void if goods
perished without the fault of the seller or buyer
1
Details on “goods” are under the heading of “subject matter of good”
2
Details on “Price” are under the heading of “The price”
Consideration = Price
o The money Consideration, for a sale of goods is known as price.
o Ways of Fixing the Price :
o Parties free to choose any price; Price stated in a
contract by the contractors.
o Price, in a manner agreed upon in a contract; It
involves price prevailing on any date or to be fixed by a
third person.
o If above methods are not chosen; then price would
be determined by the course of dealing between the
parties.
o Last alternative, Reasonable Price; In absence of all 3
methods then a reasonable price is to be paid which
depends on the circumstance.
o Token of good faith as a guarantee; earnest can be
returned after the performance of contract or it can be
adjusted if it is in terms of money