Contract Of Sale Of Goods

Introduction:

a contract of sale of goods results, like any other

contract,by an offer by one party and its acceptance
by the other.Thus it is a consensual transaction.The
parties to the contract enjoy unfettered discretion
to agree to any terms they like relating to delivery
and payment of price. It simply lays down certain
positive rules of general application for those cases
where the parties have failed to contemplate
expressly for contingencies which may interrupt the
smooth performance of a contract of sale, such as
the destruction of a thing sold ,before it is delivered
or the insolvency of the buyer, etc. The Act leaves
the parties free to modify the provisions of the law
by express stipulations.
 Contract Of Sale

The act defines a contract of sale of

goods as –” a contract whereby the
seller transfers or agrees to
transfer the property in goods to
the buyer for a price.
 Characteristics: Contract Of Sale

Two parties:There must be two

distinct parties to a contract of
sale.
Ex: when students of a hostel take
meals with a mess run by
themselves on cooperative lines,
there is no contract of sale.
 Characteristics: Contract Of Sale
Transfer of property :property means
ownership. Transfer of property in
the goods is another essential of a
contract of sale of goods. A mere
transfer of possession of the goods
can not be termed as sale. To
constitute a contract of sale the
seller must either transfer the
property in the goods to the buyer.
 Characteristics: Contract Of Sale

Goods:The subject matter of the

contract of sale must be goods.
every kind of movable property is
regarded as goods.
Ex: Goodwill,trademark,water ,gas
,electricity are all regarded as
goods.
 Characteristics: Contract Of Sale

Price:
The consideration for a contract of
sale must be money consideration
called the price. If goods are sold
or exchanged for other goods, the
transaction is barter ,governed by
the Transfer of Property Act and
not a sale of goods under this Act.
 Characteristics: Contract Of Sale
Includes both a sale and an agreement to sell.
Sale where under a contract of sale the property in
the goods is immediately transferred at the time of
making the contract from the seller to the buyer.
An agreement to sell where under a contract of sale
the transfer of property in the goods is to take place
at a future time or subject to some condition
thereafter to be fulfilled.
Eg : On 1 January, A agrees with B that he will sell B
his scooter on 15 January for a sum of 30000 tk.It is
agreement to sell, since A agrees to transfer the
ownership of the scooter to B at a future time.
 Characteristics: Contract Of Sale
No formalities to be observed :
The sale of goods act does not prescribe any
particular form to constitute a valid contract of
sale. A contract of sale of goods can be made by
mere offer and acceptance. The offer may be
made either by the seller or the buyer and the
same must be accepted by the other. Neither
payment nor delivery is necessary at the time of
making the contract of sale. Where articles are
exhibited for sale and a customer picks up one
and sales assistant packs the same for him,
there has resulted a contract of sale of goods by
the conduct of the parties.
 Sale and Agreement to sell

Transfer Of property(Ownership):
In a sale, the property in goods
passes to the buyer immediately at
the time of making the contract.
An agreement to sell -there is no
transfer of property to the buyer at
the time of the contract
 Sale and Agreement to sell
Risk Of loss- In case of sale,if the goods are
destroyed the loss falls on the buyer even
though the goods may never have come in to
his possession because the property in the
goods has already passed to the buyer.
An agreement to sell where the ownership in
the goods is yet to pass from the seller to
the buyer, such loss has to be borne by the
seller even though the goods are in the
possession of the buyer.
 Sale and Agreement to sell
Consequ e nc e Of Breach:
In case of sale, if the buyer wrongfully
neglects or refuses to pay the price of
goods, the seller can sue for the price,
even though the goods are still in his
posses si on . In case of an agreement to
sell, if the buyer breaks his promise,
the seller can only sue for damages and
not for the price even though the goods
are in the posses si on of buyer.
 Sale and Agreement to sell
Right of Resale: In a sale, the property is with
the buyer and as such the seller can not resell
the goods. The original buyer can sue and
recover the goods from the third person as
owner, and can also sue the seller for the
breach of contract.
In an agreement to sell the property in the
goods remains with the seller and as such he
can dispose of the goods as he likes and the
original buyer can sue him for the breach of
contract only. In this case, the subsequent
buyer gets a good title to the goods, irrespective
of his knowledge of previous sale.
 Sale and Agreement to sell
Insolvency of buyer before he pays for the
goods :In a sale,if the buyer is adjudged
insolvent before he pays for the goods,the
seller, in the absence of a right of lien over
the goods, must deliver the goods to the
official receiver or assignee.
But in agreement to sale ,in these
circumstances, the seller may refuse to
deliver the goods to the official receiver or
assignee unless paid for,as ownership has
not passed to the buyer.
 Sale and Agreement to sell
Insolvency of seller if the buyer has already
paid the price:
In a sale, if the seller is adjudged insolvent,
the buyer is entitled to recover the goods.In
a agreement to sell, if the buyer has already
paid the price and seller is adjudged
insolvent, the buyer can only claim a
rateable dividend and not the goods because
property in them still rests with the seller.
 Kinds Of Goods

Goods may be classified in to the

following types:
1.Existing Goods
2. Future Goods
3. Contingent Goods
 Kinds Of Goods
1.Existing Goods
Goods which are physically in
existence and which are in seller’s
ownership at the time of entering the
contract of sale are called existing
goods.
It again of two types
Specific goods
Unascertained goods
 Kinds Of Goods
Specific goods:
Goods identified and agreed upon at
the time of the making of the contract
of sale are called specific goods.
Ex :where A agrees to sell to B a
particular DVD player bearing a
distinctive number, there is a
contract of sale of specific or
ascertained goods
 Kinds Of Goods
Unascertained goods:
The goods which are not separately
identified or ascertained at the time
of the making of the contract are
known as unascertained contract.
Ex: A agrees to sell to B one bag of
sugar out of the lot of one hundred
bags lying in his godown, it is a sale
of unascertained goods .
 Kinds Of Goods
2.Future goods:
Goods to be manufactured by the seller after
the making of the contract of sale are called
future goods. It is worth noting that there
can be no present sale of future goods
because property can not pass in what is not
owned by the seller at the time of the
contract.
Ex: A agrees to sell to B all the milk that his
cow may yield during the coming year. This
is a contract for the sale of future goods.
 Kinds Of Goods
Contingent goods:
Goods the acquisition of which by the seller
depends upon an uncertain contingency are
called contingent goods. like the future
goods, in the case of contingent goods also
the property does not pass to the buyer at
the time of making the contract.
Ex : A agrees to sell to B a specific rare
painting provided he is able to purchase it
from its present owner. This is a contract
for the sale of contingent goods.
 Price
The money consideration for a sale of
goods is known as price.Price is an
essential element in every contract of
sale of goods that is no valid sale can
take place without a price. The price
should be paid or promised to be paid
in legal tender money, unless
otherwise agreed. It may be paid in
the form of a cheque, hundi,bank
deposit etc.
 Perishing Of Goods
Perishing means not only physical
destruction of goods but it also
covers :
1.Damage to goods so that the goods
have ceased to exist in the
commercial sense
2. Loss of goods by theft
3.Where the goods have been lawfully
requisitioned by the government.
 Perishing Of Goods
Perishing of specific and ascertained
goods that affects a contract of
sale.Where ,therefore,unascertained
goods form the subject matter of a
contract of sale,their perishing does
not affect the contract and the seller
is bound to supply the goods from
wherever he likes, otherwise be liable
for breach of contract.
Perishing Of specific goods at or before making of the
contract
Where specific goods form the subject
matter of a contract of sale( both actual sale
and agreement to sell) and they without the
knowledge of the seller,perish,at or before
the time of the contract,the agreement is
void.
Ex: A agrees to sell to B a certain horse.It
turns out that the horse was dead at the
time of bargain, though neither party was
aware of the fact. The agreement is void.
 In case of Perishing Of only a part of the goods
Where in a contract for the sale of
specifi c goods,onl y part of the goods
are destroy ed or damaged,th e effect of
perishing will depend upon whether the
contract is entire or divisble.I t it is
entire and part only of the goods has
perished , the contract is void. If the
contract is divisible, it will not be void
and part available in good condition
must be accepted by the buyer.
 Perishing Of specific goods before sale but after
agreement to sell
Where there is an agreement to sell specific goods,and
subsequently the goods without any fault on the part of
the seller or buyer, perish before the risk passes to the
buyer, the agreement is there by avoided and both parties
are excused from performance of the contract.
If only part of the goods agreed to be sold perish, the
contract becomes void if it is indivisible. But if is
divisible then the parties are absolved from their
obligations only to the extent of the perishing of the
goods.
It must further be noted that if fault of either party
causes the destruction of the goods,then the party in
default is liable for non delivery or to pay for the
goods,as the case may be.Again if the risk has passed to
the buyer,he must pay for the goods,though undelivered.
 Perishing Of specific goods before sale but after
agreement to sell
A, had contracted to erect machinery on
M’s premises , the price was to be paid
on completion . During the course of the
work, there was a fire which completel y
destroy ed the premises and machinery.
It was held that both parties were
excused from further performa nc e and
A was not entitled to any payment as the
price was payable on the completi on of
entire work.