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SALE OF GOODS ACT,1930

CONTRACT OF SALE Section 4 of the Sale of Goods Act defines a contract of sale as under: “A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to a buyer for a price.”

A contract of sale consists of the following: (I)Sale[or Absolute Sale] (II)Agreement to sell[or Conditional sale]

SALE Where the property (ownership) in the goods is immediately transferred from the seller to the buyer, and nothing is left on the part of the seller, there is sale or absolute sale . Counter sale in a shop is sale or an absolute sale.

AGREEMENT TO SELL Where the transfer of property(ownership) in the goods shall take place in future or on the fulfillment of certain conditions , it shall be an agreement to sell or a conditional sell . The property(ownership) in goods shall not be transferred from the seller to the buyer until and unless some condition is fulfilled for the completion of the contract of sale.

FROM OTHER TRANSACTIONS SALE DISTINGUISHED FROM OTHER TRANSACTIONS (1) Sale and Bailment

Basis Sale Bailment Possession Possession of goods is transferred to the buyer. Possession of goods is transferred to the bailee. Ownership Ownership is transferred to the buyer. Ownership resides with the bailor. Usage The buyer may use the goods in any way he likes. A bailee can use the goods only according to the directions of the bailor. Return There is no return of goods from the buyer to the seller, unless there is breach. The goods are returned after the specified time or accomplishment of the purpose. Consideration The consideration is the price in terms of money. The consideration is an undertaking to return the goods after the accomplishment of the purpose. Charges The question of any charges to be paid by the seller to buyer or vise versa does not arise. The bailor has to repay the charges which the bailee has incurred in keeping the goods safe. Duration Final. Once the sale is transacted, the seller keeps the goods until he decides to sell them to another. Temporary. The bailee has to return the goods to the bailor once the specified time is passed.

(2) Sale and hire purchase • In sale, you pay up front or as per provisions of the contract, whereas in hire purchase, the hirer pays in instalments • Buyer gets ownership rights as soon as he makes the payment of goods in sale, whereas ownership is transferred to the hirer only after he has paid the final instalment • Hirer can return the product and stop paying further instalments if he is not satisfied with the product. This is not possible in sale.

How a contract of sale is made ? Subject to this and any other Act, a contract of sale may be made in writing (either with or without seal), or by word of mouth, or partly in writing and partly by word of mouth, or may be implied from the conduct of the parties. (2) Nothing in this section affects the law relating to corporations.

Subject Matter of Contract Section 6 states that “Goods” form the subject-matter of a contract of sale. Actionable claims and current money are not considered under the term “Goods” All growing crops and grass and things attached, which can be severed from land before sale, are included.

Types of goods: Existing Goods Future Goods Contingent Goods

1. Existing Goods Goods owned and possessed by the seller at the time of the making of the contract of sale. Seller may or may not be the owner of the goods, but possesses goods. Goods must be in actual existence. E.g.,If A sells his horse to B,but the horse is already dead, no contract will arise. These are further of three types i.e., i)Specific Goods, ii)Ascertained Goods, iii)Unascertained Goods.

Specific Goods: Goods which are identified and agreed upon at the time of contract of sale is made. Ascertained Goods: Goods which are identified after the contract of sale as per the terms decided. Unascertained Goods: Goods which are not identified or ascertained at the time of making a contract of sale.

2.Future Goods Goods which are yet to be manufactured, produced or acquired by the seller after making the contract of sale. The seller must acquire or is expected to acquire the goods in future. The contract operates as an agreement to sell E.g., P agrees to sell to Q all the mangoes which will be produced in his garden next year.

3.Contingent Goods These are a type of future goods. Acquisition of these goods by the seller depends upon a contingency, which may or may not happen. Seller may sell these goods conditionally, on their acquisition, as (a) goods to arrive, (b) future crops, (c) the eggs, (d) imported goods. The contract gives no right of action if the contingency does not happen E.g., X agrees to sell Y a certain ring provided he is able to purchase it from its present owner.

Effect of destruction of Subject-matter Section 7 and 8 lay down the rules applicable to cases where the subject-matter of a contract of sale is destroyed before and after the contract. Goods perishing before making of contract: Where there is a contract for the sale of specific goods, the contract is void, if the goods, without the knowledge of the seller have at the time when contract was made, perished or become so damaged as no longer to answer to their description in the contract.

Goods perishing before sale but after agreement to sell: To make a contract void under this section, the following conditions must be fulfilled: The goods must be specific goods. The section does not apply to unascertained goods. The goods must have perished or damaged before entering into contract without the knowledge of the seller. Goods perishing before sale but after agreement to sell: Section 8 deals with the effect of perishing of specific goods before sale but after agreement to sell. Unlike section 7, it deals with a case where the goods are in existence at the time of making the contract but perish without the fault of either party before the risk has passed to the buyer .

According to section 8, a contract can be avoided on the grounds of impossibility of performance of the contract, if it satisfied the following conditions: The contract must be an agreement to sell and not an actual sale. The loss must be specific, i.e. it should relate to specific goods. The goods must have perished or damaged before the property or the risk passes to the buyer. The perishing of or the damage to goods must be without any fault on the part of the seller or the buyer.

The effect of this section, in case where specific goods agreed to be sold subsequently perish, may be stated as follows : 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. If there be no such fault, then – (a) If the risk has not passed to the buyer, the agreement is avoided and the seller is not liable for the non-delivery, but on the other hand must bear the loss. (b) If the risk has passed to the buyer he must pay for the good though undelivered.

THE PRICE Price is an essential element of sale. Price means the money consideration for a sale of goods. No valid sale can take place without a price. If no consideration is given, then it will be a gift. The price may be money actually paid or promised to be paid depending on whether the agreement is for cash or credit sale. The price constitutes the essence of a contract of sale as no sale can take place without a price.

Modes of fixing the price (section9): Expressly stated in the contract: The parties may fix such price for the goods as they may please. Mere inadequacy of price does not affect a sale. But the sum should be definite. Price to fixed at agreed manner: The contract may provide for the manner in which the price is to be fixed. Where (a) the price is agreed to whatever sum as such shall be offered by any third party or (b) where the price is left to be fixed by only one of the contracting parties the agreement would be uncertain as to price and hence void abinito.

(5) Price is to be fixed by the valuation of a third party: (3) Determined by the course of dealing between the parties: A practice to deduct discount in determining the price may be implied from a course of dealing. Similarly a usage to pay the price at the rate prevailing in the market on the date of delivery may be implied from the course of dealings. (4) Reasonable price: Where the price is not determined in accordance with the above three modes, the buyer shall pay a seller a reasonable price. What is a reasonable price is a question of fact dependent upon the circumstances of each particular case. (5) Price is to be fixed by the valuation of a third party: When such third party makes the valuation, there is a determination of the price and the agreement becomes a contract of sale. In case the party which had to fix the price does not fix the same, the agreement is thereby avoided.