Business Low Contract of Sale of a Goods

Contract of Sale

According to Section 4 of the Sale of Goods Act a contract of the sale of goods is a contract whereby the seller transfers, or agrees to transfer, the property in (i.e., ownership of) goods to  the buyer for a price.

A contract of sale may be (i) absolute or (ii) conditional, i.e., according to the wishes of  the parties to the contract.

The term “contract of sale” is a generic term. It includes an ‘actual sale’ as well as an ‘agreement to sell’. Where under a contract of sale the property in the goods (i.e., the ownership has passed from the seller to the buyer, the contract is called a sale.

Where the transfer of ownership is to take place at a future date, or subject to some condition to be fulfilled later, the contract is called an agreement to sell: An agreement to sell becomes a sale when the time elapses or the condition is fulfilled subject to which the ownership of the goods is to be transferred.

A has a book. He transfers his right or ownership to B for Rs.15. There is a sale. Where     A agrees to transfer the ownership of the book to B after two months for Rs.15, this is an agreement to sell, when the two months expire, it becomes a sale.

The main distinction between a sale and an agreement to sell is that in a sale the buyer owns the goods, while in an agreement to sell, the ownership does not pass from the seller to    the buyer at the time of the contract.

The seller continues to be the owner until the agreement     to sell becomes an actual sale by the expiry of the stipulated time or on the fulfilment of some condition.

Essentials of a Contract of Sale

A valid contract of sale must consist of the following essentials :

• Two parties: There must be two parties viz., buyer and seller to constitute the contract. So where a person buys his own goods through some agent, there is no contract. However, a part-owner can sell his share to other part-owners.
• Goods: Subject matter of contract of sale must be the goods of any kind except immovable
• Transfer of property: Passing of property is necessary and not the physical delivery of goods.
• Price: Consideration for a contract of sale must be If some goods are supplied as remuneration for work done or in exchange for some goods, it does not amount to contract of sale.
• Lastly, it must contain all the essentials of a valid

Contract of sale how made. No particular from is necessary to constitute a contract of sale. It is, like any other contract, made by the ordinary method of offer by one party and its acceptance by the other party.

It may be made in writing or by word of mouth, or partly in writing and partly by word of mouth. It may also be implied from the conduct of parties, or from the course of dealings between the parties.

Difference between Sale and Agreement to Sale

1. Nature of contract: Sale is an executed contract while an agreement to sell is an executory contract. In an agreement to sell something remains to be done. It shall become sale only when the conditions of contract are
2. Transfer of property: In a sale the transfer of property takes pl-ace immediately but in an agreement to sell, it does not pass to the buyer immediately. As the buyer, in a sale immediately becomes the owner of goods, so the risk also passes to him. But in an agreement to sell seller still remains the owner so the risk does not pass to-the buyer and if the goods are destroyed, the loss will fall on the seller even though they are in the possession of the
3. Creation of right: An agreement to sell creates a ‘Jus in personam’, i.e., a personal right only against the buyer while a sale creates ‘fus in rem’, i.e, right in the goods against the whole
4. Remedies in case of breach: In an agreement to sell, the seller can sue only for damages for non-performance of contract by the buyer. But in a sale, the seller can sue for the price of the goods. In addition to that he has the right of lien, stoppage in trai, it and re-sale.

In case of breach of .contract of sale by the seller, the buyer can sue for the delivery of goods or for damages but in an agreement to sell the buyer has only a personal remedy against the seller.

5. Consequences of Insolvency: In a sale if the buyer is adjudged insolvent; the seller must deliver the goods to the official receiver and can claim rateable dividend like other unsecured creditors for the price unpaid on his goods. In an agreement to sell the seller can refuse to deliver the goods unless paid for the

In a sale, if the seller is adjudged insolvent, the buyer is entitled to receive the goods from the official receiver. But in an agreement to sell, if the buyer has made the payment in advance  to the seller, he can only ask for rateable dividend and not the delivery of goods.