RAJESH KUMAR SINGH 19OCT2012

CLASS- MMM
SEMESTER I

Question 12. Explain sale and essentials of contract of sale.

INTRODUCTION OF SALE OF GOODS ACT, 1930
Till 1930, transactions relating to sale and purchase of goods were regulated by Indian Contract Act, 1872. In 1930,
Sections 76 to 123 of the Indian Contract Act, 1872 were repealed and separate Act called The Indian Sale of
goods Act, 1930 was passed. It came into force on 1
st
July, 1930.
With effect from 22
nd
September, 1963, the word Indian was also removed. Now, the present Act is called The
Sale of goods Act, 1930. This Act extends to the whole of India except the State of Jammu and Kashmir.
According to Section 3, the provisions of Indian Contract Act, 1872 still continue to apply to contracts for the sale
of good except where The Sale of Goods Act, 1930 provides for the contrary.

SCOPE OF THE ACT
The Sale of Goods Act deals with sale but not with mortgage (which is dealt with under the transfer of property
ACT, 1882) or pledge (which is dealt with under the Indian Contract Act, 1872). This Act deals with the goods
but not with other movable property, e.g., actionable claims and money. In other words, this Act does not deal
with movable property other than goods, and immovable property.

Meaning of Contract of sale
According to Section 4(1) of the Sale of Goods Act, 1930, contract of sale of goods is a contract whereby the seller
transfers or agrees to transfer the property in goods to the buyer for a price. Contract of Sale is a generic term
which includes both a sale as well as agreement to sell.






Distinction between Sale and Agreement to Sell
A Sale and an Agreement to Sell can be distinguished as under:

Basis of distinction

1.Transfer of ownership





2. Executed contract or
Executory contract



3.Conveyance of property






4.Transfer of risk










5.Rights of seller against the
Buyers breach





Sale

Transfer of ownership of
goods takes place
immediately



It is an executed contract
because nothing remains
to be done.


Buyer gets a right to enjoy
the goods against the whole
world including seller.
Therefore, a sale creates jus in
rem (Right against property)


Transfer of risk of loss of
goods takes place
immediately because
ownership is transferred. As a
result, in case of destruction
of goods, the loss shall be
borne by the buyer even
though the goods are in the
possession of the seller.


Seller can sue the buyer for
the price even though the
goods are in his possession.




Agreement to sell

Transfer of ownership of
goods is to take place at
a future time or subject
to fulfillment of some
condition.

Its is an executory contract
because something remains
to be done.


Buyer does not get such right
to enjoy the goods. It only
creates jus in personam (Right
against the person).



Transfer of risk of loss of
goods does not take place
because ownership is not
transferred. As a result, in
case of destruction of goods,
the loss shall be borne by the
seller even though the goods
are in the possession of the
buyer.


Seller can sue the buyer for
damages even though the
goods are in the possession of
the buyer.



Basis of distinction


6.Rights of buyer against the
sellers breach.




7.Effect of insolvency of seller
having possession of goods.






8.Effect of insolvency of the
buyer before paying the price.









Sale


Buyer can sue the seller for
damages and can sue the
third party who bought those
goods, for goods.


Buyer can claim the goods
from the official receiver or
assignee because the
ownership of goods has
transferred to the buyer.



Seller must deliver the goods
to the official receiver or
assignee because the
ownership of goods has
transferred to the buyer. He
can only claim rateable
dividend for the unpaid price.




Agreement to sell


Buyer can sue the seller for
damages only.




Buyer cannot claim the goods
even when he has paid the
price because the ownership
has not transferred to the
buyer. The buyer who has
paid the price can only claim
rateable dividend.

Seller can refuse to deliver the
goods unless he is paid full
price of the goods because
the ownership has not
transferred to the buyer.







Essential Elements of Contract of Sale with Illustration
The aforesaid definition clearly indicates the essential elements shown below
Essential Elements of a Contract of Sale


(a) (b) (c) (d) (e)
Seller and Buyer Goods Transfer of Price Essential elements of a valid contract
general property

Let us now discuss these elements one by one.
a) Seller and Buyer There must be a seller as well as buyer. Buyer means a person who buys or
agrees to buy goods [Section 2(1)]. Seller means a person who sells or agrees to sell goods
(Section 2(13). A person cannot be seller as well as buyer as a person he cannot buy his own
goods. That is why distribution of goods among partners on account of dissolution of a firm does
not amount to a sale of goods because the partners are joint owners and they cannot be both
sellers and buyers. (State of Gujarat v. Raman Lal & Co.) However, one part owner may be as
seller and another part of owner may be buyer. Where a person goods are sold under an
execution of decree, a bankrupt may also buy back his own goods from his trustee. [King v.
England]

b) Goods There must be some goods. Goods means every kind of movable property other than
actionable claims and money and includes stock shares, growing crops, grass and things
attached to or forming part of the land which are agreed to be severed before sale or under the
contract of sale [Section 2(7)]. It may be noted that the contract relating to actionable claims,
immovable property and services are not covered by this Act.
Notes:
(i) The actionable claims mean a claim which can be enforced through the courts of Law, e.g. a debt
due from one person to another is an actionable claim.
(ii) The money here means the legal tender (i.e currency of the country) and not old coins.


(c) Transfer of Property Property means the general property in goods, and not merely a special
property [Section 2(11)]. General property in goods means ownership of goods. Special property in
goods means possession of goods.
Thus there must be either a transfer of ownership of goods or an agreement to transfer the ownership
of goods. The ownership may transfer either immediately on completion of sale or sometime in future in
agreement to sell.
(d) Price There must be a price. Price here means the money consideration for a sale of goods. [
Section 2 (10)]. When the consideration is only goods, it amounts to a barter and not sale. When there
is no consideration it amounts to gift and not sale. However, the consideration may be partly in money
and partly in goods because the law does not prohibit as such. [Shelden v.Cox]

(e) Essential Elements of a Valid Contract In addition to the aforesaid specific essentials elements, all
the essential elements of a valid contract as specified under Section 10 of Indian Contract Act, 1872
must also be present since a contract of sale is a special type of a contract. For example, an agreement
to sell smuggled gold is not valid because its object is unlawful.