Sale and Agreement to Sell : JI

 
A Project on

“JUDICIAL INTERPRETATION OF

SALE AND AGREEMENT TO SELL”

SUBMITTED TO: - Ms. Padma. A Parija

FACULTY, LAW OF CONTRACTS

SUBMITTED BY: - SABYASACHI BHADURI

ROLL NO- 120

SEMESTER III; BATCH XII

2013-14

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 Sale and Agreement to Sell : JI
 

CONTENTS

ACKNOWLEDGEMENTS……………………………………………………………….PAGE 3

OBJECTIVES……………………………………………………………………………...PAGE 4

RESEARCH METHODOLOGY………………………………………………………......PAGE 4

SECTION 4…………………………………………………………………………………PAGE 5

SECTION 5…………………………………………………………………………………PAGE 5

ESSENTIAL REQUISITES OF SALE…………………………………………………….PAGE 6

STATUTORY TRANSACTIONS…………………………………………………………PAGE 7

SALE OR RETURN………………………………………………………………………..PAGE 8

SALE OR BAILMENT……………………………………………………………………..PAGE 8

SALE OR HIRE……………………………………………………………………….…….PAGE 8

SALE OR AGENCY………………………………………………………………………...PAGE 9

CONDITIONAL CONTRACTS……………………………………………………………PAGE 10

CONTINGENT CONTRACTS……………………………………………………………..PAGE 10

PROMISSORY CONTRACTS……………………………………………………………...PAGE 10

MORTGAGE………………………………………………………………………………...PAGE 11

PLEDGE……………………………………………………………………………....……...PAGE 11

SALE DISTINGUISHED FROM AN AGREEMENT TO SELL…………………………...PAGE 12

CONCLUSION………………………………………………………………………………PAGE 13

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ACKNOWLEDGEMENTS

First and foremost, I am thankful to Mrs. Padma, Faculty of Law Of Contracts, HNLU, for allotting me

the topic i.e.“SALE AND AGREEMENT TO SELL” to work as a project on Law of Contracts. She

has been very kind in providing inputs for this work, by way of suggestions and materials.

I would also like to thank my dear colleagues and friends in the University, who have helped me with

ideas about this work. Last, but not the least I thank the University Administration for equipping the

University with such good library and internet facilities, without which, no doubt this work would not

have taken the shape in correct time.

SABYASACHI BHADURI

ROLL NO.- 120

POLITICAL SCIENCE MAJOR

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Objectives:

(i) To discuss and do an extensive research on the topic “Sale and Agreement to Sell.”
(ii) To show how the judiciary interprets the statute and to discuss various cases.

Research Methodology:
The method of research adopted for the project is analytical methodology. For the present project
relevant data and information has been received and collected from secondary sources and there has
been use of authentic books and websites which provided reliable information and data.

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 Sale and Agreement to Sell : JI
 

Section 4, Sale of Goods Act 1930

Sale and agreement to sell

1. A 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. There may be a contract of sale between one part-
owner and another.
2. A contract of sale may be absolute or conditional.
3. Where under a contract of sale the property in the goods is transferred from the seller to the
buyer, the contract is called a sale, but where the transfer of the property in the goods is to take
place at a future time or subject to some condition thereafter to be fulfilled, the contract is called
an Agreement to sell.
4. An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject
to which the property in the goods is to be transferred.

Section 5, Contract of Sale how made

1. A contract of sale is made by an offer to buy or sell goods for a price and the acceptance of such
offer. The contract may provide for the immediate delivery of the goods or immediate payment
of the price or both, or for the delivery or payment by installments, or that the delivery or
payment or both shall be postponed.
2. Subject to the provisions of any law for the first time being in force, a contract of sale may be
made in writing 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.

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Essential Requisites Of Sale:

There are few essential requirements to be fulfilled for a Sale to happen.

1. The essential object of the contract of sale is the exchange of property for a money price. There
must be a transfer of property, or an agreement to transfer it, from one party, the seller, to the
other, the buyer, in consideration of a money payment or a promise thereof by the buyer.1 To
constitute a transaction of sale there should be an agreement, express or implied relating to goods
to be compelled by passing of title in those goods. Transfer of property in goods for a price is the
linchpin of the definition. 2
Exchange of property for something other than money is not a sale. A contract to barter one kind
of goods for another would not, under the old common law system of pleading support an action
for goods sold and delivered.3
The difference between a sale and an exchange is that in the former the price is paid in money,
whilst in the latter is paid in goods by way of barter.4 But if the exchange is made partly for
goods and partly for a price, the contract is probably one of sale.5 Similarly, if the exchange is
made for goods or alternatively for a price.6
2. A contract of sale becomes a sale only when the property in the goods is transferred to the buyer
under the terms of the contract itself. 7 If supposedly any party violates the terms and conditions
on which the contract was based, it would not amount to a sale.
3. As there must be a complete exchange of property to constitute a sale, it follows that a seller and
buyer must be different people. It means that a man cannot buy his own goods and, therefore, if,
unknown to the parties, the buyer is already the owner of that which the seller purports to sell to
him, the transaction is nugatory. The parties intended to effectuate a transfer of ownership: such
transfer is impossible: the stipulation is ‘naturalirationeinutilis’.

                                                                                                                       
1
Popatlal  Shah  v.  State  of  Madras,  AIR  1953  SC  274  
2
 Union  of  India  v.  the  Central  india  Machinery  Mfg  Co  Ltd  &Ors  AIR  1997  SC  1537  
3
 Harrison  v.  Luke  (1845)  14  M&W  139  
4
 Commissioner  of  Income  Tax  Andhra  Pradesh  v.  M/s  Motors  &  General  Stores  (P)  Ltd.  AIR  1968  SC  200  
5
 Aldridge  v.  Johnson  (1857)  7  E&B  885  
6
 South  Australian  insurance  Co  v  Randell  (1869)  LR  3  PC  101  
7
Popatlal  Shah  v  State  of  Madras    AIR  1953  SC  274  

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Statutory Transactions:

Sometimes a contract may not be entered into by the normal process of negotiation, but under a statutory
compulsion. When the goods are supplied under a statutory compulsion whether that results into a sale
or not, is the question which has arisen in a number of cases.

It has been held in the English cases that supply of goods by virtue of a statutory, would not be a sale of
such goods as the consensual element which forms the basis of a contract is absent.8 Cases of
compulsory acquisition of property by the stand on a different footing since there is no question in such
cases of offer and acceptance nor of consent, either express or implied. Though compulsory acquisition
of property would exclude the element of mutual assent which is vital to a sale, so long as mutual assent,
express or implied, is not totally excluded the transaction will amount to sale.
A transaction which is affected in compliance with the obligatory sense of a statue may nevertheless be
a sale in the eyes of law.9

In cases of the so called statutory transactions whether they amount in law to sale or not, would depend
upon whether the liberty of contract in relation to the fundamentals of the transaction is completely
excluded by the provision of the statue or order.

                                                                                                                       
8
 Appleby  v  Sleep  [1968]  2  All  ER  265  
9
 M/s  Vishnu  Agencies  (Pvt)  Ltd  v  Commercial  Tax  Officer  &Ors  AIR  1978  SC  449    

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Sale or Return:

Contract on ‘Sale or return’ means that the option is with the buyer to keep them as goods sold to him or
return them to the seller within the stipulated time or within a reasonable time.10

Sale or Bailment:

There is a test to distinguish to differentiate between a sale of goods and bailment. The test is whether
the party delivering the goods is entitled to the specific return of what he has delivered. If not, there is no
bailment, although the party may be entitled to claim goods of like amount and quality, or goods or
money at his election, for example, where wheat of several owners is delivered to a miller, who may
grind and sell it, the parties describing the transaction as storage.11
Whether the containers such as sacks, barrels and bottles in which the goods are supplied, are
themselves the subject of a sale or are merely bailed to the buyer is a question of construction of the
contract. The question may arise in context of merchantability of the goods when they are packed in a
defective container which may render the goods unmerchantable or harmful.12

Sale or Hire:

A common method of selling goods is by means of an agreement commonly known as hire-purchase

agreement, which is more accurately described: as a hiring agreement coupled with an optionto
purchase, that is to say, the owner lets out the chattel on hire and undertakes to sell it to the hirer his
making a certain number of payments. If that is the real effect of the agreement, there is no contract of
sale until the hirer has made the requisite number of payments, and he remains a bailee until then. But
some so-called hire-purchase agreements are in reality contracts to purchase, the price to be paid in
installments, and in those cases the contract is a contract of sale and not of hiring.13 It must be depend on
the terms of the contract whether it is to be regarded as a contract of hiring or a contract of sale.14

                                                                                                                       
10
 Poole  v  Smith’s  Car  Sales  (Balham)  Ltd  [1962]  2  All  ER  482  (CA)  
11
 South  Australian  Insurance  Co  v  Randell  (1869)  LR  3  PC  101  
12
Geddling  v  Marsh  [1920]  1  KB  668  
13
 Lee  v  Butler  [1893]  2  QB  318  
14
McEntire  v  Crossley  Brothers  [1895]  AC  457  

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Sale or Agency:

The essence of a contract of sale is the transfer of title to the goods for a price paid or promised. The
transferee in such a case, is liable to the transferor as a debtor for the price to be paid and not an agent
for the proceeds of debtor for the price to be paid and not as an agent for the proceeds of debtor for the
price to be paid and not as an agent for the proceeds of sale.
The essence of agency to sell is the delivery of the goods to a person who is to sell them not as his own
property but as the property of the principal who continues to be the owner of the goods and therefore,
will be liable to account for the sale proceeds.
The question as to whether a transaction is a sale or a contract of agency is a mixed question of fact and
law.15Mere formal description of a person as an agent or buyer is not conclusive, unless the context
shows that the parties clearly intended to treat a buyer as a buyer and not an agent.16

                                                                                                                       
15
 Sri  TirumalaVenkateshwara  Timber  and  Bamboo  Firm  v  Commercial  Tax  Officer,  Rajahmundry  AIR  1968  SC  784  
16
 Bhopal  Sugar  Industries  Ltd  v  Sales  tax  officer  Bhopal  AIR  1977  Sc  1275  

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Conditional Contracts:

Contracts are conditional when their enforceability against one or both parties depends upon the
performance or fulfillment of some condition, and condition may be either contingent or promissory.
The transfer of the property in the goods may be subjected by a term of contract of sale to a condition
that the property shall not pass until the price is paid in full. The contracts containing such ‘retention of
title’ clause are absolute contracts for the sale of goods within the meaning of s4(2) of the Act.17

Contingent Contracts:

In the first class of case, the promise of one or both parties to a contract may be dependent upon the
happening of an uncertain event or upon the existence of a state of affairs at the time when the
performance is due, or upon the existence of a state of affairs not within the promisor’s knowledge at the
time of the making of the contract, without there being any promise or statement by him that the event
will happen or that the state of affairs exists or will continue. If the event does not happen, or the state of
affairs does not exist or continue, thee promise cannot be enforced against him, and the other party is
relived from further liability, though he has no right of action for the breach of the promise.18

Promissory Conditions:

In the second class of case, the obligation of one party to perform his promise is dependent upon the
performance by the other party of his promise and that promise by the other party of his promise and
that promise may take form of a statement which he must make good, as well as of a promise to do
something in the future. In such cases, the promise to be performed or statement to be made good by the
party making it, is a promissory condition, and its non-fulfillment not only relieves the other party from
all his obligations under the contract, but may also give him a right of action.

                                                                                                                       
17
 Re  Bond  Worth  Ltd  [1980]  Ch  228,245  
18
 Ibid.  

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Mortgage:

A mortgage of goods is in form and in strict law a conditional sale, but from the earliest times equity has
regarded it as nothing more than a security. It therefore, does not give that complete domination to the
mortgagee over the goods sold which is an essential part of the contract of sale,19 and is, therefore, not
regarded as such and is expressly excluded from the operation of the Act by s 66(3). But there may be a
sale with a condition for resale to the original seller which need have nothing to do with a mortgage.20

Pledge:

A sale is defined as a transfer of ‘the property’ in goods and s 2(1-1) of the Act defines ‘property’ so as
to mean ‘the general property’ in the goods and not merely a ‘special property’. In pledge, the pledger
retains the general property. A pledge is still further removed from a contract of sale, for when the
chattel is delivered to the pledgee the general property is retained by the pledger, and the pledgee has
only a right to sell the article pledged on the expiration of the time for which the loan secured by the
pledge was granted, and after notice to the pledger.21 A pledge, too, is entirely outside the Act, as is any
other form of charge upon personal goods or any other form of security in which they play a part.

                                                                                                                       
19
 MR  Dhavan  v  Madan  Mohan  &Ors  AIR  1969  Del  313  
20
 Beckett  v  Tower  Assets  Co  [1891]  1  QB  1  
21
 Contract  Act  ss  172,177  

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Sale distinguished from an Agreement To Sell:

A ‘Contract of Sale’ is a generic term and includes both an actual sale, where the ownership in the goods
passes to the buyer immediately when the contract is made, and an agreement to sell, where the
ownership in the goods is to pass subsequent tothe making of the contract. The important points of
distinction between a sale and an agreement to sale are as follows:

1. If the property in the goods passes from the seller to the buyer at the time of making of the
contract, it is known as sale; but if the passing of the property in the goods is postponed until
some future time or fulfillment of certain conditions, it is an agreement to sell. It means that in
case of sale the buyer becomes the owner of the goods at time of making of the contract whereas
in an agreement to sell, he is to become the owner of the goods at a later time.
2. If after making the contract there is loss or damage to the goods, the question may arise as to
which of the two parties has to bear the loss to the goods. According to the general rule
contained in Section 26,the goods are at the risk of the person who is their owner at the relevant
time. It means that in the case of sale, since the ownership in the goods has passed to the buyer,
the loss to the goods has to be borne by the buyer. On the other hand, in the case of an agreement
to sell, while the seller is still the owner of the goods, the loss has to be borne by him.
3. In the case of sale, i.e., where the property in the goods has passed to the buyer, if he wrongfully
neglects or refuses to pay for the goods according to the terms of the contract, the seller may sue
him for the price of the goods.22 In case of an agreement to sell, the seller being still the owner of
the goods can dispose them of and, therefore, if the buyer wrongfully neglects or refuses to
accept and pay for the goods, the seller may sue him for damages for non-acceptance.23
4. Sale is an executed contract, where there is a contract plus a conveyance, whereas an agreement
to sell is termed as an executor contract, as it is contract pure and simple. In case of sale, if the
seller breaks the engagement to deliver the goods or sells the goods to a third party, the buyer
may sue the seller not only for the breach of a contract but may also sue him for the torts of
conversion and detinue. The buyer has also a right in rem, in case if sake in many cases, he may
follow the goods into the hands of third parties. If there is a breach of agreement to sell by the
seller, then the buyer has only a right in personam, i.e., only a personal remedy against the seller.
                                                                                                                       
22
 Sec  55  
23
 Sec  56  

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Conclusion:
Section 4 of the Sale of Goods Act, 1930, comprises of the project topic “Sale and Agreement to
Sell”.
Section 4(1) of the sale of Goods 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”.
The definition of contract of sale of goods reveals that either actual sale or an agreement to sell,
both are covered under the act. But, there are certain differences between the two.
Where in a contract of sale, the property in the goods is immediately transferred from the buyer
to the seller it is called a sale.
Where under a contract of sale, the transfer of property in the goods is to take place in the future
or after the fulfillment of certain conditions, it is called ‘An agreement to sell”.

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BIBLIOGRAPHY:
1) LAW OF SALE OF GOODS AND HIRE PURCHASE, AVTAR SINGH, 6th Edition

2) POLLOCK AND MULLA, THE SALE OF GOODS ACT

WEBLIOGRAPHY:

1) www.managementparidise.com

2) www.chestofbooks.com

3) www.slidenotes.blogspot.in

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