CHANAKYA NATIONAL LAW UNIVERSITY, PATNA

This final draft is submitted in the partial fulfilment in

Law of Contract II for the completion of B.A. LL.B course

TOPIC: FUTURE GOODS AND SALE OF GOODS

SUBMITTED TO: -

DR. VIJAY KUMAR VIMAL

FACULTY OF LAW OF CONTRACTS II

SUBMITTED BY:

AKSHITA THAPA
ROLL NO. 2106
B.A LLB, 3RD SEMESTER

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 CONTENTS

DECLARATION ....................................................................................................................... 3
ACKNOWLEDGEMENT .......................................................................................................... 4
INTRODUCTION ..................................................................................................................... 5
Sale and Contract of Sale: ....................................................................................................... 5
TYPES OF GOODS................................................................................................................. 10
LAW RELATING TO SALE OF GOODS ............................................................................... 15
CONCLUSION........................................................................................................................ 17
BIBLIOGRAPHY .................................................................................................................... 18

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 DECLARATION

I hereby declare that the work reported in the B.A.LL.B (Hons.) Project Report entitled
“Future goods and sale of goods” submitted at Chanakya National Law University,
Patna is an authentic record of my work carried out under the supervision of DR. VIJAY
KUMAR VIMAL. I have not submitted this work elsewhere for any other degree or
diploma. I am fully responsible for the contents of my Project Report.

(Signature of Candidate)
Akshita Thapa
Roll no. 2106
B.A. LL.B.
Chanakya National Law University

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 ACKNOWLEDGEMENT

A project is a joint endeavor which is to be accomplished with utmost compassion,

diligence and with support of all. Gratitude is a noble response of one’s soul to kindness
or help generously rendered by another and its acknowledgement is the duty and
joyance. I am overwhelmed in all humbleness and gratefulness to acknowledge from the
bottom of my heart to all those who have helped me to put these ideas, well above the
level of simplicity and into something concrete effectively and moreover on time.

This project would not have been completed without combined effort of my revered
Contract Law teacher Dr. Vijay Kumar Vimal, whose support and guidance was the
driving force to successfully complete this project. I express my heartfelt gratitude to her.
Thanks are also due to my parents, family, siblings, my dear friends and all those who
helped me in this project in any way. Last but not the least; I would like to express my
sincere gratitude to our teacher of Contract law for providing us with such a golden
opportunity to showcase our talents. Also this project was instrumental in making me
understand more about the innovation and economic growth and the factors affecting it.

Moreover, thanks to all those who helped me in any way be it words, presence,
encouragement or blessings.

- Akshita Thapa

- 3rd Semester

- B.A LL.B(Hons.)

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 INTRODUCTION

In 1930, transactions relating to sales and purchase of goods came in the purview of a
separate Act called the “Indian Sale of Goods Act”. This Act came into force with effect from
July 1, 1930. Before 1930, this was a part of the Indian Contract Act. The sale of goods is a
common transaction of all commercial contracts. Earlier the legal provisions relating to the
contract of sale were contained in Sections 76 to 123 of the Indian Contract Act, 1872.
However, as a result of the developments of modern commerce, certain amendments were
required in these provisions. To suit these developments, in modern trade and commerce,
Sections 76 to 123 of the Indian Contract Act were repealed, and a new Act, known as The
Sale of Goods Act, 1930 was enacted for the contracts dealing exclusively with the sale of
movable goods. This Act does not deal with the sale of immovable property. In September
1963, another change took place, as the word ‘Indian’ was removed. The Sale of Goods Act
containing 36 sections extends to all of India except the State of Jammu and Kashmir.

Thus, it can be said that sale of commodities constitutes one of the most important types of
contracts under the law in India. India, as a country, has one of the greatest economies hence,
has adequate checks and measures to ensure the safety and prosperity of its business and
commerce community.

A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the
property to goods to the buyer for a price. There may be a contract of sale between one part-
owner and another.1 A contract of sale may be absolute or conditional [Sec 4(2)]. The term
‘contract of sale’ is a generic term and includes both a sale and an agreement to sell.

Sale and Contract of Sale:

To explain a contract of sale, the distinction between sale and contract of sale must be
explained. A sale consists of a transaction between two parties, i.e. the buyer and the seller.
In each transaction, the following happens:

1
Sec 4(1), The Sale of Goods Act, 1930

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  There is a sale of movable goods.

 Between two parties, a buyer and a seller.

For example: A housewife buying a box of juice or a chemical company buys a truckload of
salt or an office goer buys a car.

Thus, the above three examples show the sale of goods. The goods sold are a box of juice, a
truckload of salt and a car. The buyer in these illustrations is the housewife, the chemical
company and the office goer respectively. The seller is the person or company or shopkeeper
who sells the goods. All the illustrations show that in a Sale or Purchase, transfer of
ownership of goods takes place.

Thus, the scope of the Act is:

 To deal with sale of goods and not mortgages.

 To deal with goods, not with actionable claims and money.

On the other hand, 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.” Thus, a contract of sale is a contract by which
the ownership of movable goods is transferred from the buyer to the seller. The above
definition brings out the following elements of contract of sale. These are:

1. It is a contract as specified in the Indian contract Act 1872-

A sale or an agreement to sell is in accordance with all the essential elements of a valid
contract. Money is the essence of any transaction.

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 Illustration:

 Sonu wanted to sell a drug, hashish to Monu . This would not be considered as a
valid contract of sale as an agreement to sell drugs is not a part of the Act because
it is an unlawful activity.

 Ram agrees with Shyam that he will sell a washing machine to Shyam, a month
later on payment of cash. This is an agreement to sell and both Ram and Shyam
are bound to it. When the washing machine will be transferred to Shyam, it will
become a sale.

 Sita pays Seema an advance amount of Rs.1,00,000 for purchase of a car. The car
will be delivered to Sita a month later. This is an agreement to sell.

In a contract of sale, the following are important:

1. There is an offer and an acceptance.

2. There is a delivery and payment, which can be immediate, in installments or

at a later date.

3. The contract may be in writing or by word of mouth or implied.

2. Existence of two parties: a buyer and a seller-

There must be 2 distinct parties i.e. a buyer and a seller, to effect a contract of sale and they
must be competent to contract. ‘Buyer’ means a person who buys or agrees to buy goods.2
‘Seller’ means a person who either sells or agrees to sell goods.3 The Act does not permit the
buyer and the seller to be the same person. Thus, the existence of both the parties, i.e, the
buyer and the seller must be there to enter into a contract of sale.

2
Sec 2(1), The Sale of Goods Act, 1930
3
Sec 2(13), The Sale of Goods Act, 1930

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 The conjoint reading of both the Sections (Sec 2(1) and Sec 2(13) give us a conclusion
that to be recognized as a buyer or a seller under the Act, it is not necessary to actually
transfer the goods. Even if you agree or promise to buy or sell the goods, you would be
considered and identified as a Buyer or a Seller under the Act.

In the case, State of Gujarat v. Ramanlal 4, a partnership firm was dissolved and the surplus
assets including some stock were divided among the partners in specie. The Sale tax officer
was interested in taxing this as a sale. The court held that the property distributed among the
partners was their own. They could not sell this property to themselves. Not being a sale,
there could be no levying of sales tax.

3. Goods for exchange between two parties-

There must be some goods the property in which is or is to be transferred from the seller to the
buyer. The goods which form the subject-matter of the contract of sale must be movable. Transfer
of immovable property is not regulated by the Sale of Goods Act. It is important, that there are
‘some goods’ for a valid sale or for an agreement to sell.

Illustration: Akash agrees to sell to Bhasker the wheat crop which is grown in his (Akash’s)
field. They agreed that upon the payment of the price, Bhakser may cut the crop and take it
away. It is a valid contract of sale as the growing crop is included in the term ‘goods’ and can
be validly sold.

“Goods” means every kind of movable property other than actionable claims and money and
includes stock and 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 contracts relating to actionable claims, immovable property and
services are not covered by this Act.

‘Actionable claims’ are the claims, which can be enforced through law, e.g, a debt due from
one person to another is an actionable claim. ‘Money’ here means legal tender (i.e. currency
of the country). Rare coins can be treated as goods and sold.

4
State of Gujarat Vs Ramanlal [1965] AIR Guj 60

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 5
In Kuresell v. Timber Operators & Contractors Ltd. : Some trees were sold so that they
could be cut down and separated from the land and then taken away by the buyer. The court
held that it was sale of goods.

4. Transfer or agreement to transfer property-

There must be a transfer of general property as distinguishes from special property in goods
from the seller to the buyer. For e.g. if A owns certain goods he has general property in the
goods. If he pledges them with B, B has special property in the goods.

The word ‘general property’ means ‘ownership of goods’. Special property means possession
of goods. For instance, if Manu pledges a scooter to Ram for a loan of Rs.20,000. In this case,
Manu has general property or ownership of the scooter, while Ram has special property or
right to the extent of Rs.20,000 in the scooter. Thus, for contract of sale, the seller should
transfer or agree to transfer the ownership of the goods to the buyer. A mere transfer of
possession of goods is not sale.

Illustration: Meena keeps some of her jewellery in Kirin’s locker. Kirin cannot become the
owner of the jewellery, as no sale has taken place. In this case, there is no sale or purchase.

5. Price as mutually determined-

Price is an essential ingredient for all transactions of sale and in the absence of the price or
the consideration, the transfer is not regarded as a sale. The transfer by way of sale must be in
exchange for a price. It has been held that price normally means money. The price can be
paid fully in cash or it can be partly paid and partly promised to be paid in future. The price
can be fixed by the agreement between the parties before the conveyance of the property.

In every sale there must be a price, which is the money consideration for a sale of goods. 6If
the consideration is in the form of ONLY GOODS, it is a barter and not a sale. However, the

5
Kuresell v. Timber Operators & Contractors Ltd. [1927] 1 K.B. 298
6
Sec 2(10), Sale of Goods Act, 1930

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Sale of Goods Act, 1930 does recognize a sale where part money and part goods are paid. 7

Illustration: Mona agrees to sell a saree to Geeta for Rs.500. Geeta makes a payment of
Rs.300 to Mona and the balance she pays in the form of a lipstick. This is a valid sale. The
illustration shows that the entire payment for the transaction has been made.

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In the case of Aldridge v. Johnsons, 52 bullocks valued at 6 pounds each were exchanged
for 100 quarters of barleys at 2 pounds per quarter and the balance in cash. The court held
that it was a sale of goods

TYPES OF GOODS

It is essential that there are always some goods for a valid sale or for an agreement to sell. For
instance, if Akash agrees to sell to Bhasker the wheat crop which is grown in his (Akash’s)
field. They agreed that upon the payment of the price, Bhakser may cut the crop and take it
away. It is a valid contract of sale as the growing crop is included in the term ‘goods’, and
can be validly sold. As defined in section 2 (7),

“Goods means every kind of movable property other than actionable claims and money; and
includes electricity, water, gas, stock and 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.”9 It has been held in the State of Maharashtra v. Champalal Kishanlal
Mohta, 10 that things which are attached to land are the subject matter of the contract of sale if
they are severed before the sale.

For example, if a resort was offering stay along with food at a consolidated charge. If
customers do not take food, the rebate on food is not allowed as the supply of food does not
come under the definition of “goods” as per the Act.

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Consideration, under the Indian Contract Act.
8
Aldridge v. Johnsons [1857] 7 E and B 885
9
Sec 2(7), The Sale of Goods Act, 1930
10
State of Maharashtra v. Champalal Kishanlal Mohta, 1971 AIR 908, 1971 SCR (1) 46

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It is concluded from the above definition that the Act deals with the sale of goods i.e.
movable property only. On the other hand sale of immovable property is governed by the
Transfer of Property Act, 1882. It is noted that the actionable claims and money are excluded
from the ambit of the definition. Actionable claims are the claim or debt for which legal
action can be taken and can be enforced, like recovery of refund is an actionable claim and is
not included in the purview of the above definition.

Section 6 of Sale of Goods Act describes the three types of goods. The goods are classified
into existing goods, future goods, and contingent goods.

1.) EXISTING GOODS:

The goods that are referred to in the contract of sale are termed as existing goods if they are
present (in existence) at the time of the contract. In sec 6 of the Act, the existing goods are those
goods which are in the legal possession or are owned by the seller at the time of the formulation
of the contract of sale. The existing goods are further of the following types:

 Specific Goods:

According to the sec 2(14) of the Act, these are those goods that are specifically “identified and
agreed upon” when the contract of sale is formed. For example, you want to sell your mobile
phone online. You put an advertisement with its picture and information. A buyer agrees to the
sale and a contract is formed. The mobile, in this case, is specific good.

Illustration:

1. A contract to sell a Nokia cell phone of a particular model is a contract to sell a

specific good. In this case, the sale is for a specific good, as the phone has been
identified.

2. ‘A’ wants to sell his HP Laptop of a particular model number and advertises the same.
‘B’ agrees to purchase the laptop. Both entered into the contract of sale. Here the

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 laptop is a specific good.

 Ascertained Goods:

This is a type not defined by the law but by the judicial interpretation. This term is used for
specific goods which have been selected from a larger set of goods. For example, you have 500
apples. Out of these 500 apples, you decide to sell 200 apples. To sell these 200 apples, you will
need to separate them from the 500 (larger set). Thus you specify 200 apples from a larger group
of unspecified apples. These 200 apples are now the ascertained goods.

Illustration: Sheela owns 20 Maruti Cars. Uma enters into a contract with Sheela to buy one
car out of those 20 cars. After the contract one car is given to Uma and this car will then be
an ascertained good.

 Unascertained Goods:

These are the goods that have not been specifically identified but have rather been left to be
selected from a larger group. For example, from your 500 apples, you decide to sell 200 apples
but you don’t specify which ones you want to sell. A seller will have the liberty to choose any
200 apples from the lot. These are thus the unascertained goods.

Illustration: 100 leather jackets are lying in the godown out of this lot of 100 jackets 10
jackets are to be bought by Bhawana, this is a contract for sale of unascertained goods made
by the leather jacket manufacturer.

3. CONTINGENT GOODS:
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Contingent goods, as defined in Sec 6(2) of the Act are actually a subtype of future goods in
the sense that in contingent goods the actual sale is to be done in the future. These goods are part
of a sale contract that has some contingency clause in it. For example, if you sell your apples
from your orchard when the trees are yet to produce apples, the apples are a contingent good.
This sale is dependent on the condition that the trees are able to produce apples, which may not

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The Sale of Goods Act, 1930

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happen. There may be a contract for the sale of goods the acquisition of which by the seller
depends upon a contingency which may or may not happen.

Illustration: Ravi agreed to sell 100 cotton shirts he was importing from China provided his
ship arrived safely in time. In this example, the cotton shirts are contingent goods as their sale
is dependent upon the safe and timely arrival of the ship.

4. FUTURE GOODS:

Future goods are the goods to be manufactured or produced or acquired by the seller after the
making of the contract of sale. There can be an agreement to sell only. There can be no sale
in respect of future goods because one cannot sell what he does not possess. In sec 2(6) of the
Act, future goods have been defined as the goods that will either be manufactured or produced
or acquired by the seller at the time the contract of sale is made. The contract for the sale of
future goods will never have the actual sale in it; it will always be an agreement to sell.

Future goods therefore are neither in existence nor in possession of the seller at the time when
the contract of sale is entered into. For example, you have an apple orchard with apples in it.
You agree to sell 1000 apples to a buyer after the apples ripe. This is a sale that has to occur
in the future, but the goods have been identified already and the agreement has been made.
Such goods are known as future goods.

Illustration:

1. Rama agrees to sell to Urmilla the entire crop of sugarcane to be grown at her farm in
Uttar Pradesh for an amount of Rs.2,00,000. Such type of agreement is not a sale but
an agreement to sell future goods.

2. Amit is a manufacturer of chairs. Shyam ordered Amit to manufacture 200 units of

chairs of specific design and they made an agreement for the same. This is the sale
with respect to future goods.

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In the case of Union of India v. K.G. Khosla & Co. Ltd. goods were manufactured
according to the specification mentioned in the contract. Therefore, the goods were “future
goods” within the meaning of Section 2(6) of the Act.

When there is a contract for the sale of unascertained goods, property in the goods is not
transferred to the buyer unless and until the goods are ascertained.13 Section 23 provides that
in the case of sale of unascertained goods or future goods by description, property passes to
the buyer when goods of that description in a deliverable state are unconditionally
appropriated to the contract, either by the seller with the assent of the buyer or by the buyer
with the of the seller.

For instance, if Ganshyam agrees to sell Ram Rattan 200 quintals of wheat out of larger
quantity lying in Ghanshyam’s godown. The agreed price is to be paid on the day appointed
under the contract. Unless and until the required quantity of 200 quintals is separated from
the larger quantity and the goods have been ascertained the property therein cannot pass from
the seller to the buyer.

Unconditional appropriation:

The unconditional appropriation of goods or future goods may be made either by the seller
with the buyer’s assent or by the buyer with the seller’s assent. Normally goods shall be
appropriated by the seller. Where he appropriates the goods to the contract, the property shall
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pass to the buyer only when the latter has assented to the appropriation. The assent
however, may be given before or after appropriation. Whether the appropriation is done by
the seller or the buyer, the assent of the other party must be obtained. Where goods are in the
possession of the buyer, he may do the appropriation.

Illustration: There are 500 bags of wheat lying with the seller and he selects 100 bags out of
the lot with the buyer’s assent, the ownership of those 100 bags would pass to the buyer as
soon as this is done.

Sale of commodities constitutes one of the important types of contracts under the law in India.

12
Union of India v. K.G. Khosla & Co. Ltd, 1979 AIR 1160, 1979 SCR (3) 453
13
Sec 18, The Sale of Goods Act, 1930
14
https://www.toppr.com//

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India is one of the largest economies and also a great country where and thus has adequate
checks and measures to ensure the safety and prosperity of its business and commerce
community. Here we shall explain The Sale of Goods Act, 1930 which defines and states terms
related to the sale of goods and exchange of commodities.

LAW RELATING TO SALE OF GOODS

Sale as defined in sec 4 (3) of the Act as,

“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.”

Agreement to sell:

 Contract of sale is comprised of sale as well as agreement to sell.

 When transfer of ownership in the goods is to be transferred from seller to buyer at some
future date, it shall be called as agreement to sell.
 Agreement to sell is not sale of goods.

The distinguishing features between sale and agreement to sale are as follows:

1. Nature of Contract:
Where the nature of Contract in case of a sale is an executed contract, on the other
hand the nature of contract in agreement to sale is executory.

2. Transfer of Property:
Transfer of Property in Sale is transferred to the buyer immediately, whereas, in
Agreement to Sale, ownership is transferred to the buyer at some future date or time.

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 3. Risk of Loss:
In Sale, loss shall be suffered by the buyer, whereas, loss shall be suffered by the
seller, in case of an Agreement to Sale.

4. Right of Re-sale:
The right to re-sale vests with the buyer in Sale, that is, the seller cannot resell the goods.
On the other hand, in an Agreement to Sale since possession of goods is with the seller,
he can sell the goods, but this would result in the breach of contract.

5. Insolvency of seller:
Buyer has the right ot recover the goods from the official receiver in the case of Sale,
while, the Buyer cannot recover the goods from the official receiver in an Agreement
to Sale.

Delivery:

The delivery of goods signifies the voluntary transfer of possession from one person to another.
The objective or the end result of any such process which results in the goods coming into the
possession of the buyer is a delivery process. The delivery could occur even when the goods are
transferred to a person other than the buyer but who is authorized to hold the goods on behalf of
the buyer.

There are various forms of delivery as follows:

 Actual Delivery: If the goods are physically given into the possession of the buyer, the
delivery is an actual delivery.

 Constructive delivery: The transfer of goods can be done even when the transfer is
effected without a change in the possession or custody of the goods. For example, a case
of the delivery by attornment or acknowledgment will be a constructive delivery. If you
pick up a parcel on behalf of your friend and agree to hold on to it for him, it is a
constructive delivery.

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 Symbolic delivery: This kind of delivery involves the delivery of a thing in token of a
transfer of some other thing. For example, the key of the godowns with the goods in it,
when handed over to the buyer will constitute a symbolic delivery.

CONCLUSION

It can be concluded that the sale or purchase of goods is the most recurring transaction in
almost every kind of business. Every now and then, businessmen get involved in the sale &
purchase of goods and enter into the contract of sale. These contracts are governed by the
Sale of Goods Act, 1930. It is important for every individual, be it a legal professional or a
common man who deals in the transaction of sales on a regular basis, to have an
understanding of the important terms in the Sale of Goods Act,1930. In business law, the
term "goods" refers to all movable property apart from actionable claims and money. This
includes growing crops, grass, and other things attached to land or forming a part of the land,
as well as stocks and shares. There are three main types of goods: existing goods, future
goods, and contingent goods. Future goods are goods that are not yet in existence or that do
not yet belong to the seller when the contract of sale is made. This could be goods that are yet
to be manufactured or that the seller has not yet acquired. For example, a farmer may agree to
sell a buyer all of the milk produced by his/her cows in the coming year. This is called an
"agreement to sell."

A contract of sale is a specific legal contract concerning the exchange of goods between two
parties, the seller and a buyer. The contract of sale concerns the transfer of goods, property,
or services from the seller to the buyer, in exchange for an agreed-upon sum of money. The
contacts for sale of goods are subject to the general principles of the law relating to contracts
i.e. the Indian Contact Act. A contract for sale of goods has, however, certain typical features
relating to transfer of ownership of the goods, delivery of goods, rights and duties of the
buyer and seller, remedies for breach of contract, conditions and warranties implied under a
contract for sale of goods, etc. These peculiarities are the subject matter of the provisions of
the Sale of Goods Act, 1930.

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 BIBLIOGRAPHY

BOOKS:-

 “The Sale of Goods” by Dr. Madhusudan Saharay

 “Law of Sale of Goods” by Akhileshwar Pathak

 “The Sale of Goods Act” by Pollock & Mulla

WEB SOURCES:-

 https://www.upcounsel.com/classification-of-goods-in-business-law

 https://www.oxfordreference.com/

 https://indiankanoon.org/

 https://nslegislature.ca/

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