Contents

Sales of goods act

Contract of sale
 Essentials of Contract of Sale.
Meaning of contract of sale
Distinction between Sale and Agreement to Sell.
Goods.
Kinds of goods
Destruction of goods.
Price.
Modes of fixing price 
Rights of buyer
Duties of buyer
 Sale of Goods Act
• The law relating to sale of goods is contained
in the Sale of Goods Act,1930. This law came
force on 1st July 1930. The Act contains 66
sections and extends to the whole of Pakistan.
 Definition of contract of sale
• Sale of Goods Act defines a contract of sale of
goods as “A contract whereby the seller
transfer or agrees to transfer the property in
goods to the buyer for a price”.

• In the other words, a contract to transfer the

ownership of goods from the seller to the
buyer is known as contract of sale.
 essentials of contract of sale
• The Following are essentials of a contract of
sale of goods:
1. Contract
The word contract means an agreement
enforceable by law. All the essential of a valid
contract like capacity of parties, free consent,
legality of object, etc. should also be present in a
contract of sale. It may be verbal or in writing. It
may be express or implied.
 essentials of contract of sale
2. Two Parties:
There should be two parties to a contract of sale, i.e. a
buyer and seller. One person cannot act as a buyer and
seller because a person cannot buy his own goods and
similarly a person cannot sell his goods to himself.
However, an owner of a one part can sell his share to the
owner of other part. Similarly, a partner may buy the goods
from the firm in which he is a partner and vice-versa.
Example: A sells his computer to B for Rs. 40,000. A is seller
and B is buyer.
 essentials of contract of sale
3: Transfer of Property:
Transfer of property is another essential of contract of sale.
Property here means ownership. A mere transfer of
possession of the goods cannot be termed as a sale. To
constitute a contract of sale the seller must either transfer or
agree to transfer the property (ownership) in the goods to
the buyer.

Example: “A” sells his car to “B” for Rs 8,000,000. The

ownership and possession of the car will be transfer from “A”
to “B”.
 essentials of contract of sale
4: Goods:
Goods means every kind of movable property other
than actionable claims and money; and includes
electricity, water, gas, stock and shares, growing crops,
car etc. Every movable property is regarded as goods.
The trees, fruits etc. are regarded as goods because
they can be separated from land.
Example: A sell his Car to M for Rs 3 lac. It is a contract
of sale because here the subject matter is car which is
moveable thing.
 essentials of contract of sale
5: Price:
 The consideration in a contract of sale must be the
price. When goods are sold or exchanged for other
goods, the transaction is barter, and not a contract
of sale of goods. If goods are sold partly for goods
and partly for money, the contract is sale.

Example: A sells his chair to B for Rs. 2000. It is the

contract of sale.
 essentials of contract of sale
6: Sale and Agreement to sell:
The term contract of sale includes both sale and an agreement to
sell. When the property in the goods is transferred from the seller
to the buyer at the time of formation of contract, the contract is
called a sale. Where under a contract of sale the transfer of
ownership in the goods is to be transferred from seller to buyer at
some future date, the contract is called an agreement to sell.

Example: “A” buys a book from “S” and pays the entire price on a
counter and received the goods, it’s a sale. “A” agree to buy “B’s”
car for Rs 2 lac, but deliver will be take placed after a month, it’s a
agreement to sale.
 Meaning of contract of sale
Contract of Sale may be of two types
• SALE 
• AGREEMENT TO SELL 
• SALE :
It is a contract where the ownership in the goods is transferred
by seller to the buyer immediately at the conclusion contract.
• EXAMPLE: A sells his house to B for Rs.25 Lac. It is a sale since
the ownership of the house has been transferred from A to B.
• AGREEMENT TO SELL :
It is a contract of sale where the transfer of property in goods is to take place
at a future date or subject to some condition thereafter to be fulfilled.
• EXAMPLE: A agreed to buy from B’s car for Rs.2 Lac if his mechanic
approves the car. It is an agreement to sell.
DIFFERENCE BETWEEN SALE AND
AGREEMENT TO SELL
DIFFERENCE BETWEEN SALE AND
AGREEMENT TO SELL
DIFFERENCE BETWEEN SALE AND
AGREEMENT TO SELL
 GOODS 
• The subject matter of a contract of a sale must
be goods . According to Section 2(7) the term
‘goods’ means “every kind of movable
property other than actionable claims and
money and includes stock and shares ,
growing crops , and things attached to or
forming part of the land which are agreed to
be severed before sale or under the contract
of sale”
 Kinds of goods
GOODS.
• Exiting goods
Specific
Ascertained
Unascertained
• Future goods
• Contingent goods
 Kinds of goods
Existing goods:
These are the goods which are owned or possessed by
the seller at the time of sale. Only existing goods can be
the subject of a sale. The existing goods may be-
a) Specific goods:
Goods identified and agreed upon at the time of making
of the contract of sale of goods.
Example: A owns many cows and promises to sell one of
them. If one cow is singled out, the contract is for
specific goods.
 Kinds of goods
 b) Ascertained goods:
Goods identified subsequent to the formation of
the contract of sale. The terms ascertained and
specific, are commonly used for same kind of
goods.
Example: A makes a contract with B to sell 10
bags of sugar. After the contract, a separates 10
bags from his stock of sugar for B. these bags are
ascertained goods. 
 Kinds of goods
c) Unascertained or generic goods:
Goods not identified or agreed upon at the time
of making of the contract of sale. They are the
goods defined for description only.
Example: A has 100 bags of sugar. A promises to
sell 10 bags of sugar out of them. It is a contract
of unascertained goods.
 Kinds of goods
2. Future goods:
Goods to be manufactured, produced or
acquired after making of the contract are called
future goods.
Example: A agrees to sell to Y all the mangoes
which will be produced in his farm next year. It is
a contract for the sale of future goods.
 Kinds of goods
3. Contingent goods :
Goods that are not in existence at the time of
contract of sale are called contingent goods. In
this case, the performance of contract by the
seller depends upon uncertain events which may
or may not happen.[sec.2(6)]
Example: A agrees to sell to B a rare painting if he
is able to purchase from its present owner. This is
a contract of sale of contingent goods.
 Destruction of Goods.
The following may be the causes of destruction
of goods.
•  Damage to goods in which the goods have
lost their commercial value e.g. when cement
is spoiled by water.
• Loss of goods by theft.
 Perishing of goods before making of the
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 the contract was made, perished or
become so damaged as no longer to answer to their description
in the contract.  Illustration Facts: ‘A’ agrees to sell to ‘B’ a
certain horse. It turns out that the horse was dead at the time
of bargain, though neither party was aware of the fact. Discuss
the validity of the contract. Solution: The agreement is void. In
case part of goods is perished, the following rule applies : (a)if
contract is indivisible, it shall be void; and (b)if contract is
divisible, it will not be void and the part available in good
condition must be accepted by the buyer
 Goods perishing before sale but after
agreement to sell (Sec.8)
• 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 the contract was made, perished or
become so damaged as no longer to answer to their description
in the contract.
• illustration Facts: A buyer took a horse on a trial for 10 days on
condition that if found suitable for his purpose the bargain
would become absolute. The horse died on 5th day without any
fault of either party. Discuss the position of both parties.
• Solution :The contract , which was in the form of an agreement
to sell, becomes void and the seller shall bear the loss.
 A contract of sale of future and contingent goods

• A contract of sale of future and contingent gods is an

agreement to sell. The destruction of future and
contingent goods makes the contract void.

• Example: C agreed to sell to H 200 tons of potatoes to

be grown on C’s land. C sowed sufficient land to grow
the required quantity of potatoes, but without any
fault on his part, a disease attacked the crop and he
could deliver only about ten tons. The contract was
held to have become void.
 Price
• Sec.2(10) defines price “as money
consideration for a sale of goods”.
• It forms an essential part of the contract.  It
must be expressed in terms of money.
• It is not essential that the price should be fixed
at the time of sale. It must, however, be
payable, though it may not have been fixed.
 Models of fixing price
Parties:
It is the most common mode of fixing the price. The parties are free to
fix any price. The price may be stated in a contract by the parties to the
contract.
• Example: A agrees to sell his car to B for RS.5Lac. Here, the price is
fixed in the contract itself.
Agreed manner:
The price may be fixed in a manner agreed upon in a contract. It may be
the price prevailing on any particular date or price to be fixed by a third
person.
• Example: A agrees to sell 100 shares of w company to B at the market
rate prevailing on the 20th day after deal. It is a valid contract of sale.
 Models of fixing price
•  Course of Dealings:
when price is neither expressed in the contract nor any
manner of fixing the price is agreed, the price is
determined during the course dealings between the
parties.
Example: A agrees to buy 100 shares of W company
from B. In general course of dealings, the accepted
price of shares is the price prevailing on the date of
contract. It is the price prevailing in the stock market
on the date of sale.
 Models of fixing price
• Reasonable price:
If the price is not capable of being fixed by any of
the above modes, the buyer is bound to pay to the
seller a reasonable price. The amount of reasonable
price depends upon the circumstances of each case.
Example: A order B to supply 100 kg of sugar
without fixing the price. Price of sugar in the market
on the day of order will be considered as reasonable
price. B must supply sugar to A at this market rate.
 Rights of The Buyer
1. He has the right to have delivery of the goods as per the contract.

2. If the seller does not send, as per the contract, the right quantity of goods to the buyer, the buyer can reject
the goods.

3. If the goods are sent by sea route by the seller, the buyer has a right to be informed by the seller so that 
he may get the goods insured.

4. The buyer has a right to examine the goods which he has not seen earlier before giving his acceptance for the
same.

5. If the seller wrongfully refuses to deliver the goods to the buyer as per the contract, the buyer may sue the
seller for damages for non delivery. The amount of damages will be the difference between the contract price
and the market price of the goods.
 Rights of The Buyer
6. If the buyer has already paid the price and the seller has not delivered
the goods as per the contract, the buyer can recover the amount paid.

7. If the contract is for the sale of specific or goods, the buyer may sue the
seller for the specific performance of the contract in case of 
breach of contract by the latter.

8. The buyer may sue the seller for damages for the breach of any implied
warranty as per the provisions of this Act.
 Rights of The Buyer
9. If the seller rejects the contract before the date of delivery, the
buyer may either treat the contract as still existing and wait till the
date of delivery or he may treat the contract as cancelled and sue
the seller for damages for the breach. The second case is known as
the anticipatory breach of contract.

10. If, in view of the breach of contract by the seller, the price has
to be refunded to the buyer, the buyer has a right to claim interest
on the amount.
 Duties of the Buyer in a Contract of Sale

1. It is the duty of the buyer to accept the goods and pay

for them in accordance with the terms of the contract.

2. It is the duty of the buyer to apply for delivery.

3. It is the duty of the buyer to demand delivery of the
goods within a reasonable time.
 Duties of the Buyer in a Contract of Sale

4. It is the duty of the buyer to take the risk of

deterioration in the goods which is necessarily incident
to the course of transit. Example: Rusting of iron.
5. If the buyer refuses to accept the goods, it is his duty
to inform the seller about it.
6. If the seller delivers the goods as per the contract, it
becomes the duty of the buyer to take delivery of the
same within a reasonable time. 
 Duties of the Buyer in a Contract of Sale

7. If the ownership rights have already been passed

on to the buyer by the seller, the former has the duty
to pay the price as per the terms of the contract.
8. If the buyer wrongfully refuses to accept and pay
for the goods, he will have to compensate the seller
for damages for non-acceptance.