CONTRACT

OF SALE

BY:- UDITA BHANDARI (00850501719)

SNEHA SINGH (01650501719)
GARIMA JAGGI (01750501719)
 • The Law relating to sales and
purchase of goods, prior to 1930
were dealt by the Indian Contract
Act, 1872.
• In 1930, Sections 76 to 123 was
repealed, and a separate Act known
INTRODUCTI as Sales of Goods Act, 1930 was
passed .
ON • This Act lays down special provisions
governing the Contract of Sales of
Goods. The General Law of Contract
is also applicable to the Contract of
Sale of Goods unless they are in
consistent with the express provision
of the Sales of Goods Act.
MEANING OF
CONTRACT OF SALE

• Contract of the sale is an agreement between the buyer and the

seller intending to exchange property. Section 4(1) defines the
contract of the sale as – a contract of the sale of goods is a contract
whereby the seller transfers or agrees to transfer the property in
goods to a buyer for a price.
Contract of Sale are of two types:-

Contract of
Sale

AGREEMENT
SALE
TO SELL
1) SALE :-
• It is contract where the ownership in the goods is transferred by seller to the
buyer immediately at the conclusion of Contract.
Example – “A” sells his house to “B” for Rs 10 lakh. It is a sales since the
ownership of the house has been transferred from “A” to “B”.

2) AGREEMENT TO SELL :-
• It is a Contract of sale where the transfer of property in goods is to take place
on a future date or subject to some condition thereafter to be fulfilled.
Example – “A” agreed to buy from “B” a certain quantity of nitrate soda. The ship
carrying the nitrate soda was yet to arrive. This is an “Agreement to Sale”. In this
case the ownership of nitrate soda is to be transferred to “A” on the arrival of
ship containing the specific goods (nitrate soda).
 DIFFERENCE
BETWEEN SALE AND
AGREEMENT TO SELL
 • A contract of sale of goods
involves transfer of
TRANSFER ownership from seller to
the buyer.
OF * Transfer of ownership or
OWNERSH property in goods is in fact
the main object of making a
IP contract of sale.
IMPORTANCE OF TRANSFER
OF OWNERSHIP
• In a contract of sale, the precise moment at which property or ownership in goods
passes from the seller to the buyer is of great importance because, it has multiple
legal ramifications. This is so because it is the ownership or title in goods that
dictates the legal course in several extraordinary circumstances. The significance of
transfer of ownership in goods can broadly be studied under the following four
heads.

1. Risk ‘Prima-Facie’ Passes with Property:

• The general rule of law is that the ‘risk‘ prima-facie follows ownership. If goods are
lost or damaged by some accident or otherwise, then, subject to certain exceptions,
whosoever is the owner of the goods at the time of loss or damage, shall bear the
loss. In other words, it is the owner of the goods at the time of loss who suffers the
risk of loss and not the person who is merely in possession of the goods.
Example - A hired a van from B. As a result of an accidental fire, the van was
totally damaged while it was in the custody of A. The loss would be borne
by B because at the time of loss he was the oner of the van.

2 .Action against third party in transfer of ownership

If after the contract of sale, there is a risk of the goods being damaged by the action
of third parties, it is generally the owner who can take action and not the person
who is merely in possession of the goods.
3. Insolvency of the Buyer or Seller in transfer of ownership

If the buyer or seller becomes insolvent, it is necessary to ascertain whether the goods
can be taken over by the ‘official receiver‘ or ‘official assignee‘. This depends upon
whether the property in the goods was with the party adjudged insolvent. If the buyer is
adjudged insolvent, the buyer’s official receiver or official assignee shall be entitled to
take the possession of the goods even though the goods have not been delivered by the
seller. On the other hand, if the seller becomes insolvent before effecting delivery of the
goods but the property in goods has already passed to the buyer who has paid the price,
the seller’s official receiver shall have no claim against the goods.
 ESSENTIAL OF
CONTRACT OF SALE

• Two Parties - There must be two parties- a buyer

and a seller to constitute a contract of sale.
• Goods - Contract of sales relates to good i.e.,
movable property.

• Transactions involving purchase and sale of

immovable property are out of the preview of
the Sales of Goods Act.
• Transfer of general property – The object of
the contract must be the transfer of the
general property as distinguished from the
special property in the goods by one person to
another. The term “general property” refers to
sale of goods.
• Price – The consideration of the contract of
sale called price must be money.
• Essential elements of a valid contract – All the
essential elements of a valid contract must be
present in the contract of sale.
 KIND OF GOODS
The following are the kind of goods.
1. Existing goods - Existing goods are goods that physically exist
and belong to the seller at the time of contract of sale.
* Existing can be further divided into two categories:
• Specific Goods: These are goods that are specifically agreed
upon between the seller and buyer at the time of making the
contract of the sale. For example, the seller may agree to sell the
buyer a specific item bearing a specific number. These are
sometimes known as "ascertained goods." This distinction
becomes important because of the rules regarding the
transfer of property between parties.
• Unascertained goods: These are goods that are agreed upon at
the point of making the contract of sale but are not specifically
identified in the contract. For example, a seller may agree to sell a
buyer one out of a number of items of the same type (e.g., bags of
sugar) without defining which specific item the buyer will
receive. As soon as the specific item is defined, for example when
being prepared for delivery, this becomes specific, or ascertained
2. 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." Because the milk does not yet exist at the
point of making the contract, it is an example of future goods.
3. Contingent Goods
Although contingent goods are a type of future goods, they
differ in that they are dependent on a specific contingency. For
example, a seller may agree to sell a buyer some specific goods
that are due to arrive on a particular ship. If, when the ship
arrives, it does not contain those goods, the buyer will still have
fulfilled his agreement, because the sale was contingent on the
ship containing those specific goods.
 FIXATION OF
PRICE
• The money consideration for sale of goods is
know as price . Price is an essential element in
every contract of sale of goods . A valid sale
cannot take place without a price. The price
should be paid or promised to be paid .
Modes of Fixing Price :
1. Parties: This is most usual mode of fixing
the price. The Parties are free to fix any
price. The price may be stated in a contract
by the parties of the contract.
• Example : “Y” agrees to sell his car to “Z” for
Rs 5 lakh, here the price is fixed in the
contract itself.
2. Agreed Manner :
The price is fixed in a manner agreed upon in a
contract it may be the price prevailing on any
particular date.
*Example : “A” agrees to sell 1,000 share of PIAA
to “B” at the rate prevailing on the 20 day after the
deal.

3. Course of Dealing :
Where price is neither expressed in the contract
nor any manner of fixing the price is agreed the
price would be determined by the course of
dealing between the parties.
*Example – “A’ agrees with “B” to buy 100 shares
of XYZ company. In general course of dealing the
accepted price of shares is the price prevailing on
date of contract , it is the price prevailing in the
matter on date of sale.
4. Reasonable Price
If the price is not capable of being fixed
in by any of the above modes, the buyer is
bound to pay to seller a reasonable price,
what is the reasonable price depends upon
the circumstance of each case.
Example : “B” orders “C” to supply 1500
kg of Sugar without fixing the price . Price
of sugar in the market on the day of order
would be considered as reasonable price
“C” must supply sugar to “A” at this market
rate.