Unit-1 Contract of Sale 3) Price means the monetary

Definitions consideration for a sale of goods.

It is the essential requirement to
1) Goods means every kind of movable
property other than actionable claims and make a contract of sale of goods.
money and includes stock and shares, growing If Goods are exchanged for money,
crops, grass, and things attached to or it is contract of sale. If exchanged
forming part of the land, which are agreed to for goods it is contract of barter
be severed/ separated from the land before
and not sale
sale or under the contract of sale (Ex- Wood)
(Ex-Part in cash and part in Kind
Note : Actionable Claims are claims which
shall be treated as valid contract
can be enforced only by an action or suit. Ex-
Debt of sale. Gift is not contract of
sale)
2) Property (Also known as Ownership)- The
property in the goods means the general 4) Buyer means a person who buys
property i.e., ALL ownership right of the or agrees to buy goods
goods. (Note: General Property is
5) Seller means a person who sells
distinguished from Special property- Ex of
or agrees to sell goods
Special Property- Bailment, Pledge, Hire
purchase) – Risk Follows Ownership.
6) Contract of sale of goods is a 7) Insolvent A person is said to be
contract whereby the seller transfers insolvent when he ceases to pay his
debts in the ordinary course of business,
or agrees to transfer the property in
or cannot pay his debts as they become
goods to the buyer for a price. There due, whether he has committed an act of
may contract between part owners insolvency or not.

Contract to sale includes sale and Note: There may be a contract of sale
agreement to sell In Sale where under a between one part-owner and another.
contract of sale the property in the goods
What is Hire Purchase?
is transferred from the seller to the buyer
immediately, the contract is called a sale. means an agreement under which goods
are let on hire and under which the
hirer has an option to purchase them as
Agreement to sell where the transfer of per terms of the agreement and includes
the property in the goods is to take place an agreement under which—
at a future time or subject to some
Possession of goods is delivered by the
condition thereafter to be fulfilled, it is
owner to a person on condition that such
called an agreement to sell.”
person pays the agreed amount in
Thus Contract of sale may be absolute or instalments, and
conditional
The property in the goods will pass on
An agreement to sell becomes a sale when payment of last instalments
the time elapses or the conditions are
Such person has a right to terminate
fulfilled subject to which the property in
the agreement before the property passes
the goods is to be transferred.
 Basis of difference Sale Agreement to sell
Transfer of property The property in the goods passes Property in the goods passes
to the buyer immediately. to the buyer on future date or
on fulfilment of some condition.
Nature of contract It is an executed contract It is an executory contract

Remedies for breach The seller can sue the buyer for The aggrieved party can sue for
the price of the goods because of damages only and not for the price
the passing of the property
therein to the buyer.
Liability of parties A subsequent loss or Such loss or destruction is the
destruction of the goods is the liability of the seller.
liability of the buyer.
Burden of risk Risk of loss is that of buyer Risk of loss is that of seller.
Nature of rights Creates Jus in rem means right Creates Jus in personam means
against the whole world. rights against a particular party
to the contract
Right of resale The seller cannot resell the goods. The seller may sell the goods since
ownership is with the seller.
In case of insolvency of seller The official assignee will not be The official assignee will acquire
able to take over the goods but control over the goods but the
will recover the price from the price will not be recoverable.
buyer.
In case of insolvency of buyer The official assignee will have control The official assignee will not have
over the goods. any control over the goods.
Basis of difference Sale Hire- Purchase
Time of passing property Property in the goods is The property in goods passes to the hirer
transferred to the buyer upon payment of the last instalment.
immediately at the time of contract.

Position of the party The position of the buyer is that of The position of the hirer is that of a
the owner of the goods. bailee till he pays the last instalment.

Termination of contract The buyer cannot terminate the The hirer may, if he so likes, terminate
contract and is bound to pay the price the contract by returning the goods
of the goods. to its owner without any liability to pay
the remaining instalments.
Burden of Risk of The seller takes the risk of any loss The owner takes no such risk, for if the
insolvency of the buyer resulting from the insolvency of the hirer fails to pay an instalment, the
buyer. owner has right to take back the goods.

Transfer of title The buyer can pass a good title to The hirer cannot pass any title even to a
a bona fide purchaser from him. bona fide purchaser untill he pays
the last instalment.

Resale The buyer in sale can resell the goods. The hire purchaser cannot resell
unless he has paid all the instalments.
Sale and contract for work and labour A contract of sale of goods is one in
which some goods are sold or are to be sold for a price. But where no goods are
sold, and there is only the doing or rendering of some work of labour, then the
contract is only of work and labour and not of sale of goods.

Difference between sale and Bailment

Basis of Sale Bailment
differen
ce
Transfer of The property in goods There is only transfer of possession of goods
property is transferred from the from the bailor to the bailee for any of the
seller to the buyer. So, it is reasons like safe custody, carriage etc. So, it is
transfer of general transfer of special property.
property.

Return of The return of goods in The bailee must return the goods to the
goods contract of sale is not bailor on the accomplishment of the purpose
possible. for which the bailment was made.

Consideration The consideration is the The consideration may be gratuitous or non-

price in terms of money. gratuitous.
Types of Goods B) FUTURE GOODS means goods to be
A) EXISTING GOODS are such goods manufactured or produced or acquired by
which are in existence (owned or possessed the seller after the contract of sale(
by seller) at the time of the contract of (Ex- Apple Farming)
sale. C) CONTINGENT GOODS The acquisition
It is further divided into 3 types of goods which depends upon an uncertain
contingency (uncertain event) are called
1) Specific goods mean goods identified
contingent goods.
and agreed upon at the time when a
contract of sale is made
2) Ascertained Goods are those goods Delivery- It means voluntary transfer of
which are identified in accordance with possession from one person to another.
the agreement after the contract of sale Types of Delivery
is made.( Out of 100 packets 10 were 1) Actual delivery: When the goods are
selected) physically delivered to the buyer or 3rd
When out of a large quantity of person. This is the most common method
unascertained goods, quantity contracted of delivery. ( Ex- Zomato,Swiggy)
is identified or selected, such identified 2) Constructive delivery: When transfer
goods are called ascertained goods of goods is effected without any change in
3) Unascertained goods are the goods the custody or actual possession of the
which are not specifically identified or thing.
ascertained at the time of the contract. 3) Symbolic delivery When there is a
(Ex- Packet of Sugar) delivery of a thing in token of a transfer
of something else.
This includes delivery by handing over Essential Elements for Contract of Sale
document of title to goods 1) There must be 2 parties
2) Subject matter of contract must be
movable goods
Document of title shows an 3) Price shall be in money
unconditional undertaking to deliver 4) Transfer of property must take place
the goods to the holder of the 5) It may be absolute or conditional
document. Example 6) All essential elements of contract must
1) Bill of lading exist as per ICA,1872
2) Dock Warrant
A contract of sale can be made in following
3) Warehouse Keeper certificate
modes
4) Railway receipt 1) Offer to buy or sell and acceptance of it
5) Multimodal transport 2) Immediate Delivery and future payment(
Note: Mate Receipt is not Document Credit Sale)
of Title 3) Immediate Price payment and future
delivery(Online Shopping, CIF)
Document showing title- It merely
4) Immediate delivery and immediate
represent ownership. It is not payment(FOB Sale)
transferable 5) Delivery or Payment or both in
Ex- Share certificates installments(Ex- EMI)
6) Delivery or payment or both at future
date( COD)
Initial and Supervening Impossibility Ascertainment of price( Sec-9)
Goods perishing before making of contract Price means the monetary
Where there is a contract for the sale of
specific goods, the agreement is void if consideration for sale of goods. T he
the goods without the knowledge of the price in the contract of sale may be-
seller at the time when the contract was
made, perished or become damaged
(1) fixed by the contract, or
(2) agreed to be fixed in a manner
Goods perishing before sale but after provided by the contract
agreement to sell Where there is an (3) determined by the course of
agreement to sell specific goods, and dealings between the parties.
subsequently the goods without any fault Payment of the price by the buyer is
on the part of the seller or buyer, an important ingredient of a contract
perish or become so damaged before the of sale.
risk passes to the buyer, the Contract is If the parties ignore the question of
thereby avoided or becomes void. price it would not become an
Perishing of future goods The destruction uncertain and invalid agreement.
of such goods will amount to supervening It will rather be a valid contract and
impossibility and the contract shall the buyer shall pay a reasonable
become void. price depending on circumstances(Ex-
Seller refuses to fix price)
Agreement to sell at valuation

1) Where there is an AGREEMENT TO

SELL GOODS and price has to be fixed by
the third party and he either does not or
cannot make such valuation, agreement
becomes void
2) If 3rd party is prevented from fixing
the price by the default of seller or
buyer, the party at fault will be liable to
the damages to the other party who is not
at fault and contract can be terminated
3) However, a buyer who has received and
appropriated the goods must pay a
reasonable price for them
( Ex- 2 bikes one Bike is delivered and one is
agreement to sell. And valuer refuses to fix
price. – Ans-Bike-1 Reasonable Price Bike-2
Contract can be avoided)