SPECIAL CONTRACT
UNIT-4, CONTRACT OF SALE OF GOODS
SYNOPSIS
Introduction
Definitions
Essentials of valid sale
Sale and agreement to sell
Kinds of goods
Condition and warranties
Transfer of property
Performance of contract of sale
INTRODUCTION
The contract of the sale of goods is governed by The Sale of Goods Act, 1930.
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.
A contract for the sale of goods has certain unusual features such as 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 the sale of goods, etc.
DEFINITIONS
Goods’ is defined as per Section 2 (7) of the ‘Act’ as. “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.”
In clause 1 of Section 2, the term ‘buyer’ is defined to include both a
person who actually purchases the goods and a person who is almost
willing to do so.
Clause 2 defines the term ‘delivery’ to involve a transaction of a transfer
of possession which is done voluntarily. Delivery can be actual or
constructive. It becomes ‘actual’ when the buyer receives the actual
products or receives the key to the warehouse where the goods are kept.
ESSENTIALS OF VALID SALE
At least two parties ought to be there.
Products ought to be the basis of the contract.
Price.
Transfer of ownership of property.
Ultimate or Conditional.
The other important constituents of a contract that is legitimate.
SALE AND AGREEMENT TO SELL
The sale and an arrangement to sell is one of the foundation principles of the
Sale of Goods Act 1930.
Section 4 of the Sale of Goods Act 1930 deals directly with the sale and the
selling agreement. It directly deals with sale and selling agreements.
Sale is described in Section 4(1) as a contract in which the seller transfers or
agrees to move the goods to the buyer for a price.
An agreement to sell may be described as a transfer of assets in goods to take
place in the future, or a transfer may take place in accordance with the
fulfilment of certain conditions. The same is mentioned in section 4 (3).
The terms and conditions of the sale of a property by the seller to the buyer are
laid down by an agreement to sell.
The amount for which it is to be sold and the future date of payment are
incorporated into these terms and conditions.
All the terms and conditions reported for the understanding of sales must be
carried out by all parties together and obeyed during the deal process before the
selling deed is made or completed.
An agreement to sell is, therefore, a simple document on which the sales deed is
drawn up.
In other words, a sale agreement may be considered a confirmation of the
potential occurrence that will take place based on the fulfilment of the present
terms and conditions.
KINDS OF GOODS
Goods may be further understood in the following subtypes:
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:
A) Specific Goods
According to the sec 2(14) of the Act, these are those goods that are “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.
B) 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.
C) 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.
2. Future Goods
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.
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 made. Such
goods are known as future goods.
3. Contingent Goods
Contingent goods 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 happen.
CONDITIONS AND WARRANTIES
Section 12 of The Sale of Goods Act,1930 defines condition and warranty. A
stipulation in a contract of the sale with reference to goods may be a condition
or a warranty. A condition is an arrangement which is essential to achieve the
main purpose of the contract. The breach of a condition must give the right to
abandon the contract which results in claiming the damages.
Contrarily, a warranty is an arrangement which is corroborative to the main
purpose of the contract. The breach of such a warranty must give rise to a claim
for damages but such warranty can not take away the right from the parties to
reject and deny the acceptance of the goods. Warranties and Conditions can
either be expressed or implied.
