Table of Contents
INTRODUCTION
Sale and Agreement to sell are defined in section 4 of The SALE OF GOODS ACT, of 1930.
SECTION 4 (1)
“A 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”. There may be a contract of sale between one part-owner and another.
SECTION 4 (2)
A contract of sale may be absolute or conditional.
SECTION 4 (3) AGREEMENT TO SELL
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, it is called an agreement to sell
An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the
property in the goods is to be transferred.
SALE - The property in goods is transferred from seller to the buyer immediately. The term sale is defined in the Section 4(3) of the Sale of Goods Act, 1930 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.” AGREEMENT TO SELL - In an agreement to sell, the ownership of the goods is not transferred immediately. It is intending to transfer at a future date upon the completion of certain conditions thereon. The term is defined in Section 4(3) of the Sale of Goods Act, 1930, as – “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, it is called an agreement to sell.”
EXAMPLE X agrees with Y on 10th October 2020 that he will sell his car to Y on 10th November 2020 for a
sum of ` 3 lakhs. It is an agreement to sell.
When the agreement to sell becomes a sale
An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred.
ESSENTIAL ELEMENTS FOR CONTRACT OF SALE OF GOODS UNDER THE SALE OF GOODS ACT, 1930
- There must be at least two parties, the seller and the buyer and the two must be different persons. A person cannot be both the seller and the buyer and sell his goods to himself
- The subject matter of the contract must necessarily be goods covering only movable property. It may be either existing goods, owned or possessed by the seller or future goods
- A price in money (not in kind) should be paid or promised. But there is nothing to prevent the consideration from being partly in money and partly in kind
- A transfer of property in goods from the seller to the buyer must take place. The contract of sale is made by an offer to buy or sell goods for a price by one party and the acceptance of such offer by another.
- A contract of sale may be absolute or conditional
- All other essential elements of a valid contract must be present in the contract of sale, e.g. free consent of parties, competency of parties, the legality of object and consideration, etc.
DISTINCTION BETWEEN A SALE AND AN AGREEMENT TO SELL
| Sale | Agreement to sell |
| The property in the goods passes to the buyer immediately. | Property in the goods passes to the buyer on a future date or on fulfillment of some condition |
| It is an executed contract i.e. contract for which consideration has been paid. | It is an executory contract i.e. contract for which consideration is to be paid at a future date |
| The seller can sue the buyer for the price of the goods because of the passing of the property therein to the buyer. | The aggrieved party can sue for damages only and not for the price unless the price was payable at a stated date |
| The risk of loss is that of the buyer since the risk follows ownership. | The risk of loss is that of the seller. |
| The seller cannot resell the goods. | The seller may sell the goods since ownership is with the seller |
| The official assignee will not be able to take over the goods but will recover the price from the buyer. | The official assignee will acquire control over the goods but the price will not be recoverable |
| The official assignee will have control over the goods | The official assignee will have control over the goods |
Sale and Hire Purchase
Contract of sale resembles contracts of hire purchase very closely, and the real object of a contract of hire purchase is ultimately the sale of the goods.
Hire Purchase
The Hire-purchase Act, of 1972 govern hire-purchase agreements. The term “hire-purchase agreement” means an agreement under which goods are let on hire and under which the hirer has the option to purchase them in accordance with the terms of the agreement and includes an agreement under which
- Possession of goods is delivered by the owner thereof to a person on condition that such person pays the agreed amount in periodical installments, and
- The property in the goods is to pass to such person on the payment of the last of such installments, and
- Such a person has a right to terminate the agreement at any time before the property so passes;
DISTINCTION BETWEEN A SALE AND HIRE-PURCHASE
| SALE | HIRE-PURCHASE |
| Property in the goods is transferred to the buyer immediately at the time of the contract. | The property in goods passes to the hirer upon payment of the last installment. |
| The position of the buyer is that of the owner of the goods. | The position of the hirer is that of a bailee till he pays the last installment |
| The buyer cannot terminate the contract and is bound to pay the price of the goods. | The hirer may, if he so likes, terminate the contract by returning the goods to its owner without any liability to pay the remaining installments. |
| The seller takes the risk of any loss resulting from the insolvency of the buyer. | The owner takes no such risk, for if the hirer fails to pay an installment, the owner has right to take back the goods |
| The buyer can pass a good title to a bona fide purchaser from him | The hirer cannot pass any title even to a bona fide purchaser. |
| The buyer in the sale can resell the goods | The hire purchaser cannot resell unless he has paid all the installments |
Sale and Bailment
A ‘Bailment’ is the delivery of goods for some specific purpose under a contract on the condition that the same goods are to be returned when the purpose is accomplished to the bailor or are to be disposed of according to the directions of the bailor. Provisions related to bailment are regulated by the Indian Contract Act, of 1872.
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 the sale of goods.
MUST READ
FORMATION OF THE CONTRACT OF SALE 1930