Essentials of Contract of Sale

The sale of goods Act came into force July 1,1930. It extends to the whole of India except the state of Jammu and Kashmir.

According to Section 4 of the Act,a contract of sale means “a contract where the seller transfers or agree to transfer the property in goods to the buyer for price.” Thus,a contract of sale may be of two types:

contract sale

  • Sale: Where under a contract of sale the property in the goods is immediately transferred from the seller to buyer,the contract is called a ‘Sale’.

Example: On 21, March, A sells 12 bags of rice to B for a sum of Rs.150.It is a sale since the ownership of 12 bags of rice has been transferred from A to B.

  • Agreement to Sell: Where under a contract of sale, the transfer of property in goods is to take place at a future time or subject to the fulfillment of certain conditions,the contract is called an agreement to sell.

Example: On 15,December, A agrees with B that he will sell to B,his horse on 20 of December for a sum of Rs.10,000. It is an agreement to sell,since A agrees to transfer the ownership of the horse to B in future.

An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods will be transferred.

Essentials of Contract of Sale

1. Two Parties: There must be two parties- a buyer and a seller-to constitute a contract of sale. The same person cannot be both a purchaser and a seller.

Example: A is the owner of certain goods but he does not know. B pretends to the owner of those goods and sells them to A. There is no sale since there is nothing for A to but.

2. Goods: There must be some goods as a subject-matter. Goods must be one which is defined as goods in Sec. 2(7) of the Sale of Goods Act. As per the definition given in Sec. 2(7) of the Act, goods means every kind of movable property and it includes: stock and share, growing crops, grass, the things attached to or forming a part of the land which can be severed from the land.

3. Transfer of general property: The object of the contract must be the transfer of general property as distinguished from special property in the goods by one person to another. The term ‘general property’ refers to ownership in goods.

4. Price: Transfer a property must take place for some money consideration called ‘price’.Where goods are exchanged for goods,it is not a contract of sale but simply a barter transaction. But in case the consideration consists partly of money,it will be taken as a contract of sale.