contract of Sales, its essentials and formalities

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Q-1:     Describe contract of Sales, its essentials and formalities.

Ans:    INTRODUCTION

Initially the law governing the sale of goods was part of the Contract Act 1872 and it was contained from Sections 76 to 123. On 1st July 1930, it was enacted as a separate law and renamed as sale of goods act. The number of sections also increased from 48 to 66. The purpose of this law is to define and amend the law relating to the sale of goods

CONTRACT OF SALE

It is defined under the Section 4(1) & 4(2) of the Sale of Goods Act 1930 in the following words.

“A contract whereby the seller transfer or agrees to transfer the property in goods to the buyer for a price.

There are two parts of this definition.

1. An actual sale            2. An agreement to sell

1.         AN ACTUAL SALE

When under a contract of sale property in goods is transferred from the seller to the buyer, the contract is called a “Sale”. If there is no price for the goods, which are agreed to be a transferred, it will be known a gift and not a sale of goods.

EXAMPLE

Mr. A buys a watch from a shop and pays the whole price to the shopkeeper. It is a sale.

2.         AN AGREEMENT TO SELL [Sec-4(2)]

“Where under a contract of sale, the transfer of property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled the contractor is called agreement to sell”

EXAMPLE

A agrees with B to sell his TV for Rs.5000A after its repair, at the end of next year. It called agreement to sell.

ESSENTIAL ELEMENTS OF CONTRACT OF SALE

(a)        Seller and Buyer

There must be a seller as well as a buyer, ‘Buyer’ means a person who buys or agrees to buy goods [Section 2(1)]. .’Seller’ means a person who sells or agrees to sell goods [Section 2(13)]. A person cannot be a seller as well as a buyer as a person cannot buy his own goods. That is why distribution of goods among partners on account of dissolution of a firm does not amount to a sale of goods because the partners are joint owners and they cannot be both sellers and buyers. However, one part owner may be a seller and another part owner may be buyer. Where a person’s goods are sold under an execution of decree, a bankrupt may also buy back his own goods from his trustee

(b)        Goods

There must be some goods. ‘Goods9 means 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 [Section 2(7)]. It may be noted that the contract relating to actionable claims, immovable property and services are not covered by this Act.

Notes: (i) The ‘actionable claim’ means a claim, which can be enforced through the courts of Law, e.g. a debt due from one person to another is an actionable claim, (ii) The ‘money’ here means the legal tender (i.e. currency of the country and not old coins.

(c)        Transfer of Property

Property means the general property in goods, and not merely a special property [Section 2(11)]. General property in goods means ownership of the goods. Special property in goods means possession of goods. Thus there must be either a transfer of ownership of goods or an agreement to transfer the ownership of goods. The ownership may transfer either immediately on completion of sale or sometime in future in agreement to sell.

(d)        Price

There must be a price. Price here means the money consideration for a sale of goods [Section 2(10)]. When the consideration is only goods, it amounts to a ‘barter’ and not sale. When there is no consideration, it amounts, to gift and not sale. However, the consideration may be partly in money and partly in goods because the law does not prohibit a$ such.

(e)        Essential Elements of Valid Contract?

In addition to the aforesaid specific essential elements, all the essential elements of a valid contract as specified under Section 10 of Contract Act 1872 must also be present since a contract of sale is aspecial type of a contract. For example, an agreement to sell smuggled gold is not valid because its object is unlawful.

Absolute or Conditional

A contract of sale may be absolute or conditional according to the desire of buyer and seller.

 

FORMALITIES OF CONTRACT OF SALE [SECTION 5]

In connection with the formalities of a Contract of sale, the provisions of Section 5 specifically provide only for the following three matters.

(a)        Offer and Acceptance

A contract of sale is made by an offer to buy or sell the goods for a price and acceptance of such offer.

(b)        Delivery and Payment

The contract of sale provide for any of the following combinations:

Option

Delivery

Payment

I

Immediate Immediate

II

Immediate By Installments

III

Immediate At some future date

IV

By installments By Installments

V

By Installments Immediate

VI

By Installments At some future date

VII

At some future date At some future date

VIII

At some future date Immediate

IX

At some future date By Installments

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