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Thursday, July 19, 2012

Definition and Essentials of Contract of Sale

Contract of Sale of Goods:
According to Section 4 of the Sale of Goods Act, 1930, ‘A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in the goods to the buyer for a price.’
The term ‘Contract of sale’ is a generic term and includes both a sale and an agreement to sell. Where under a contract of sale, the property in the goods is transferred from the seller to the buyer (i.e. at once), the contract is called a ‘sale’ but where the transfer of the property in the goods is to take place at a further time or subject to some condition thereafter to be fulfilled, the contract is called an ‘agreement of sell’. [Section 4(3)].
The following are thus the essentials of a contract of sale are:-
a.       Number of parties: Two or more parties are necessary namely the seller and buyer.
b.      Goods: The subject matter of a contract of sale must be goods.
c.       Price: The consideration for a contract of sale is price.
d.      Transfer of property – In a contract of sale, there must be transfer of property, from the seller to the buyer.
e.      All essential elements of a valid contract.

Two Parties
Two or more parties are necessary in a contract of sale namely the seller and buyer.
Buyer [ Sec 2 (1) ] :- Buyer means a person who buys or agrees to buy goods.
Seller [Sec 2 (13)] :- Seller means a person who sells or agrees to sell goods.
Goods is defined in Section 2 (7) as ‘Every kind of moveable property other than actionable claims and money; and includes stocks 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.’ Trademarks, copyrights, patent rights, goodwill, electricity, water and gar are all considered as goods.
Goods may be (a) existing, (b) future, or (c) contingent. The existing goods may I be (i) specific or generic, (ii) ascertained or unascertained.
No sale can take place without a price. Thus, if there is no valuable consideration to support a voluntary surrender of goods by the real owner to another person, the transaction is a gift, and is not governed by the Sale of Goods Act. Therefore, price. which is money consideration for the sale of goods, constitutes the essence for a contract of sale. It may be money actually paid or promised to b/3 paid. If a consideration other than money is to be given, it is not a sale.
a)      Modes of Fixing Price (Sections 9 and 10):  The price may be fixed:
b)      at the time of contract by the parties themselves, or
c)       may be left to be determined by the course of dealings between the parties, or
d)      may be left to be fixed in some way stipulated in the contract, or
e)      may be left to be fixed by some third-party.
Passing of Property or Transfer of Ownership (Sections 18-20)
In a contract of sale, there must be transfer of property, from the seller to the buyer.
Essential Elements of a Valid Contract
a)      Intention to create legally binding relationship
b)      Their must be Offer and Acceptance
c)       Their must be Two or more persons
d)      Competence of parties to the contract
e)      Lawful consideration
f)       Free consent of parties
g)      Lawful Object
h)      Certainty of performance
i)        Legal Formalities
j)        Not declared to be void