Thursday, July 19, 2012

Sale and Agreement to Sale


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)].
Difference between Sale and Agreement to Sale:-
Basis
Sale
Agreement to Sell
a)      Definition
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’.
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’
b)      Transfer of ownership
Transfer of ownership of goods takes place immediately.
Transfer of ownership of goods is to take place at a future time or subject to fulfillment of some condition.
c)       Executed contract or Executory contract
It is an executed contract because nothing remains to be done.
It is an Executory contract because something remains to be done.
d)      Conveyance of property
Buyer gets a right to enjoy the goods against the whole world including seller.
Buyer does not get such right.
e)      Transfer of risk
Transfer of risk of loss of goods takes place immediately because ownership is transferred.
Transfer of risk of loss of goods does not take place because ownership is not transferred.
f)       Right of seller against the buyer’s breach
Seller can sue the buyer for the price, even though the goods are in his possession.
Buyer can sue the seller for damages only.
g)      Rights of buyer against the seller’s breach
Buyer can sue the seller for damages and can sue the third party who bought those goods for goods.
Buyer can sue the seller for damages only.
h)      Effect of insolvency of seller having possession of goods.
Buyer can claim the goods from the official receiver or assignee because the ownership of goods has transferred to the buyer.
Buyer cannot claim the goods, even when he has paid the price because the ownership has not transferred to the buyer. The buyer who has paid the price can only claim rateable dividend.
i)        Effect of insolvency of the buyer before paying the price.
Seller must deliver the goods to the official receiver or assignee because the ownership of goods has transferred to the buyer. He can only claim rateable dividend for the unpaid price.
Seller can refuse to deliver the goods unless he is paid full price of the goods because the ownership has not transferred to the buyer.
j)        Right in rem / personam
It is a right in rem i.e. right against the whole world.
It creates a right in personam i.e. right against a person.
k)      In risk of destruction of goods.
Buyer has to bear the risk even if possession is with the seller as ownership has passed.
Seller has to bear the risk, even if possession is with the buyer, as ownership has not passed.

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