Essentials of a Valid Contract of Sale

A contract of sale is a special type of contract; therefore, all the essentials of a valid contract must be fulfilled. If any of the essential element of a valid contract is missing, then the contract of sale will not be valid. For example, A agreed to sell his scooter to B without any consideration. This contract of sale is not valid since there is no consideration.

From the definition of Contract of Sale as per Section 4 of the Sale of Goods Act, the following essential features may be noted.



1. There must be two parties: There must be two parties, one seller and the other buyer. A person cannot be a seller as well as a buyer. A person cannot buy his own goods. For example, X is the owner of certain goods, but he is not aware of this fact. A pretends to be the owner of the goods and sells them to X. There is no sale, for X cannot buy goods which are already his own (Bell v. Lever Bros. Ltd.). However, a part-owner may sell to another part-owner (Section 4). Partners are not regarded as separate persons for the purpose of sale of the partnership property. They are the joint owners of the goods and as such they cannot be both seller and buyer. But a partner may buy goods from the firm or sell goods to the firm.

 

2. Subject matter of sale must be ‘goods’: The subject matter of a contract of sale must be goods and the goods must be movable. Sale and purchase of immovable property is not covered by this Act, but is regulated by the Transfer of Property Act. Similarly, contracts relating to services are not treated as contract of sale.

 

3. Transfer of Property in the goods: In every contract of sale, it is the ownership that is transferred and, in an agreement, to sell the ownership is agreed to be transferred as in case of pledge. According to Section 2(II) of the Act, property means the general property in the goods and not merely a special property. In a contract of sale, the general property is transferred from seller to the buyer. On the other hand, when the goods are pledged, it is only the special property which is transferred i.e., possession of the goods is transferred to the pledgee while the ownership rights remain with the pledger. You should note that for transferring the ownership of goods, the physical delivery of the goods is not essential.

 

4. Consideration in Price: Consideration in a contract of sale has necessarily to be money. Thus, if for instance, goods are offered as consideration for goods, it will not amount to sale, but it will be called a ‘barter’. Similarly, in case there is no consideration, it amounts to gift and not sale. However, the consideration may be partly in money and partly in goods.

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