Meaning of a Contract of Sale

According to Section 4 of the Sale of Goods Act, “a contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price” (Section 4). A contract of sale may be absolute or conditional according to the desire of the contracting parties.




The term ‘contract of sale’ is a generic term and, therefore, broader than ‘sale’. It includes ‘sale proper’ and ‘an agreement to sell’. Where under a contract of sale, the property in goods has passed from the seller to the buyer, it is called a ‘sale’, but where the transfer of property in goods is to take place at a future time or subject to some conditions thereafter to be fulfilled, it is an ‘agreement to sell’. You should remember that an agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the ownership in the goods, is to be transferred (Sec.4(4)).

Examples

i) A enters into a contract with B to buy 100 quintals of potatoes, from B’s cold storage for Rs. 2,000. It shall amount to a sale if the seller authorises A to come to his cold storage and take away the potatoes whenever A desires.

ii) A agrees to sell his scooter to B after ten days for Rs. 5,000. B agrees to buy it after ten days, for Rs. 5,000. It is an ‘agreement to sell’ and it will become sale after ten-days. The specific points of distinction between ‘sale’ and ‘agreement to sell’ shall be discussed a little later in this unit. Formalities of a Contract of Sale (Section 5)

A contract of sale is regulated by the general law of contract. Accordingly, there must be an offer to buy or sell goods and an acceptance of that offer, parties must be competent to contract and there should be free consent. The subject matter of such contract is goods the property in which is transferred or is to be transferred for a money consideration called the price-paid or promised to be paid. As per Section 5 of the Sale of Goods Act, a contract of sale may be made in any of the following modes:

i) There may be immediate delivery of the goods;

ii) There may be immediate payment of the price but the delivery to be made at some future date;

iii) There may be immediate delivery of goods and also immediate payment of price;

iv) It may be agreed that the delivery or payment or both are to be made in instalments; or

v) The delivery or payment or both may be made at some future date.

Except where specially provided by some law for the time being in force, no specific formalities are required to constitute a valid contract of sale of goods. However, the buyer and the seller should mutually agree for the transfer of property in goods. A contract of sale may be express or implied from the conduct of the parties and in the case of express contract, it may be oral or in writing or partly in writing and partly by wards of mouth.

A written offer to sell goods may be accepted verbally or by writing, similarly, a verbal offer may be accepted in writing. In case of a contract made with a company, the contract may have to be in writing.

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