ESSENTIALS OF CONTRACT OF SALE
DISTINGUISH BETWEEN SALE AND
AGREEMENT TO SELL
DOCUMENTS OF TITLE TO GOODS`
CONDITIONS AND WARRANTIES
DOCTRINE OF CAVEAT EMPTOR
RIGHTS OF UNPAID SELLER
DELIVERY – RULES REGARDING DELIVERY
SALE BY AUCTION
3. Originally, the law relating to sale of goods
was contained in Chapter VII of the Indian
Contract Act, 1872. The same was repealed
and re-enacted by the Sale of Goods Act, III
4. (Section 4)
A contract of sale of goods is a contract
whereby the seller transfers or agrees to
transfer the property in goods to the buyer
5. From the above definition, the following essentials
of a contract of sale may by noted:
1. There must be at least two parties
2. Transfer or Agreement to transfer the
ownership of goods.
3. The subject matter of the contract must
necessarily be 'goods'.
4. The consideration is Price.
5.A Contract of sale may be in writing or by
6. All other essentials of a valid contract must be
It is a contract where the ownership in the goods is
transferred by seller to the buyer immediately at the
conclusion contract. Thus, strictly speaking, sale
takes place when there is a transfer of property in
goods from the seller to the buyer. A sale is an
It must be noted here that the payment of price is
immaterial to the transfer of property in goods.
A sells his Yamaha Motor Bicycle to B for Rs. 10,000.
It is a sale since the ownership of the motorcycle has
been transferred from A to B.
7. It is a contract of sale where the transfer of property in
goods is to take place at a future date or subject to some
condition thereafter to be fulfilled.
A agreed to buy from B a certain quantity of nitrate of
soda. The ship carrying the nitrate of soda was yet to
arrive. This is `an agreement to sale`. In this case, the
ownership of nitrate of soda is to be to transferred to A on
the arrival of the ship containing the specified goods (i.e.
nitrate of soda) [Johnson V Mcdonald (1842) 9 M & W
600, 60 RR 838]
On 1st March 1998, A agreed to sell his car to B for Rs.
80,000. It was agreed between themselves that the
ownership of the car will transfer to B on 31st March 1998
when the car is got registered in B`s name. It is an
agreement to sell and it will become sale on 31st March
when the car is registered in the name of B.
Other points of distinction between a sale and an
agreement to sell are:
8. Sale -Agreement to sell
1. A sale is an executed contract. 1. An Agreement to sell is an executory
2. In a sale, since the property has passed to contract.
the buyer, the seller can sue the buyer for the 2. In an agreement to sell, in case of breach,
price of the goods. the seller can only sue for damages, unless
3. A sale creates a right in rem. the price was payable at a stated date.
4. In case of loss of goods, the loss will fall on 3. An agreement to sell creates a right in
the buyer, even though the goods are in the personam.
pos-session of the seller. It is because 'Risk' 4. The loss in this case shall be borne by the
is as-sociated with ownership. seller, even though the goods are in the
4. In case buyer pays the price and the seller pos-session of the buyer.
thereafter becomes an insolvent, the buyer 5. In these circumstances, the buyer cannot
can claim the goods from the Official claim the goods but only a rateable
Receiver or Assignee. dividend for the money paid.
6. If the buyer becomes an insolvent without 6. In these circumstances, the seller can
paying the price, the ownership having refuse to deliver the goods to the Official
passed to the buyer, the seller shall have to Assignee or Re-ceiver.
deliver the goods to the Official Assignee or
Receiver ex-cept where he has a lien over the
9. Hire Purchase Agreement
It is an agreement for hire, with an option to purchase.
The hirer, under this agreement, is required to pay every
month a particular sum of money, and if he pays in that
way for a fixed number of months, the hirer will become
the owner of the goods on the payment of the last
But, if the hirer fails to pay any particular instalment, the
owner can terminate the contract and take away the
goods, because the ownership continues to remain in the
owner. A "Hire-purchase agreement" is distinct from "Sale"
in which price is payable by instalments
A 'Hire-purchase agreement,' does not result in passing of
the property unless the option to purchase is exercised,
usually by payment of all the instalments. Till such time, it
ln case of sale, the property passes as soon
as sale is made though price has not been
In determining as to whether a particular
contract belongs to one type or the
other, regard shall have to be paid to the fact
whether the hirer has merely an option to
purchase, or whether he has bought or
agreed to buy the goods.
11. Definition of `GOODS` under the Act
'Goods' means every kind of moveable property 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
Actionable claims and money are not included in the
definition of goods.
Thus, goods include every kind of moveable property
other than actionable claim or money. Example -
goodwill, copyright, trademark, patents, water, gas, and
electricity are all goods and may be the sub-ject matter of
a contract of sale.
The test is if the property on shifting its situation, does
not lose its character, the said property shall be movable
and fall within the definition of `Goods`.
13. A document of title to goods may be described as any
document used as proof of the possession or con-trol
of goods, authorising or purporting to
authorise, either by endorsement or by delivery, the
possessor of the document to transfer or receive
goods thereby represented.
The following are documents of title to goods:
◦ Bill of Lading;
◦ Dock Warrant;
◦ Warehouse keeper's Certificate;
◦ Warfinger's Certificate;
◦ Railway Receipt;
◦ Warrant or order for the delivery of goods; and
Any other document used in the ordinary course of
business as a document of title
14. Sec 12(2) of Sales Of Goods Act, 1930 has
defined Condition as:
“A condition is a stipulation essential to the
main purpose of the contract, the breach of
which gives rise to a right to treat the
contract as repudiated”.
15. Sec 12(3) of Sale Of Goods Act, 1930 has
defined Warranty as :
“A warranty is a stipulation collateral to the
main purpose of the contract, the breach of
which gives rise to only claim for damages
but not to a right to reject the goods and
treat the contract as repudiated”.
16. DISTINCTION BETWEEN 'CONDITION' AND
1. A condition is a stipulation (in 1. A warranty is a stipulation,
a contract), which is essential which is only collateral or
to the main purpose of the subsidiary to the main
contract. purpose of the contract.
2. A breach of condition gives 2. A breach of warranty gives
the aggrieved party a right to only the right to sue for
sue for damages as well as damages. The contract
the right to repudiate the cannot be repudiated.
3. A breach of condition may be 3. A breach of warranty cannot
treated as a breach of be treated as a breach of
warranty in certain condition.
17. CASES OF TREATING THE BREACH OF
CONDITION AS BREACH OF
1. Voluntary Waiver .
2. Compulsory treatment of breach of
condition as breach of Warranty.
18. Conditions and Warranties may be either
express or implied.
They are said to be "express" when they are
expressly provided by the parties.
They are said to be 'implied' when the law
deems their existence in the contract even
without their actually having been put in the
19. (1) Condition as to Title
(2) Sale by Description
(3) Condition as to Quality or Fitness
(4) Merchantable Quality
1)They are reasonably saleable under the
description by which they are known in
2)They are purchased for the personal
use they must be reasonably fit for the
purpose for which they are generally
20. (5)Sale by sample-
In a sale by sample, the following are the
1. The bulk shall correspond with the sample in
2. That the buyer shall have a reasonable
opportunity of comparing the bulk with the
3. That the goods shall be free from any defects
rendering them unmerchantable, which would
not be apparent on reasonable examination of
21. Implied warranties
1. Warranty of Quiet Possession
In a contract of sale, unless the circumstances
of the contract are such as to show different
intention, there is a implied warranty that the
buyer shall have and enjoy quiet possession
of the goods.
2. Warranty of Freedom from Encumbrances
22. Caveat Emptor is a fundamental
principle of the law of sale of goods
It means "Caution Buyer", i.e. "Let the
23. In case of any misrepresentation by the seller
In case of concealment of latent defects by the
In case of sale by descriptions and sample(Sec 15)
Conditions as to merchantability
Conditions as to quality of fitness for buyers
Conditions of wholesomeness
24. The general rule is that only the owners of the
property can transfer a goods title.
“Nemo dat quod non habet” which means
“no one can give which he himself has not”
25. UNDER THE SALE OF GOODS ACT IN OTHER LAWS
Estoppels (Sec . 27) Sale by a finder of lost
Sale by a mercantile agent
Sale by a Pawnee
Sale by one of several joint
Sale by Official Receiver
owners (Sec 28)
Purchase in market overt
Sale by an unpaid seller
Instrument Act 1881
26. A seller deemed to be an unpaid seller
(a). When the whole of the price has not been
paid or rendered
(b). When the bill of exchange or other
negotiable instrument has been received as
conditional payment and condition has not
been fulfilled by the reason of the dishonor of
the instrument or otherwise (Sec. 45)
27. AGAINST THE BUYER
AGAINST THE GOODS PERSONALLY
Unpaid sellers lien Right to sue for price
Stoppage in transit Right to sue for damage
Repudiation of contract
Right of resale before due date
28. It has been defined as a voluntary transfer of
possession from one person to another..
Delivery of the goods may, be:
I. Physical or Actual Delivery
2. Symbolic Delivery - e.g., delivery of a
railway receipt properly endorsed, or deliv-ery
of the key of a warehouse;
3. Constructive Delivery or Attornment -
only an acknowledgement by the person in
possession that he holds them on behalf of
29. 1. The seller is not bound to deliver goods till the
buyer applies for delivery in terms of the
2. Place of Delivery - goods sold are to be
delivered at the place agreed for delivery in the
3. Time of Delivery – as per contract otherwise
within reasonable time.
4. The expenses of and incidental to putting the
goods into a deliverable state shall be borne by
the seller, as per the terms of the contact.
30. 5 Demand and tender must be at a reasonable hour -
What is a reasonable hour is a question of fact.
6 Delivery of Wrong Quantity -.
7 Instalment Deliveries - The buyer is not bound to
accept delivery by instalment, unless otherwise
8 Delivery to the Carrier or Wharfinger –
9 Buyer not bound to return rejected goods -.
10 Liability of the Buyer -
31. In the case of sale by auction the following rules
1. At an auction, the sale is complete when the
auctioneer announces its completion by the
fall of the hammer
2. A bidder is at liberty to withdraw his bid at any
time before it is accepted by auctioneer
3. Advertisement to auction is not an offer but
mere invitation .
4. Auctioneer has right to make any condition he
5. Biddings can be withdrawn before acceptance
32. 6 In case of goods put up for sale in lots –
7 no seller or any person who has advertised
can bid at an auction sale – unless right is
8 Knockout agreements are unlawful
9 Pretended bidding by seller to raise price is
voidable at option of buyer
33. The Sale of goods is the most common of all
commercial transaction . Knowledge of sale
of goods is important to all . Law relating to
sale of goods is contained in sale of goods