Essential Of Contract Of sale.

A Contract of Sale-

The Sale of Goods Act, 1930 primarily deals with the laws, rules and regulations governing the sale of goods in India. When a seller sells goods to a buyer, there may arise a number of complications, disputes, inconsistencies, confusions and miscommunications between them. In order to have a uniform code of law to resolve such issues, the law relating to sale of goods was formed.

Definition of Contract of Sale- 

The contract of sale has been defined u/s 4 of Sale of Goods Act, 1930 as follows:

" 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. There may be a contract of sale between one part owner and another." 

Essential of contract of sale-

(1) Valid Contract- A contract of sale must fulfill all the essentials of a valid contract U/S 10 of Indian Contract Act, 1872. 

Therefore a contact of sale comprises of:

(i) Lawful offer by one party;

(ii) Lawful acceptance by the other party;

(iii) Competent parties (U/S 11 of ICA, 1872) Free and mutual consent of parties to form a contract

(iv) Lawful consideration for both the parties.

(v) Legality of object of the contract. 

(2) Two Parties- In a contract of sale there must be at least two persons, one who transfers the ownership rights i.e. SELLER and the other to whom the property is transferred i.e. BUYER. The seller and buyer must be two different persons. A person cannot sell goods to himself. Hence, until there is a seller of goods who intends to sells his goods to a buyer, a contract of sale cannot come into existence.

(3) Transfer of Property- Until and unless the ownership rights of the goods transferred by the seller to the buyer, it does not become a contract of sale of goods Transfer of property i.e. transfer of ownership rights in the goods from the seller to the buyer is the essence of the contract.

A transfer of property may take place:

(i) Either at the time of making the contract; then it amounts to SALE [U/S 4 (3)]

(ii) Or at a future time, then it is called as AGREEMENT TO SELL. [U/S 4(4)]

Example- Joy agreed to sell her car and transfer ownership right of her car to Divya only when Divya pays the entire amount of payment or say after two months. This is an agreement to sell on fulfillment of conditions in future.

4) Subject Matter of Contract is "Goods"- U/S 2(7) of SOGA, 1930

Goods means every kind of movable property other than actionable claims and money. and includes stock and share, 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.

Goods are the SUBJECT MATTER of contract of sale. Goods include any kind of movable property. But goods do not include the following:

(i) Money

(ii) Actionable claims - such as Bills of Exchange, Promissory note

(iii) Any other Immovable Property 

However, the following are considered as goods:

(i) A Power in the shape of electrical energy is good

(ii) Water and gas are also goods.

[Power, gas and water can be transmitted, transferred, delivered, stored and possessed in the same way as any other movable property, hence are included under goods.]
(iii) Electronic T.V signals are goods just like electricity. 

(iv) Lottery tickets are goods.

(5) Price of goods- In a contract of sale, the consideration is ONLY MONEY. U/S 2(10) of the Act, "Price means the money consideration for a sale of goods. Where the consideration received by the buyer is not in terms of money, the transaction does not amount to contract of sale. It could be goods exchanged for some other goods, making it a transaction of barter or exchange. Or where there is absolutely no consideration in a transaction, it would amount to a gift. 

(6) A contract of sale could be express or implied- Under section 5 of the SOGA, 1930 a contract of sale could be:

(i) An Express Contract- which is formed by words spoken or written. A contract of sale could even be formed party by words and partly in writing.

(ii) An Implied Contract- which is implied from the conduct of the parties or from the circumstances of the case.

Examples: 

-A wrote a letter to B offering to sell his study table to B for 2500/-. It is a written express contract of sale.

-Filling petrol tank of car from a self-service petrol pump is implied contract of sale.

(7) Performance by parties: It is up to the parties to the contract of sale to decide upon the performance by them. The parties may decide:

(i) to make delivery of goods and payment of price, happen simultaneously; or 

(ii) to make payment of price on instalments: or

(iii) to deliver goods in future; or

(iv) to postpone both the delivery of goods and payment of price in the future.