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Q. Explain the difference and agreement to sell and contract of sale.

Discuss
the essential features which govern the formation of two. (1998)
1. Introduction:
If goods are transferred under contract it is called sale. If transfer of property in goods is
to take place at a future time the contract is called an agreement to sell.
2. Contract of sale:
According to Sec 4 of sales of goods act.
A contract where by the seller transfer or agrees to transfer the property or
the goods to the buyer for a price.
Case law
1996 CLC 1758
It was held that agreement to sell does not create any right, title or interest in
immovable property in question.
3. Form of contract of sale
(i) Written
(ii) Oral
(iii) Implied i. e. from the conduct of the parties.
Case law
PLD 1973 Lac. 387
It was held that a contract of sale may be made in writing or by word of mouth, or partly
in writing and partly by word of mouth or may be implied from conduct of the parties.
4. Essential features of sale:
Following are essential of sale.
(I) Bilateral contract:
There must be two parties the buyer and seller. The seller and buyer must be different
persons.
(II) Price:
Consideration for a sale of goods must be money called price. If goods are exchanged
with goods it is not sale.
(III) Goods:
The subject matter of sale must be goods meaning.
(a) Every kind of moveable property other than actionable claims and money and
includes stock and shares, growing crops, grass and attached to or forming part of the
land which are agreed to be served before sale or under a contract of sale.
(b) Things attaching to earth can be subject matter of sale provided they are served
from earth under the contract.
(IV) Transfer of ownership:
There must be agreement or agree to transfer the property to the buyer.
(V) Sale and agreement to sell:
The term contract of sale includes, both sale and agreement to sell.
(VI) Essentials of a valid contract:
Contract of sale must have all the essential of a valid contract.
5. Distinction between sale and agreement to sell:
Following are the main points of distinction.
(I) Transfer of property:
In contract of sale property is transferred from sellor to buyer.
In an agreement to sell only promise is to made to transfer the property.
(II) Risk:
In contract of sale risk is transferred by buyer.
In an agreement to sell risk remains with the owner.
(III) Types of goods:
In contract of sale there can be only existing and specific goods.
An agreement to sell is relate to future and contingent goods.
(IV) Consequences of breach:
If buyer commits default the seller may sue him for the price in contract of sale.
In an agreement to sell, the buyer can only sue for the damages.
(V) Nature of contract:
Contract of sale is an executed contract.
An agreement to sell is an executor contract.
(VI) Right of resale:
In contract of sale, seller cannot resell except in certain cases.
In an agreement to sell, the seller can resale to the new buyer.
(VII) Nature of performance:
A contract of sale is a contract which is being performed.
An agreement to sell is a contract which is to be performed.
(VIII) Insolvency of buyer:
In contract of sale, if buyer becomes insolvent seller can use his right of line or
stoppage.
In an agreement to sell, seller can refuse to deliver the goods.
(IX) Insolvency of seller:
In a contract of sale buyer is entitled to recover the goods from official receiver. So he
has no risk.
In an agreement to sell a buyer can only claim dividend.
6. Conclusion:
To conclusion it can be said that, a contract of sale and agreement to sell are
different terms. Contracts of sale includes both the sale and an agreement to
sell. Like any other contract it is formed by an offer and acceptance by the
persons of the contract. An agreement to sell becomes sale when that
something which prevented the property from passing from the seller to the
buyer is done or fulfilled, resulting in the passing of the property in the goods
sold from the seller to the buyer.

What are the essentials of a contract


of sale under the sale of goods Act
1930?
Answer:
Sec.4 defines a contract of sale as 'a contract whereby the seller transfers or agrees
to transfer the property in goods to the buyer for a price'. From the definition, the
following essentials of the contract emerge:
1. There must be at least two parties. A sale has to be bilateral because the
property in goods has to pass from one person to another. The seller and the buyer
must be different persons. A person cannot buy his own goods. However, a part-
owner may sell to another part-owner.
Examples: A partnership firm was dissolved and the surplus assets, including some
goods, were divided among the partners in specie. The sales-tax officer sought to tax
this transaction. Held, this transaction did not amount to sale. The partners were
themselves the joint owners of the goods and they could not be both sellers and
buyers. Moreover, no money consideration was promised or paid by any partner to
the firm as consideration for the goods allotted to him.
2. Transfer or agreement to transfer the ownership of goods. In a contract of
sale, it is the ownership that is transferred (in the case of sale), or agreed to be
transferred (in the case of agreement to sell), as against transfer of mere possession
or limited interest (as in the case of bailment or pledge).
3. The subject matter of the contract must necessarily be goods. The sale of
immovable property is not covered under Sale of Goods Act. The expression 'goods'
is defined in Sec.2(7).
4. Price is the consideration of the contract of sale. The consideration in a
contract of sale has necessarily to be 'money', (i.e., the legal tender money). If for
instance, goods are offered as the consideration for goods, it will not amount to sale.
It will be called a 'barter'.

he subject matter in sales of goods is goods. I have already explained


what we mean by Goods. Let us know about its classification.

Goods may be classified into


1. Existing goods;
2. Future goods; and
3. Contingent goods
1. Existing goods: At the time of sales if the goods are physically in
existence and are in possession of the seller the goods are called Existing
Goods. Existing goods can be classified into specific or unascertained.

(a) Specific goods. Goods identified and agreed upon at the time of the
making of the contract of sale are called specific goods [Sec. 2(14)]. It
may be noted that in actual practice the term ascertained goods is used
in the same sense as specific goods, For example, where A agrees to sell
to B a particular radio bearing a distinctive number, there is a contract of
sale of specific or ascertained goods.
(b)Unascertained goods. The goods, which are not separatelyidentified or
ascertained at the time of the making of the contract, are known as
unascertained goods. They are indicated or defined only by description. For
example, if A agrees to sell to B one bag of sugar out of the lot of
one hundred bags lying in his godown; it is a sale of unascertained goods
because it is not known which bag is to be delivered. As soon as a particular
bag is separated from the lot for delivery, it becomes ascertained or
specific goods.

The distinction between specific or ascertained and unascertained goods


is important in connection with the rules regarding transfer of property
from the seller to the buyer.

2. Future goods: Future goods are goods to be manufactured or produced


or yet to be acquired by seller. There cannot be present sale in respect
future goods because the property cannot pass.
Example
(a) A agrees to sell to B all the milk that his cow may yield during the coming
year. This is a contract for the sale of future goods.
(b)X agrees to sell to Y all the mangoes, which will be produced in his garden
next year. It is contract of sale of future goods, amounting to an agreement
to sell.
3. Contingent Goods: Though a type of future goods, these are the goods
the acquisition of which by the seller depends upon a contingency, which
may or may not happen [Sec. 6 (2)].
Example
A agrees to sell specific goods in a particular ship to B to be delivered on
the arrival of the ship. If the ship arrives but with no such goods on board,
the seller is not liable, for the contract is to deliver the goods should they
arrive.

Do you know what would happen if the goods are perished?

Effect of Pershing of Goods


The first we must know what we mean by perishing of goods.
Pershing means not only physically destruction of goods but it also
covers:
(a) Damage to goods so that the goods have ceased to exist in the
commercial sense, i.e., their merchantable character as such has been
lost (although they are not physically destroyed), e.g., where cement is
spoiled by water and becomes almost stone or where sugar becomes
sharbat and thus are unsaleable as cement or sugar;
(b) Loss of goods by theft (Barrow Ltd. Vs Phillips Ltd. );
(c) Where the goods have been lawfully requisitioned by the government (Re
Shipton, Anderson & Co.).

You must note that it is only the perishing of specific and


ascertained goods that affect the sales. In the case of unascertained
goods, their perishing does not affect the contract. Where A agrees to sell
to B ten bales of Egyptian cotton out of 100 bales lying in his godown and
the bales in the godown are completely destroyed by fire, the contract
does not become void. A must supply ten bales of cotton after purchasing
them from the market or pay damages for the breach.

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Goods/15-Destruction-Or-Deterioration-Of-The-Goods.html#.UWGuGZNvAg8

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Destruction-Of-The-Goods-Prior-To-The-Sale-The-English-
Sale.html#.UWGuGpNvAg8

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