BCOC -133 BUSINESS LAW CHAPTER-16 NATURE OF CONTRACT OF SALE

 

BCOC -133 BUSINESS LAW CHAPTER-16 NATURE OF CONTRACT OF SALE

1. Meaning of Contract of Sale:
A contract of sale, as defined by Section 4 of the Sale of Goods Act, is

a legal agreement wherein the seller transfers or agrees to transfer the property in goods to the buyer for a price. Here are key points explaining the meaning of a contract of sale:

a. Transferring Property:
- The primary objective is the transfer of property in goods from

the seller to the buyer.

b. Price:
- A consideration, termed as the price, is involved in the transaction.

c. Absolute or Conditional:
- The contract may be absolute or conditional, based on the mutual

desire of the parties.

d. Sale vs. Agreement to Sell:
- If the property in goods has passed from the seller to the buyer, it

is a sale.
- If the transfer is to occur in the future or is subject to certain

conditions, it is an agreement to sell.

2. Essentials of a Valid Contract of Sale:

A valid contract of sale must fulfill certain essential elements. As per the Sale of Goods Act, these are:

a. Two Parties:
- Involves a seller and a buyer; a person cannot be both seller and

buyer simultaneously.

b. Subject Matter - Goods:
- The subject matter must be goods, which are movable and exclude

immovable property.

c. Transfer of Property:
- There must be a transfer of ownership (property) in the goods.

d. Consideration in Price:

- The consideration must be money; barter or no consideration would make the contract invalid.

e. Formalities:
- The contract may be express or implied and can be oral or in

writing.

f. Mutual Agreement:
- Both buyer and seller must mutually agree to the transfer of

property in goods.

g. Competent Parties and Free Consent:
- The parties must be competent to contract, and there should be

free consent.

h. Express or Implied:
- The contract may be express (stated explicitly) or implied

(inferred from the conduct of the parties).

i. No Specific Formalities:
- Except where provided by law, no specific formalities are required

for a valid contract of sale.

j. Divisibility:
- The contract may be divisible, and the buyer may accept goods in

installments.

3. Sale and Agreement to Sell:

The distinction between sale and agreement to sell is crucial and involves the following points:

1. Ownership Transfer:
   - Sale: Ownership transfers immediately.
   - Agreement to Sell: Transfer is future or conditional.

2. Nature of Contract:
   - Sale: Executed contract.
   - Agreement to Sell: Executory contract.

c. Rights and Remedies:- Sale: Buyer has rights in rem (against the whole world).

- Agreement to Sell: Rights in persona (against the other party).

4. Risk and Loss:
   - Sale: Risk follows ownership.
   - Agreement to Sell: Loss borne by the seller.

5. Insolvency:
   - Sale: Rights and remedies available to buyer.
   - Agreement to Sell: Limited remedies for the buyer.

f. Termination:
- Sale: Buyer can recover goods from subsequent purchaser. - Agreement to Sell: Buyer's remedy is damages.

g. Transfer of Title:
- Sale: Seller can't dispose of goods once sold.
- Agreement to Sell: Seller retains ownership until sale.

4. Sale and Hire Purchase Agreement:

A hire-purchase agreement is distinct from a sale and involves the following characteristics:

a. Ownership and Possession:
- Ownership remains with the seller until the last installment in a

hire-purchase agreement.

b. Termination:
- The hirer has the option to buy or return the goods.

c. Payment Structure:
- Payments made by the hirer may result in ownership transfer.

d. Implied Conditions:
- Implied conditions and warranties may not apply until it becomes

a sale.

e. Sales-Tax:
- Sales-tax is not levied on a hire-purchase until it becomes a sale.

f. Contract Form:
- A hire-purchase agreement must be in writing.

5. Meaning and Types of Goods:

Goods are defined as every kind of movable property, excluding actionable claims and money. Types of goods include:

a. Existing Goods:
- Specific Goods: Identified and agreed upon.
- Ascertained Goods: Identified after the contract.
- Unascertained Goods: Identified only by description.

b. Future Goods:
- To be manufactured, produced, or acquired after the contract.

c. Contingent Goods:
- Acquisition depends on a contingency.

6. Effect of Destruction of Goods:

The effect of the destruction of goods can be outlined as follows:

a. Goods Perishing Before Making the Contract:
- Contract void if specific goods perish before the contract without

seller's knowledge.

b. Goods Perishing Before Sale but After Agreement to Sell:
- Agreement to sell specific goods becomes void if the goods are

destroyed without fault.

c. Divisibility:
- Divisibility of the contract determines the impact of partial loss.

d. Applicability:
- Sections 7 and 8 apply to specific goods only.

e. Example:
- A trial agreement for a horse; horse dies without fault, making the

agreement void.

These points provide an overview of the key concepts related to the sale of goods, essential elements of a valid contract, distinctions between sale and other agreements, and the impact of the destruction of goods.