NOTES


CA-Foundation > Business Laws > The Sale of Goods Act, 1930 - Formation of Contract of Sale (Old & New)

State the distinction between Sale and an agreement to sell.



Ans.

SALE & AGREEMENT TO SELL

A contract for the sale of goods may be either a sale or an agreement to sell.

Sale

Where under a contract of sale the property in the goods (i.e. the ownership) is transferred from the seller to the buyer the contract is called a sale. Sec. 4(3). The transaction is a sale even though the price is payable at a later date or delivery is to be given in the future, provided the ownership of the goods is transferred from the seller to the buyer.

Example: S makes a contract with P for sale of his Nano Car for ₹ 80,000. P makes the payment and takes the delivery of car. This is the transaction of sale where the ownership has passed from S to P for a price.

Agreement to sell

When the transfer of ownership is to take place at a future time or subject to some condition to be fulfilled later, the contract is called an agreement to sell. [Sec. 4(3)]

Example: S agrees to sell his Car to P for ₹ 2,00,000 after one month. P agrees to buy the car and make payment after one month. This an agreement to sell and it will become a sale after one month when P make the payment and gets the ownership of car.

The conditional contract of sale like goods sent on “sale or return” basis are in the nature of an agreement to sell.

When an agreement to sell becomes a sale?

An agreement to sell becomes a sale when the prescribed time elapses or the conditions, subject to which the property in the goods is to be transferred, are fulfilled. [Sec. 4(4)]

Thus, if goods are delivered to the buyer on approval i.e. "on sale or return”, the transaction is an agreement to sell, but it becomes a sale and the property in the goods passes to the buyer where the buyer gives his approval or acceptance to the seller.

 

SALE

AGREEMENT TO SELL

Transfer of property

The title to the goods passes to the buyer immediately.

The title to the goods passes to the buyer on future date or on fulfillment of some condition.

Nature of Contract

It is an executed contract.

It is an executory contract.

Burden of risk

Risk of loss is that of buyer since risk follows ownership.

Risk of loss is that of seller.

Nature of rights

It creates jus in rem that is the buyer as a owner gets the right to enjoy the goods against the whole world. If the seller refuses to deliver the goods the buyer may sue for recovery of goods by specific performance.

It creates jus in personam that is the buyer has only a personal remedy against the seller. He can sue only for damages for breach and not for recovery of goods.

Remedies for breach

If the buyer fails to pay for the goods, the seller may sue for the price (suit for price sec. 55) and also has other remedies available to an unpaid seller.

If the buyer fails to accept and pay for the goods, the seller can only sue for damages and not for price. (Damages for non- acceptance sec. 56)

Insolvency of Buyer

If the buyer becomes insolvent before paying the price, the seller shall have to deliver the goods to the Official Receiver on his demand because the ownership of the goods has passed to the buyer.

Since the seller continues to be the owner, he can refuse to deliver the goods to the Official Receiver unless he is paid the price because the seller continuous to be the owner of the goods.

Insolvency of Seller

If the seller becomes insolvent while the goods are still in his possession, the buyer shall have a right to claim the goods from the Official Receiver because the ownership of goods has passed to the buyer.

If the seller becomes insolvent, the buyer cannot claim the goods. If the buyer has paid the price he can claim ratable dividend from the estate of the insolvent seller.

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Notes of The Sale of Goods Act, 1930 - Formation of Contract of Sale (Old & New)



  1. What are the implied conditions in a Contract of Sales:
    see in detail

  2. Define Buyer, Seller and Sale in the Contract of Sale of Goods Act.
    see in detail

  3. What is a ‘Price’ under the Sales of goods act, 1930?
    see in detail

  4. What are the various rules and modes of fixing the prices of goods, as provided under section 9 and section 10 of the Sale of Goods Act?
    see in detail

  5. State the distinction between Sale and an agreement to sell.
    see in detail


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