Essential Features of a Contract of Sale:
• Two Parties: A contract of sale involves two parties, namely the seller (the person who
transfers or agrees to transfer the ownership of goods) and the buyer (the person who
buys or agrees to buy the goods).
• Goods: The subject matter of the contract must be existing or future goods. Goods refer
to movable property, excluding actionable claims, money, and immovable property.
• Transfer of Ownership: The contract must involve the transfer or agreement to
transfer the ownership of goods from the seller to the buyer.
• Price: There must be a price agreed upon by the parties. The consideration for the goods
is usually in monetary terms, but it can also be in the form of barter or exchange.
• Consent: The contract must be entered into by the free consent of both parties, without
any coercion, fraud, undue influence, or mistake.
• Legal Capacity: The parties involved in the contract must have the legal capacity to
enter into a contract. They should not be disqualified by law, such as minors or persons
of unsound mind.
Formation of Contract of Sale:
• Offer and Acceptance: The formation of a contract of sale requires a valid offer and
its acceptance. The offer can be made by the seller or the buyer, and acceptance must
be communicated to the offeror.
• Intention to Transfer Ownership: Both parties must have the intention to transfer or
acquire the ownership of the goods. The agreement must clearly indicate when the
ownership will pass from the seller to the buyer.
• Price Determination: The contract should contain a provision for determining the
price of the goods. If the price is not fixed, it must be determined based on the method
agreed upon in the contract or calculated according to a reasonable standard.
• Terms and Conditions: The contract may include specific terms and conditions
regarding the quality, quantity, description, delivery, and payment of the goods. These
terms can be express (explicitly mentioned) or implied (inferred from the
circumstances).
• Written or Oral Agreement: A contract of sale can be made in writing, orally, or
implied from the conduct of the parties. However, certain types of contracts, such as
those involving goods worth a certain value or falling under specific statutes, may
require written documentation or registration.
Risk and Title:
• Risk: In a contract of sale, the risk associated with the goods may pass from the seller
to the buyer at a different time than the transfer of ownership. It depends on the terms
of the contract, such as the delivery terms and agreement between the parties.
• Title: The transfer of ownership, also known as the transfer of title, occurs when the
seller intends to transfer the ownership rights to the buyer. The time of transfer of title
may differ based on the terms of the contract, such as whether it is a sale or an agreement
to sell.
Breach and Remedies:
• Breach of Contract: If either party fails to fulfil their obligations as per the contract,
it constitutes a breach. It could be a non-delivery, non-payment, or any other violation
of the terms agreed upon.
• Remedies: The injured party has various remedies available in case of a breach of
contract, such as:
• Damages: The party suffering the loss due to the breach may claim monetary
compensation.
• Specific Performance: In certain circumstances, the court may order the defaulting
party to perform the contract as agreed.
• Repudiation: The innocent party may treat the contract as repudiated if the other
party has clearly shown an intention to not fulfil the contract.
• Rescission: The contract can be cancelled, and both parties can be restored to their
original positions before entering the contract.
• Lien: The seller may retain possession of the goods until the buyer fulfils their
payment obligations.
