THE SALE OF GOODS ACT,

1930
UNIT -1: FORMATION OF THE CONTRACT OF
SALE
1. The provisions of the Act are applicable to the contracts related to the sale of
goods which means movable properties.
2. The Act is not applicable for the sale of immovable properties like land, shop
or house etc

Definitions:

1. Buyer : Means a person who buys or agrees to buy goods.

2. Seller: Means a person who sells or agrees to sell goods.
3. Goods: Means every kind of movable property other than
actionable claims and money; and includes stock and shares,
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” include both tangible goods and intangible goods like goodwill,
copyrights, patents, trademarks etc. Stock and shares, gas, steam, water,
electricity and decree of the court are also considered to be goods.

Classification of Goods: (Refer ISM)

 Delivery
1.Meaning: Voluntary transfer of possession from one
person to another.
2. Form of delivery:

Symbolic Constructive
Delivery Delivery
Actual
Delivery

Where the goods are bulkier or

where the actual handover is
not possible a symbolic Where a third person, who
The goods are physically
handover is done. holds the goods on behalf of
transferred to the buyer
Eg: Handover the key of car, the buyer and acknowledges
Invoice etc the buyer.
Actual Delivery: It is effected when goods are physically delivered
to the buyer or his agent.

Symbolic Delivery: When there is a delivery of a thing in token of

transfer of something else such as key of Godown or warehouse
where the goods are stored or documents of title then it amounts
to symbolic delivery.

Constructive Delivery: It is used as a method of transferring

position when the goods are in the custody of a 3rd person.
when the seller gives such directions to the 3rd party who has
physical custody of the goads which has the effect of transferring
the goods into the position of the buyer without the actual
movement or delivery of the goods, it amounts to constructive
delivery.
It is also known as delivery by attornment (acknowledgement).
 Document of title to goods:
Includes bill of lading, dock-warrant, warehouse keeper’s
certificate, wharfingers’ certificate, railway receipt,
multimodal transport document, warrant or order for the
delivery of goods used as proof of possession.

 Property :
1. ‘Property’ here means ‘ownership’ or general property.
2. In every contract of sale, the ownership of goods must be
transferred by the seller to the buyer, It means the
general property (Ownership).
3. When goods are pledged or given on bailment – the
pledgee or bailee has the a special property and not
general property.
 Price:

1. Price means the money consideration for a sale of goods.

2. It is the value of goods expressed in monetary terms.
3. It is the essential requirement to make a contract of sale
of goods.
 SALE AND AGREEMENT TO SELL
CONTRACT OF SALE: (Includes both sale and agreement to
sell)
• Two parties – there must be two parties a buyer and a seller.
• Transfer of property – a transfer of property i.e. ownership, in
goods from the seller to the buyer must take place (in the case of
sale) or ownership should be agreed to be transferred (in the
case of agreement to sell)
• Goods – the subject matter of sale must be goods.
• Price – transfer of property must take place for some money
consideration called price.
• It includes both a ‘sale’ and ‘an agreement to sell’.
• A contract of sale may be absolute or conditional.
• It may be in writing/oral or implied
• Essential elements of a valid contract must be present.
1. 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.

Eg.: 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.

2. 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.

Eg.: S agrees to sell his Car to P for t 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.
When an agreement to sell becomes a
sale?
1. 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.
Eg.: 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.
DISTINCTION BETWEEN SALE AND AN
AGREEMENT TO SELL
 SALE DISTINGUISHED VS SIMILAR
CONTRACTS
Sale and Hire Purchase
1. Contract of sale resembles very closely with contracts of hire
purchase.
2. In fact, the real object of hire purchase is ultimate sale only.
3. “hire-purchase agreement” means an agreement under which
goods are let on hire and under which the hirer has an option to
purchase them and includes an agreement under which—
(a) Possession of goods is delivered by the owner to a person on
condition that such person pays the agreed amount in periodical
instalments, and
(b) The property in the goods is to pass to such person on the
payment of the last instalment, and
(c) Such person has a right to terminate the agreement at any time
before the property so passes.
 Sale and Bailment
1.A ‘bailment’ is the delivery of goods for some specific
purpose under a contract.
2. It is delivered on the condition that the same goods are to
be returned when the purpose is accomplished to the bailor
or are to be disposed of according to the directions of the
bailor.
Sale and contract for work and labour
1. A contract of sale of goods is one in which some
goods are sold or are to be sold for a price.
2. Whereas, contract for work and labour is the one
where doing of some labour is alone involved.
Eg. Providing gold to goldsmith to do Gold
ornaments.
HOW DOES CONTRACT OF SALE MADE?
1. It is made by an offer to buy or sell goods for a price and the
acceptance of such offer.
2. There may be immediate delivery of the goods; or
3. There may be immediate payment of price, but it may be
agreed that the delivery is to be made at some future date; or
4. There may be immediate delivery of the goods and an
immediate payment of price; or
5. It may be agreed that the delivery or payment or both are to
be made in instalments; or
6. It may be agreed that the delivery or payment or both are to
be made at some future date.
7. It can be made oral, written or by conduct.
SUBJECT MATTER OF CONTRACT OF SALE
1. Existing or future goods :
 A contract of sale can be made for both existing goods and
future goods.
 If contract of sale is made for future goods, it is called
agreement to sell.

2. Goods perishing before making of contract :

a. In case of contract of sale of specific goods
b. if the goods had become perished at the time of contract and
c. the seller doesn’t have the knowledge of the same,
d. the contract shall become VOID.
3. Goods perishing before sale but after agreement to sell:

a) Where there is an agreement to sell specific goods

b) subsequently the goods become perished or damaged (after
agreement to sell but before sale)
c) The Destruction amounts to supervening impossibility.
d) without any fault on the part of the seller or buyer
e) The contract becomes VOID.
 ASCERTAINMENT OF PRICE
 ‘Price’ means the monetary consideration for sale of
goods .
 The price in the contract of sale may be-
(1) fixed by the contract, or
(2) agreed to be fixed in a manner provided by the contract,
e.g., by a valuer, or
(3) determined by the course of dealings between the
parties.
 If not determined the buyer shall pay a reasonable price.
 What is reasonable price depends on the circumstances of
the case.
 Agreement to sell at valuation/Price
determined by third party
1. Where there is an agreement to sell goods on the terms that price has to be
fixed by the third party (Valuation):

he does not or cannot

make such valuation,
the agreement can be He is prevented from
avoided. determining price by fault
on seller or buyer, the
If the goods or part party at fault will be liable
thereof has been to the damages to the
delivered, the buyer party not in fault.
shall pay a reasonable
price.
EG.: P is having two bikes. He agrees to sell both of the
bikes to S at a price to be fixed by the Q.
He gives delivery of one bike immediately.
Q refuses to fix the price.
As such P ask S to return the bike already delivered while S
claims for the delivery of the second bike too.
In the given instance, buyer S shall pay reasonable price to P
for the bike already taken.
As regards the Second bike, the contract can be avoided.