The document discusses key concepts relating to contracts of sale under the Sale of Goods Act 1930 in India. It defines a contract of sale as involving the transfer of property in goods from a seller to a buyer for a price. A sale transfers ownership immediately, while an agreement to sell involves future transfer. It also outlines essential elements like goods, price, parties. Modes of fixing price are discussed, including those set by parties, an agreed manner, course of dealings, or a reasonable price. Risks in cases of goods destruction prior to or after an agreement are explained.

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3.  Introduction
 General Principles
 Meaning of Contract of Sale
 Distinction between Sale and Agreement to Sell
 Essentials of Contract of Sale
 Goods
 Destruction of goods
 Price
 Modes of fixing price
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4.  The law relating to sale of goods is contained in the
sale of goods act,1930. This law came in to force on Ist
July, 1930.
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5. MEANING OF CONTRACT OF SALE
 According to Section 4 of the Act, a contract of Sale
means “a contract where the seller transfers or agrees to
transfer the property in goods to the buyer for price”
 Contract of Sale may be of two types
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SALE AGREEMENT TO SELL
CONTRACTOF
SALE

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SALE :
 It is a contract where the ownership in the goods is transferred by seller to
the buyer immediately at the conclusion contract
EXAMPLE: A sells his house to B for Rs.25 Lac. It is a sale since the ownership
of the house has been transferred from A to B.
AGREEMENT TO SELL :
 It is a contract of sale where the transfer of property in goods is to take place
at a future date or subject to some condition thereafter to be fulfilled.
EXAMPLE: A agreed to buy from B’s car for Rs.2 Lac if his mechanic approves
the car. It is an agreement to sell.

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DIFFERENCE BETWEEN
SALE AND AGREEMENT TO SELL
BASIS SALE AGREEMENT TO SELL
1. Transfer of
property
The property of goods passes
from the seller to the buyer
immediately. So the seller is
no more owner of the goods
sold. It is an executed
contract.
The transfer of property of the
goods is to take place at a
future time or subject to
certain conditions to be
fulfilled. It is an executory
contract.
2. Existence of
goods
A sale can only be in case of
existing and specific goods
only.
There can be an agreement to
Sell if the goods are either
inexistent or unspecified.
3. Risk of loss
In a sale if the goods are
destroyed , the loss falls on
the buyer even though the
goods are in the posssession
of the seller.
In an Agreement to Sell if the
goods are destroyed the loss
falls on the seller even though
the goods are in the
posssession of the buyer.

8. BASIS SALE AGREEMENT TO SELL
4.Consequences
of the breach
In a sale the buyer fails to pay
the price of goods (or) if there
is a breach of contract by the
buyer the seller can sue for the
price even though the goods
are still in his possession
If there is a breach of
contract by the buyer the
seller can only sue for the
damages and not for the
price.
5. Recovery of
goods
If the seller refuses to deliver
the goods, the buyer may sue
for recovery of goods
If the seller refuses to deliver
the goods, the buyer cannot
recover the goods but may
sue for damages.
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9. BASIS SALE AGREEMENT TO SELL
6. Insolvency of buyer
In a sale if the buyer
becomes insolvent before
he pays for goods, the
seller in the absence of
the lien over the goods,
must return them to the
official receiver or
assignee. He can only
claim the reteable
dividend for the price of
the goods.
In an Agreement to Sell ,
If the buyer becomes
insolvent and has not yet
paid the price the seller is
not bound to part with the
goods until he is paid for.
7. Insolvency of the
seller
In a sale the seller
becomes insolvent, the
buyer being the owner is
entitled to recover the
goods from the official
receiver of the assignee.
If the buyer who has paid
the price, finds that the
seller has become
insolvent he can only
claim a reteable dividend
and not the goods
because property in them
has not yet passed to
him.
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10. ESSENTIALS OF CONTRACT OF SALE
 Two parties/seller & buyer: There must be two parties- a buyer and a
seller to constitute a contract of sale.
 Goods: Contract of sale relates to goods i.e., movable property. Every
movable property is regarded as goods. The fruits, vegetables etc. are
regarded as goods because they can be separated from land.
 Transfer of property: The term property refers to ownership of goods. A
mere transfer of possession of the goods cannot be termed as sale. In
order to constitute a contract of sale, the seller must either transfer or
agree to transfer the property(ownership) in the goods to the buyer.
 Price: The consideration for the contract of sale called price must be
money.
 contract: A contract means an agreement enforceable by law. All the
essential elements of a valid contract must be present in the contract of

11. GOODS
Definition:
The subject matter of a contract of a sale must be goods .
According to Section 2(7) the term ‘goods’ means “every kind of
movable property other than actionable claims and money and
includes stock and shares , growing crops , and things attached to
or forming part of the land which are agreed to be severed before
sale or under the contract of sale”
Types of goods:
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GOODS
Exiting goods
Future goods
Contingent goods
Specific
Ascertained
Unascertained

12. 1. Existing goods: These are the goods which are owned or
possessed by the seller at the time of sale. Only existing
goods can be the subject of a sale. The existing goods may
be-
a) Specific goods: Goods identified and agreed upon at the
time of making of the contract of sale of goods.
Example: A owns many cows and promises to sell one of them. If one
cow is singled out, the contract is for specific goods.
b) Ascertained goods: Goods identified subsequent to the
formation of the contract of sale. The terms ascertained and
specific, are commonly used for same kind of goods.
Example: A makes a contract with B to sell 10 bags of sugar. After the
contract, a separates 10 bags from his stock of sugar for B. these bags
are ascertained goods.
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13. c) Unascertained or generic goods: Goods not identified or agreed
upon at the time of making of the contract of sale. They are the goods
defined for description only.
Example: A has 100 bags of sugar. A promises to sell 10 bags of sugar out of
them. It is a contract of unascertained goods.
2. Future goods: Goods to be manufactured, produced or
acquired after making of the contract are called future goods.
Example: A agrees to sell to Y all the mangoes which will be produced in his
farm next year. It is a contract for the sale of future goods.
3. Contingent goods : Goods that are not in existence at the time
of contract of sale are called contingent goods. In this case, the
performance of contract by the seller depends upon uncertain
events which may or may not happen.[sec.2(6)]
Example: A agrees to sell to B a rare painting if he is able to purchase from its
present owner. This is a contract of sale of contingent goods. 13

14. The following may be the causes of
destruction of goods.
o Damage to goods in which the goods have lost their commercial value
e.g. when cement is spoiled by water.
o Loss of goods by theft.
o When gods are lawfully confiscated by the government.
The effects of destruction of goods are as follows:
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15. Perishing of goods before making of the contract(Sec.
7)
Where there is a contract for the sale of specific goods, the contract is
void if the goods without the knowledge of the seller have, at the
time when the contract was made, perished or become so damaged
as no longer to answer to their description in the contract.
 Illustration
Facts: ‘A’ agrees to sell to ‘B’ a certain horse. It turns out that the
horse was dead at the time of bargain, though neither party was
aware of the fact. Discuss the validity of the contract.
Solution: The agreement is void. In case part of goods is
perished, the following rule applies :
(a)if contract is indivisible, it shall be void; and
(b)if contract is divisible, it will not be void and the part available
in
good condition must be accepted by the buyer 15

16. Goods perishing before sale but after agreement to sell
(Sec.8)
Where there is a contract for the sale of specific goods, the contract is void
if the goods without the knowledge of the seller have, at the time when
the contract was made, perished or become so damaged as no longer to
answer to their description in the contract.
 Illustration
Facts: A buyer took a horse on a trial for 10 days on condition that
if found suitable for his purpose the bargain would become
absolute. The horse died on 5th day without any fault of either
party. Discuss the position of both parties.
Solution :The contract , which was in the form of an agreement
to sell, becomes void and the seller shall bear the loss.
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17.  A contract of sale of future and contingent gods is an
agreement to sell. The destruction of future and
contingent goods makes the contract void.
 Example: C agreed to sell to H 200 tons of potatoes to be grown
on C’s land. C sowed sufficient land to grow the required quantity of
potatoes, but without any fault on his part, a disease attacked the
crop and he could deliver only about ten tons. The contract was held
to have become void.
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18. Sec.2(10) defines price “as money consideration for
a sale of goods”.
 It forms an essential part of the contract.
 It must be expressed in terms of money.
 It is not essential that the price should be fixed at the
time of sale. It must, however, be payable, though it
may not have been fixed.
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19. Ascertainment / Fixation of price
 Price in a contract of sale may be
 fixed by the contract itself, or
 left to be fixed in an agreed manner, or
 determined by the course of dealing between the parties.
 In the absence of this, the buyer must pay to seller a
reasonable price. What is the reasonable price is a
question of fact dependent on the circumstances of
each particular case.
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20.  Parties: It is the most common mode of fixing the price.
The parties are free to fix any price. The price may be
stated in a contract by the parties to the contract.
Example: A agrees to sell his car to B for RS.5Lac. Here, the price is
fixed in the contract itself.
 Agreed manner: The price may be fixed in a manner
agreed upon in a contract. It may be the price prevailing
on any particular date or price to be fixed by a third
person.
Example: A agrees to sell 100 shares of w company to B at the
market rate prevailing on the 20th day after deal. It is a valid contract of
sale.
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21.  Course of Dealings: when price is neither expressed in the
contract nor any manner of fixing the price is agreed, the price
is determined during the course dealings between the parties.
Example: A agrees to buy 100 shares of W company from B. In general
course of dealings, the accepted price of shares is the price prevailing on
the date of contract. It is the price prevailing in the stock market on the date
of sale.
 Reasonable price: If the price is not capable of being fixed
by any of the above modes, the buyer is bound to pay to the
seller a reasonable price. The amount of reasonable price
depends upon the circumstances of each case.
Example: A order B to supply 100 kg of sugar without fixing the price.
Price of sugar in the market on the day of order will be considered as
reasonable price. B must supply sugar to A at this market rate.
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