Business Law Contract of sale of goods

2.  The law relating to sale of goods is contained in the
Sale of Goods Act,1930. This law came force on 1st
July 1930. The Act contains 66 sections and extends
to the whole of Pakistan.

3.  Sale of Goods Act defines a contract of sale of
goods as “A contract whereby the seller transfer or
agrees to transfer the property in goods to the buyer
for a price”.
 In the other words, a contract to transfer the
ownership of goods from the seller to the buyer is
known as contract of sale.

4.  The Following are essentials of a contract of sale of goods:
1: Contract
The word contract means an agreement enforceable by law. All the
essential of a valid contract like capacity of parties, free consent,
legality of object, etc. should also be present in a contract of sale. It
may be verbal or in writing. It may be express or implied.
2: Two Parties
There should be two parties to a contract of sale, i.e. a buyer and
seller. One person cannot act as a buyer and seller because a
person cannot buy his own goods and similarly a person cannot sell
his goods to himself.
However, an owner of a one part can sell his share to the owner of
other part. Similarly, a partner may buy the goods from the firm in
which he is a partner and vice-versa.
Example: A sells his computer to B for Rs. 40,000. A is seller and B is buyer.

5. 3: Transfer of Property:
Transfer of property is another essential of contract
of sale. Property here means ownership. A mere transfer
of possession of the goods cannot be termed as a sale.
To constitute a contract of sale the seller must either
transfer or agree to transfer the property (ownership) in
the goods to the buyer.
Example: “A” sells his car to “B” for Rs 8,000,000. The
ownership and possession of the car will be transfer from
“A” to “B”.

6. 4: Goods:
Goods means every kind of movable property other than
actionable claims and money; and includes electricity, water,
gas, stock and shares, growing crops, car etc.
Every movable property is regarded as goods. The trees,
fruits etc. are regarded as goods because they can be
separated from land.
An actionable claim means a debt or a claim for money
which a person may have against another and which can be
recovered by filing a suit. Money is not regarded as goods.
However, old coins are treated as goods

7. 5: Price:
The consideration in a contract of sale must be the price. When goods are sold or
exchanged for other goods, the transaction is barter, and not a contract of sale of goods. If
goods are sold partly for goods and partly for money, the contract is sale.
Example: A sell his Car to M for Rs 3 lac. It is a contract of sale because here the subject
matter is car which is moveable thing.
6: Sale and Agreement to sell:
The term contract of sale includes both sale and an agreement to sell. When the
property in the goods is transferred from the seller to the buyer at the time of formation of
contract, the contract is called a sale.
Where under a contract of sale the transfer of ownership in the goods is to be
transferred from seller to buyer at some future date, the contract is called an agreement to
sell.
Example:
“A” buys a book from “S” and pays the entire price on a counter and received the goods, it’s
a sale.
“A” agree to buy “B’s” car for Rs 2 lac, but deliver will be take placed after a month, it’s a
agreement to sale.

8.  The following are the kinds of goods.
1. Existing Goods: The good which are owned or possessed by the seller at the time
of contract of sale are called existing goods. In other words the goods which are
physically in existence and in seller’s possession, at the time of contract are called
existing goods.
These goods can be divided into following kinds
a. Specific Goods: The goods identified and agreed upon at the time of the contract
of sale are called specific goods. In other words these are the goods which can be
clearly identified and recognized as separate things at the time of contract.
a. Unascertained Goods: The goods which are not identified and agreed upon at the
time when a contract of sale is made are called unascertained goods.
Example: A has 100 bags of sugar. A promise to sell 10 bags of sugar out of them, it is
a contract of unascertained goods.

9. 2. Future Goods: The goods which a seller does not
possess at the time of contract but will be manufactured,
produced or acquired by the seller after making the
contract of sale are called future goods. The seller can just
make an agreement sell about future goods.
Example: “A” agrees to sell to “B” all the wheat which will
be produced in his farm next year, it is a contract of future
goods.

10.  3. Contingent Goods:
Though a type of future goods, these are the goods the acquisition of which by
the seller depends upon a contingency, which may or may not happen
Example:
 “X agrees to sell to Y 25 bales of Egyptian cotton, provided the ship which is
bringing them reaches the port safely. It is a contract for the sale of contingent
goods. If the ship in sunk, the contract becomes void and the seller is not liable.
 A agrees to sell specific goods in a particular ship to B to be delivered on the
arrival of the ship. If the ship arrives but with no such goods on board, the seller is
not liable, for the contract is to deliver the goods should they arrive.

11. › The money consideration for sale of goods is known as price. Price
is an essential element in every contract of sale of goods, a valid
sale cannot take place without a price. The price should be paid or
promised to be paid.
Modes of Fixing Price:
1.Parties: This is most usual mode of fixing the price. The parties
are free to fix any price. The price may be stated in a contract by
the parties of the contract.
Example: “Y” agrees to sell his car to “Z” for Rs 5 lac, Here the
price is fixed in the contract it self.

12. 2. Agreed Manner:
The price is fixed in a manner agreed upon in a contract it may
be the price prevailing on any particular date.
Example: “A” agrees to sell 1,000 share of PIAA to “B” at the
rate prevailing on the 20th
day after the deal.
3. Course of Dealings:
Where price is neither expressed in the contract nor any
manner of fixing the price is agreed, the price would be determined
by the course of dealings between the parties.
Example: “A” agrees with “B” to buy 100 shares of XYZ company, In
general course of dealings the accepted price of shares is the price
prevailing on date of contract, it is the price prevailing in the marker
on date of sale.

13.  Reasonable Price:
If the price is not capable of being fixed in by any of the
above modes, the buyer is bound to pay to the seller a
reasonable price, what is the reasonable price depends
upon the circumstances of each case.
 Example: “B” orders “C” to supply 1500 kg of Sugar
without fixing the price. Price of sugar in the market on
day of order would be considered as reasonable price
“C” must supply sugar to “A” at this market rate.

14. Conditions and
Warranties .

15.  A contract of sale of goods contains various terms or
stipulations regarding the quality, price, mode of
payment, delivery of goods, time of performance
and place where the goods are to be sent. The
major terms are called conditions and minor terms
are called warranties.
Conditions and Warranties

16.  Condition is a stipulation essential to the main
purpose of the contract, the breach of which gives
rise to a right to treat the contract as repudiated.
 Thus, a condition is essential for the main purpose of
the contract. Its non fulfillment causes massive losses
to the suffered party. In case of violation of condition,
the suffered party can cancel the contract.

17.  Examples:
 “A” contract to deliver 100 fans of GFC fans to “B”, but
“A” delivers Millet Fans, it is breach of condition, B can
accept or reject them and claim for damages.
 “C” contract to delivery 50 laptops of HP to “D”, but “B”
delivers 50 laptops of Dell, its breach of condition.

18.  Warranty is a stipulation to the main purpose of the
contract, the breach of which gives rise a claim for
damages but not the right to reject the goods and treat
the contract as a repudiated.
 In other words , a warranty is not essential for the main
purpose of the contract, The breach of warranty gives
the suffered party a right to recover damages only but
not to reject the contract.

19.  Examples:
 “A” promise to deliver to “B” 100 fans at his office, but
“A” delivers them at his home, it is breach of warranty, B
can claim damages only but cant reject the contract.

20. CONDITION WARRANTY
1. Value
A condition is a stipulation essential to the
main purpose of the contract.
1. Value
A warranty is a stipulation not essential to the
main purpose of the contract.
2. Basis
It forms the basis of a contract and goes direct
to the root of the contract.
2. Basis
It doesn’t forms the basis of a contract and
doesn’t goes direct to the root of the
contract.
3. Breach
The breach of a condition gives the suffered
party the right to reject the contract.
3. Breach
The breach of a warranty doesn’t gives the
suffered party the right to reject the
contract.
4. Treatment
The treatment of condition may be treated
as a breach of warranty.
4. Treatment
The treatment of warranty cannot be treated
as a breach of condition.
5. Option
In the breach of condition, the suffered
party has an option to claim damages
instead of rejecting the contract.
5. Option
In the breach of warranty, the suffered
party has no option to reject the contract.
He can only claim for damages

21.  The condition and warranty which are included in
contract are called express. The conditions and
warranty which are not included in the contract but
the law presumes their existence in the contract are
called implied.

22. Whether any express condition is made or not law
presumes certain standards which are to be ensured by
the seller before selling the any product .These
presumptions as to nature, quality, and rightful ownership
of the product are termed as implied conditions.

23. 1. Sales by description: “If you contract to sell peas, you
cannot oblige a party to take beans.” where there is a
contract for the sale of goods by description, there is an
implied condition that the goods shall correspond with the
description. If the goods are not according to the description,
the buyer can reject the goods. If the seller supplies different
goods, the buyer is not bound to accept the goods.
Example: “A” advertised a car for sale as Corolla, 2014
model, B after buying the car, found it of an older model, B
could return the car.

24. 2. Sale by sample: In case of sale by sample, the goods must be supplied
according to a sample agreed. Seller should supply the goods according to sample
shown to the buyer.
3. Sale by sample and description: When the goods are sold by sample as
well as by description, there is an implied condition that the bulk of the goods shall
correspond with the sample and the description. If the goods supplied correspond only
with the sample and not with description, so the buyer could reject.
Example: Mr. Ali agreed to sell Mr. Asif imported refined almond oil. The oil
supplied corresponded with the sample but was mixed with grape oil, held, that the oil
was not in accordance with the description, so the buyer could reject the oils.

25. 4. Condition of Fitness and Quality: Where the buyer
inform to the seller about the particular purpose for which
goods are required, there is an implied condition that the
goods shall be reasonably fit for such purpose. This
condition applies if the following requirement satisfied.
Example: A enters into an agreement with B to buy 100 oil
filters to be used for Suzuki Car, The oil filters were unfit, A
reject them

26. 5. Condition for wholesomeness: Wholesomeness means
beneficial for health. This condition applies only in
contract of sale of eatables. In such cases goods supplied
must be in a suitable condition to be sold, its means good
must be fit for consumption.
Example: “F” bought Milk for “E”, a dairy owner, but milk
contained germs of typhoid fever, F’s wife after taking the
milk became infected and died, “A” was held liable in
damages

27. Implied Warranties:
Unless otherwise agreed, the law includes
following implied warranties into the contract of sale of
goods.

28.  2. Disclosure of dangerous goods:
The implied warranty on the part of the seller is that if the
goods are of dangerous nature, seller should warn the
buyer about the product and how it would be
dangerous.
Example: C purchased a tin of insect killing powder from A,
A knew that if tin is not opened with special care, it may
be dangerous but told nothing to C, C opened the tin in
the normal way and as a result the powder flied into his
eyes and caused injury.

29.  2. Quiet Possession: It is an implied assurance to the
buyer that he shall have the possession and enjoyment of
the goods sold to him without disturbance from the seller or
any other person. If the buyer is disturbed in the enjoyment
of the goods due to the seller’s defective title, he can claim
damages from the seller.
 Example: Mr. Waqar purchased a second hand car
from Mr. Javed, Mr. Waqar spent money on its repair and
used it for some months. The Car was found to be stolen
and Mr. Waqar had to return it to its true owner, Held Mr.
Waqar could recover damages and the price.

30. PERFORMANCE OF CONTRACT OF
SALE

31.  A contract of sale is said to be performed when each
party to it fulfills his promise or does his duty. It is the
duty of the seller to deliver the goods, and of the
buyer to accept and pay them in accordance with
the terms of the contract of sale.

32.  Buyer’s Rights ( or seller’s duty): The most important
duty of the seller is to deliver the goods to the buyer
according to the terms of the contract of sale. Delivery
simply means transfer of possession from one person to
another.
A. Part Delivery: A delivery of part of goods, in progress
of the delivery of the whole, has the same effect for the
purpose of passing the property in such goods as a
delivery of the whole.

33. B. Time of Delivery: In the absence of any express
contract, the seller of goods is not bound to deliver
them until the buyer applies for delivery. Where under
the contract of sale the seller is bound to send goods to
the buyer but if no time for sending them is fixed, the
seller is bound to send them within reasonable time.
C. Place of Delivery: Goods must be delivered where
it is mentioned in the contract by the buyer to the seller
or manufacturer of the goods.

34. Seller’s Rights ( or Buyer’s Duties ):
The buyer must accept the goods delivered to him at the
proper place and at a reasonable time and must pay to the
seller in accordance with the terms of the contract.
A. Delivery of Wrong Quantity: Where the seller delivers to
the buyer a quantity of goods less than he contracted to sell,
the buyer may reject the them, but if the buyer accepts the
goods so delivered, he shall pay for them at the contract rate.
Again, where the seller delivers to the buyer a quantity of goods
larger than he contracted to sell, the buyer may accept the
goods included in the contract and reject the excess quantity
to the contract. If the buyer accepts the entire goods, so
delivered, he shall pay for them at the contract rate.

35. B. Delivery of the Goods of Wrong Description: Where the
seller delivers to the buyers the goods he contracted to
sell mixed with goods of a different description not
included in the contract, the buyer may accept the
goods which are in accordance with the contract and
reject the rest, if he accepts the goods he must pay the
seller according to contract.
C. Neglect or refusal of delivery: Where the seller is
ready and willing to deliver the goods and request the
buyer to take the delivery and the buyer does not within
a reasonable time after the request take delivery of the
goods, he is liable to the seller for any loss occur due to
his neglect or refusal to take the delivery.

37.  Where under a contract of sale of the property in goods has passed
to the buyer and buyer intentionally refuse to pay for the goods
according to the terms of the contract, the seller may sue him for the
goods. If the buyer wrongfully neglects or refuse to accept and pay
for the goods, the seller may claim for damages.
 Where under a contract of sale the price is payable on a certain day
irrespective of delivery and the buyer wrongfully neglect to refuse to
pay such price, the seller may sue him for the price although the
property in goods has not passed or it may be passed to the buyer. If
the seller wrongfully neglect or refuse to deliver the goods to the
buyer, the buyer may claims for damages.