Contract of sale of goods

1. Legal Environment for Business in Nepal
26 December 2016
Saroj Shrestha 1

2. “Sale of Goods” refers to ‘transfer of ownership of
goods” against a price from seller to the buyer.
The business of selling and buying of ‘movable goods’
is regulated by the Contract of Sale of goods. It does
not deal with ‘mortgage’ and ‘pledge’ of immovable
properties and all the movable properties (actionable
claim and money).
The Contract of Sale of goods is provided in Chapter 7
of Contract Act, 2056 which is influenced by the
Indian Contract Act, 1930 and English Sale of Goods
Act, 1893
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3. Sec. 40 of Contract Act, 2056 states “A contract of
Sales of goods shall be deemed to have been
concluded, in case a seller agrees to handover may
goods to the buyer immediately of in future by
receiving the price of that goods.” The section
further explain that, the term ‘goods’ refers to any
types of movable properties which can be sold and
bought.
The contract of Sale of goods may be either
conditional or unconditional and the contract may be
concluded with the provision to sale goods owned or
possessed by the Seller or those to be produced or
acquired by him in future.
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4. The Indian Sale of Goods Act, 1930 defines it as ‘A
contract whereby the seller transfers or agrees to
transfer the property in goods to the buyer for price.’
Contract of Sale of Goods
1. Sale: A sale is an executed contract. ‘Sale’ means
‘a transfer of property in goods (the ownership) from
the setter to the buyers.
2. Agreement to sell: Agreement to sell is an
executor contract. It is a contract of sale, under
which the transfer of property is to take place in the
future or is subject to some condition to be fulfilled.
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5. It is only an agreement to transfer the goods later, not
an actual transfer of goods.
In this regard, the SC has established a principle that
‘the agreement concluded with the condition that ‘the
land and building will be sold according to the deed
after certain time’, and the deed itself is not a
contract of sale (sale deed), it is an agreement to
sale’. (Titha Kumari Rana Vs. Ram Shanker Shrestha
NLJ 2049 pg. 1)
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6. Differs in Sale Agreement to Sale
1. Nature of Contract This is current selling
contract (executed)
This is the agreement to
sell the goods in future
(executory)
2. Transfer of ownership Ownership of the goods is
transferred at the time of
contract
Ownership of the goods
will be transferred in
future in certain
circumstances.
3. Transfer of risk When goods are sold the
risk of the goods shifts
with ownership to buyer
Ownership lies with the
seller, risk remains on the
seller not to the buyer.
4. Right against each
other
The seller may file a suit
against the buyer for price
The buyer may file a suit
against the seller for
indemnity.
5. Right of seller to re-sale After payment the goods
in possession of the seller
can not be sold
The seller can sell the
same goods again to
another buyer.
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7. 6. In case of
insolvency of seller
The buyer has a
right to acquire the
goods
The buyer has a
right to refund the
price
7. In case of insolvency
of buyer
In case of insolvency of
buyer, the seller can
have the price only
An unpaid seller may
have the goods, In case
of insolvency of buyer
8. Responsibility of loss The buyer will be
responsible for the loss
of the goods after the
sale
The Seller will be
responsible in case of
loss of the goods
9. Types of goods The Seller can sell
specific and existing
goods
The seller can sell future,
contingent and
unascertained goods.
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8. 1. Goods/ Movable property:
2. Price
3. Two Parties
4. Transfer of ownership
5. Terms of a contractz
6. Essential of valid contract
7. Includes ‘sale’ and ‘agreement to sale’
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9. Contractual terms are the provisions forming part of
the contract. There are contained various types of
terms and stipulations regarding the quality,
quantity, price, goods, modes of its payment, time,
place of delivery of goods etc. But all of them are
not equal importance. Some of the terms and
stipulations are major terms, called ‘conditions’
and some of them may be minor terms, called
‘warranties’.
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10. 1. Conditions: The conditions are the factors or
stipulations of the contract of sale, which are
essential for the main purpose of the contract. In
case of breach of the conditions, the aggrieved
party has the right to repudiate the contract.
2. Warranties: Warranty is the stipulation which is
collateral or auxiliary or a relating factor for the
main purpose of the contract. But it is not such a
vital factor as a condition is. In case of the breach
of warranty, the aggrieved party can only claim
damage and can not be treated as a repudiated
contract.
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11. 11Saroj Shrestha
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