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(i) Definition(ii) Applicability(iii) Essentials of a Contract of Sale
Definition It is a contract by which the ownership of movable goods is transferred from the seller to the buyer. The term ‘contract of sale’ is defined in Section 4(1) of the Sale of Goods Act as- “A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price” The Sale of Goods Act extends to whole of India except the State of Jammu and Kashmir
Essentials of a Contract of Sale(i) All requirements of a valid contract must be fulfilled(ii) Two Parties –(iii) Goods(iv) Transfer of Property(v) Price(vi) Includes both a ‘sale’ and ‘agreement to sale’(vii) No formalities are required
Price , Exchange,saleMode of determining of price [ section 9(1)] Fixed by contract By third parties
(iii) Goods The subject matter of a contract of sale of goods is goods. According to Sec 2(7) “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 contract of sale.
ACTIONABLE CLAIM – ‘means a claim which can be enforcedthrough the court of law e.g a debt due from one person to anotheris an actionable claim
Examples of GoodsGoodwill, Trade Mark, Copyright, Patentright, Water, Gas, Electricity, are all example of goodClassification of Goods(i) Existing Goods (ii) Specific goods (iii)unascertained goods(iv) Future Goods- This is applicable to goods which are subjectmatter of the agreement to sale(v) Contingent Goods- i.e. the goods arriving by ships etc.
Sale & Agreement to sell The ownership is At some future date transferred immediately Executory Contract Executed contract A seller can sue for damages. A seller can sue for An agreement to sell takes price. He has all the place in the case of future right of unpaid seller goods. Sale takes place in the A seller bears the risk. case of existing goods usually. A buyer bears the risk.
Stipulation, Condition & Warranty A representation which forms part of the contract of sale and affects the contract, is called a stipulation. A stipulation which is most important for formation of the contract of sale is known as a ‘condition’. A stipulation which is collateral or of least importance for the formation of the contract of sale, is known as a ‘warranty’.
ConditionsSection 12(2) of the Sale of Goods Act, 1930 definescondition as, “a condition is a stipulation essentialto the main purpose of the contract, the breach ofwhich gives rise to right to treat the contract asrepudiated.”Example: Buyer wanted a horse which could run at aspeed of 45 m.p.h.
Implied Conditions(i) Condition as to Title [Sec 14(a)](ii) Condition as to Description [Sec 15](iii) Condition as to Sample [Sec 17(2)](iv) Condition as to Sample as well as Description [Sec 15](v) Condition as to Quality or Fitness for Buyer’s purpose [Section 16(1)](vi) Condition as to Merchantability [Section 16(2)](vii)Condition as to Wholesomeness
Condition as to Title [Sec 14(a)] It is the most important implied condition in a contract of sale that seller has the right to sell the goods..
Condition as to Description [Sec 15] Whenever the goods are sold by description, the implied condition is that the goods shall correspond with the description. ’
Condition as to SampleIn a sale by sample there is a implied condition that thegoods shall correspond with the sample in quality, and thegoods shall be free from the defects which render themunmerchantable.Sale by sample has following three conditions:(i) Correspondence of Goods with sample in quality [sec17(2)(a)](ii) Reasonable opportunity of comparing goods with thesample [Sec 17(2)(b)](iii) Merchantability of Goods [Sec 17(2)(c)]
Condition as to Sample as well as Description[Sec 15] Sometimes, the seller shows sample to the buyer and also gives him description. In such case, the implied condition is that the goods shall correspond with both, the sample as well description.
Condition as to Merchantability [Section 16(2)]The term merchantability means two things:(i) If goods are purchased for resale, they should be immediately re-saleable; &(ii) If goods are purchased for self use then they should be reasonably fit for the purpose for which they are generally used..
Condition & Warranties Condition is a Warranties are subsidiary stipulation which is or collateral to the main essential to the main purpose of the contract. purpose of the It is not of vital importance. contract. The main contract can be It is of vital completed even if warranty importance is not fulfilled.
Condition & Warranties In case of breach of In case of breach of condition, the buyer may warranty, the buyer cannot put an end to the put an end to the contract. contract. He can only claim damages from the seller. A breach of condition A breach of warranty may be treated as a cannot be treated as a breach of warranty. breach of condition.
Doctrine of Caveat Emptor[Sec 16] The doctrine of caveat emptor is a fundamental principle of law of sale of goods. It means ‘Caution Buyer’ i.e. ‘let the buyer beware’. In other words, it is no part of the seller’s duty to point out defects in his own goods. The buyer must inspect the goods to find out if they will suit his purpose e.g. certain pigs are sold ‘subject to all faults’. These pigs being infected cause typhoid to the other healthy pigs of the buyer. The rule of caveat emptor would apply.
Exceptions to the Doctrine of Caveat Emptor(i) Condition as to Quality or Fitness for Buyer’s purpose(ii) Where the seller makes a false representation or obtainsconsent of the buyer by fraud(iii) Condition as to Merchantability(iv) Condition as to Wholesomeness(v) Condition implied by the Custom or Trade Usage