Legal Question in Business Law in India

22.04.2012

Dear Colleague,

Your question is incomplete. I am still answering it under the presumption that you are referring to the circumstances under the Sale of Goods Act :

1. CHAPTER 4 SALE OF GOODS ACT 1930

Originally, the law relating to sale of goods was contained in Chapter VII of the Indian Contract Act, 1872. The same was repealed and re-enacted by the Sale of Goods Act, III of 1930.

4.1 FORMATION OF THE CONTRACT OF SALE Definition (Section 4) 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 price quoted;.

ESSENTIALS OF CONTRACT OF SALE From the above definition, the following essentials of a contract of sale may by noted: 1. There must be at least two parties 2. Transfer or Agreement to transfer the ownership of goods. 3. The subject matter of the contract must necessarily be 'goods'. 4. The consideration is Price. 5. A Contract of sale may be absolute or conditional 6. All other essentials of a valid contract must be present.

`SALE` AND 'AGREEMENT TO SELL' DISTINGUISHED Sale: It is a contract where the ownership in the goods is transferred by seller to the buyer immediately at the conclusion contract. Thus, strictly speaking, sale takes place when there is a transfer of property in goods from the seller to the buyer. A sale is an executed contract. It must be noted here that the payment of price is immaterial to the transfer of property in goods. Ex - A sells his Yamaha Motor Bicycle to B for Rs. 10,000. It is a sale since the ownership of the motorcycle 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. Ex- (i) A agreed to buy from B a certain quantity of nitrate of soda. The ship carrying the nitrate of soda was yet to arrive. This is `an agreement to sale`. In this case, the ownership of nitrate of soda is to be to transferred to A on the arrival of the ship containing the specified goods (i.e. nitrate of soda) [Johnson V Mc'donald (1842) 9 M & W 600, 60 RR 838] (ii) On 1st March 1998, A agreed to sell his car to B for Rs. 80,000. It was agreed between themselves that the ownership of the car will transfer to B on 31st March 1998 when the car is got registered in B`s name. It is an agreement to sell and it will become sale on 31st March when the car is registered in the name of B. Other points of distinction between a sale and an agreement to sell are: Sale Agreement to sell 1. A sale is an executed contract. 1. An Agreement to sell is an executory contract. 2. In a sale, since the property has passed to the buyer, 2. In an agreement to sell, in case of breach, the seller the seller can sue the buyer for the price of the goods. can only sue for damages, unless the price was 3. A sale creates a right in rem. payable at a stated date. 4. In case of loss of goods, the loss will fall on the buyer, 3. An agreement to sell creates a right in personam. even though the goods are in the possession of the 4. The loss in this case shall be borne by the seller, seller. It is because 'Risk' is associated with even though the goods are in the possession of the ownership. buyer. 4. In case buyer pays the price and the seller thereafter becomes an insolvent, the buyer can claim the goods 5. In these circumstances, the buyer cannot claim the from the Official Receiver or Assignee. goods but only a rateable dividend for the money 6. If the buyer becomes an insolvent without paying the paid. price, the ownership having passed to the buyer, the 6. In these circumstances, the seller can refuse to seller shall have to deliver the goods to the Official deliver the goods to the Official Assignee or Re- Assignee or Receiver except where he has a lien over receiver. the goods.

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Regards,

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