Soga 2

CONTRACT OF SALE
Parties- Seller & Buyer

“seller” means a person who sells or agrees to
sell goods; Sec. 2 (13)
“buyer” means a person who buys or agrees to

buy goods; Sec. 2(1)
Sec. 4 , SOGA
4. Sale and agreement to sell.—(1) 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. There may be a contract
of sale between one part-owner and another.
(2) A contract of sale may be absolute or conditional.
(3) Where under a contract of sale the property in the goods is
transferred from the seller to the buyer, the contract is called a sale,
but where the transfer of the property in the goods is to take place
at a future time or subject to some condition thereafter to be
fulfilled, the contract is called an agreement to sell.
(4) An agreement to, sell becomes a sale when the time elapses or the
conditions are fulfilled subject to which the property in the goods is
to be transferred.
A “contract of sale” can be of 2 types-
1. Sale; or
2. Agreement to sell
Sale Agreement to sell
It is an executed transaction. It is an executory transaction.
Property/ ownership in goods is transferred from seller to buyer. Property/ ownership in goods gets transferred ar a future time or
subject to the fulfilment of some condition.
It is a contract and conveyance of property in goods. It is only a contract. No conveyance of property takes place.
Buyer acquires a right in rem. Buyer has right in personum- right only against the selelr.
Sale always refers to existing goods. Agreement to sell refers to future or contingent goods.
Goods are at buyer’s risk. Goods remain with the seller until the agreement to sell is converted
into sale.
Unpaid seller has remedy to sue the buyer for price. If goods are in the Seller can only sue the buyer for breach of contract.
possession of seller, he can exercise right such as right to lien; right to
stoppage in transit; right to re-sell the goods
Sale cannot get converted into an agreement to sell. It gets converted into sale after fulfilment of the condition or lapse of
stipulated time.
If seller refuses to deliver goods, buyer can sue him for recovery of Buyer can sue only for damages but he cannot sue for recovery of
goods. goods.
If seller sells goods to a third person, buyer can recover them, subject to Original buyer cannot recover goods from new buyer.
conditions.
Firm Bhagwandas V. State of MP
AIR 1966 MP 95
Contract of sale between plaintiff and State for
sale of tender leaves for five years.
Consideration was payable at the beginning of
each year.
Held-When goods are not specific and
ascertained at the time of making the
contract, it is only an agreement to sell.
Ram Narain Mahato V. State of MP
[1970] 1 SCC 25
Sale of timber logs to be cut from trees.
Held- Not sale.

It is an agreement to sell. Property in the goods
will pass to the buyer on the severance of the
goods from the land and not before that.
How is Contract of Sale made?
Sec. 5-
(1) A contract of sale is made by an offer to buy or sell
goods for a price and the acceptance of such offer. The
contract may provide for the immediate delivery of
the goods or immediate payment of the price or both,
or for the delivery or payment by instalments, or that
the delivery or payment or both shall be postponed.
(2) Subject to the provisions of any law for the time being
in force, a contract of sale may be made in writing or
by word of mouth, or partly in writing and partly by
word of mouth or may be implied from the conduct of
the parties.
AGREEMENT TO SELL & HIRE- PURCHASE
AGREEMENT
Hire-Purchase Agreement-
Owner of goods lets out his goods on hire and
undertakes to sell them to the hirer if the hirer
makes a certain number of payments. Until
the hirer has paid the last instalment, he holds
the goods in the capacity of a bailee. When
the last instalment is paid, hirer becomes the
owner.
In a HP agreement-
• Buyer has the option to purchase.
• Ownership in goods is passed when intending
buyer exercises his option to purchase.
• Option to either purchase the goods or to
terminate the contract anytime before the last
instalment is paid.
• On termination of contract, owner takes back
the possession of goods.
Agreement to sell Hire- Purchase Agreement
Delivery of possession is not required. Possession of goods is delivered (through
bailment) on rent.
Buyer has no option to make the sell Bailee has the option to purchase the
effective. Both parties are bound to fulfill goods or not
their promise to make the sale effective
It can be verbal or written or implied. Terms and conditions must be written.
A buyer acquiring possession can transfer Until the buyer has purchased the goods,
the title to other by way of contingent he has no right to pass the property in
contract. goods.
Lee V Butler 1893
Owner agreed by a hire purchase agreement to let
furniture on hire to the hirer. Hirer agreed to pay
certain sum of rent immediately and a further
amount in three months. Agreement provided
that property in furniture would automatically
pass to hirer on his paying the agreed price in full.
Held-It is a agreement of sale because hirer has
bound herself to pay the total price of furniture.
Helby V. Mathew 1895
Agreement was for hire of a piano for a certain
period of time. The hirer was permitted to return
the piano to the owner at any time subject to the
payment of all instalments due to the date of
return. If the hirer kept the goods or the full
period of hire and paid all the due amount, the
goods would become the property of hirer.
Held- it is not an agreement to sell. It is a hire
purchase agreement because here the buyer has
the option to buy or not to buy the goods.
SALE OF GOODS & CONTRACT FOR WORK &
LABOUR
State of Madras V Gannon Dunkerly & Co.
1958 AIR 560
Contract to construct a building was entered into

between the parties.
What kind of contract it is?
Held- In a contract of constructing a building, there is no
sale of goods because in such a contract agreement
between the parties is that the contractor should
construct the building according to the specifications
contained in the agreement and in consideration
receive a payment as agreed. There is neither a
contract to sell the material used in the construction
nor that the property which passes is movable.
In contract of work and labour, goods are not
sold.
The agreement is for rendering some work or
labour.
Substance of contract is that the skill and labour
is exercised.
Eg. Asking a goldsmith to prepare ornaments for

a price

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CONTRACT OF SALE

Parties- Seller & Buyer

“buyer” means a person who buys or agrees to

4. Sale and agreement to sell.—(1) A contract of sale of goods is a

It is an executed transaction. It is an executory transaction.

Held- Not sale.

Contract to construct a building was entered into

Eg. Asking a goldsmith to prepare ornaments for

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