The Sale of Goods Act, 1930 governs contracts related to the sale of goods in India. As per Section 4 of the Act, a contract of sale involves the transfer of ownership of goods from the seller to the buyer for a price. This transfer may be immediate (sale) or to occur at a future time (agreement to sell).
To be a valid and enforceable contract of sale, certain essential elements must be fulfilled:
1. Two Parties: Buyer and Seller
There must be two distinct parties – a seller (who sells or agrees to sell) and a buyer (who buys or agrees to buy). A person cannot sell goods to himself/herself.
Case Reference: Multiscreen Ltd. v. Indian Express Ltd., AIR 1984 Cal 104
→ Clarified the existence of distinct parties is necessary for valid contract.
2. Transfer or Agreement to Transfer Property
There must be a transfer of ownership of goods (property in goods), not just the possession.
- If the ownership is transferred at once, it is a sale.
- If it is to be transferred at a later time or subject to conditions, it is an agreement to sell.
3. Goods
The subject matter of the contract must be goods, as defined under Section 2(7) of the Act – every kind of movable property, excluding actionable claims and money.
Goods can be:
- Existing
- Future
- Contingent
4. Price
The consideration for the contract must be money only. A barter is not a sale under this Act.
Case Reference: Halsbury’s Laws of England
→ Consideration must be monetary; exchange of goods is not a contract of sale.
5. Essential Elements of a Valid Contract
Since a contract of sale is a special type of contract, all essential elements of a valid contract under the Indian Contract Act, 1872 must also be satisfied:
- Free consent
- Lawful object
- Competency of parties
- Lawful consideration, etc.
6. Delivery and Payment Terms
The terms relating to delivery of goods and payment of price must be mutually agreed upon, though the transfer of property does not necessarily depend on delivery.
7. Other Conditions and Warranties
The contract may include conditions (essential terms) and warranties (subsidiary terms). Breach of condition can repudiate the contract; breach of warranty only gives rise to a claim for damages.
Text-Based Mind Map
Essentials of Contract of Sale
→ Two Distinct Parties
→ Transfer or Agreement to Transfer Ownership
→ Subject Matter: Goods
→ Price in Money
→ Valid Contract Elements (per Indian Contract Act)
→ Delivery & Payment Terms
→ Conditions & Warranties
Situation-Based Questions
Q1: A agrees to sell 10 quintals of wheat to B for ₹5,000, but the wheat is not yet harvested. Is this a valid contract of sale?
A: Yes, this is a valid agreement to sell future goods under the Sale of Goods Act.
Q2: A agrees to exchange his old laptop with B’s tablet. Is this a contract of sale?
A: No. Since the consideration is not money, it is a barter and not covered under the Sale of Goods Act.
Q3: Can a person sell goods to themselves in a different capacity, such as an agent?
A: No. Even if acting in different capacities, legally the parties must be distinct and separate.
Frequently Asked Questions (FAQs)
Q1: What is the difference between a sale and an agreement to sell?
A sale is an executed contract where ownership is transferred immediately. An agreement to sell is executory, where ownership is transferred at a future time or on fulfillment of conditions.
Q2: Can services be sold under the Sale of Goods Act?
No. The Act covers only movable goods, not services.
Q3: Is the Sale of Goods Act, 1930 applicable to immovable property?
No. It deals only with the sale of movable goods.
Q4: What happens if price is not fixed in the contract?
If price is not determined, the buyer must pay a reasonable price (Section 9 of the Act).
Citations / References
- The Sale of Goods Act, 1930
- Indian Contract Act, 1872
- Multiscreen Ltd. v. Indian Express Ltd., AIR 1984 Cal 104
- Halsbury’s Laws of England – Commentary on Contracts of Sale
