Sales of Goods Act - Definition of Contract of Sales

Definition

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

Contract of sales is defined as above in sales of goods act. Essentials things are as below

  1. Contract between two parties, buyer and seller
  2. Subject matter of Contract is "Goods"
  3. Seller to transfer or agree to transfer the property, ownership in the goods
  4. Consideration is money 

 Contract between two parties, buyer and seller

 Act stipulates that Contract of Sale must have two parties. Seller is a person who sells or give off the possession of goods, whereas buyer is a person who take possession or property in goods.

Can a same person buy his own property ? Possibly. Say your property is attached by a bank for default of loan payment. In Auction of your property you buy that same property. Nevertheless, this is sale!

One important thing, for example if government passes law that Onion should be sold in Government shops only. Will such transaction be sales ? Will government will able to tax this transaction. Earlier few high courts were of the opinion that this is not sale. One of the case was New India Sugar Mills V Commissioner of Sales Tax, Bihar. However, later supreme court over ruled this decision in Vishnu Agencies V Commercial Tax Officer and stated that such transaction will be valid.

Subject matter of contract is goods

In contract of sale, subject matter or important aspect of contract is good. In this article, we have discussed definition of goods, types of goods, importance of why goods need to be classified.

Transfer of property(Ownership) in the Goods

Transfer of ownership in the goods is essence of the contract. Generally, there could be ownership in property or their could be some interest. For example, you pledge a nano car with moneylender. Moneylender enjoys the benefit of car, but he doesn't have absolute ownership.

Sales where there is no transfer of ownership or property in goods will not be contract of sale.

Price

Consideration in contract of sales must be money.  We have seen that "Money" is not a good. If goods are exchanges with goods then it would be barter.

Generally price is mentioned in contract. But what if there is no mention of price in the contract. There are few methods by which price is decided. 

  1. First, of obvious, price to be fixed in contract.
  2. Goods, which are subject matters of contract could be valued by third party. For example, diamond will be valued by diamond exper.
  3. It may be fixed by an agreed manner. For example A and B enters into contract, where A buys Coal from B, and they mention in contract that price will be market price at the date of delivery.
  4. Price determined by course of dealing. Two parties A  and B, where A buys Coal monthly from B, in their trade, price is generally the price of Coal in market in last day of every month, then such price will be applicable for their contract
  5. If All above fails, then typically court will determine the price which is just

That's in. These are all essential ingredients of contract of sale.


Legalfudaa

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