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Sale and Agreement to Sell: Judicial Interpretation


Authored By- Divya Surana


Keywords: Sale, Agreement to Sell, Contract, Sale of Goods Act, Buyer, Seller

Abstract-

This topic deals with the Sale of Goods Act, 1930. A Contract of Sale is a type of contract whereby one party (seller) either transfers the ownership of goods or agrees to transfer it for money to the other party (buyer).

Introduction

The Sale of Goods Act has been derived from the Indian Contract Act, 1872. The sale and agreement to sell is enshrined in section 4of Sale of Goods Act, 1930. Both terms have a different meaning.

An economy is based on contracts since the beginning we contract each other for our needs and necessities; this is how the concept and kinds of contracts have evolved. Thus, contracts are the roots of the law which deals with business, transactions of the Indian economy as well as the society.

Bare Provision

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.

Explanation

From the above statutory provision we can draw some points which will serve as essentials to contract of Sale:

  • There ought to be at least two parties.

  • The basis of the contract ought to be products.

  • Consideration (Price)

  • Transfer of property in goods

  • The contact of sale may be absolute or conditional

Many people get confused amidst these two terms, but these are not the same.

Both sale and agreement to sell are types of contracts, wherein the former is an executed contract whereas the latter represents an executory contract. Both sale and agreement to sell are types of contracts, wherein the former is an executed contract whereas the latter represents an executory contract. A sale can never be an agreement to sale but an agreement to sell can be converted into the sale as per clause 4 of the said provision.

Sale

A sale means that when the property in goods is transferred from seller to the buyer, price acts as a consideration. And a contract of sale must fulfill all the conditions that a valid contract carries.

Seller- a person who offers to sell the property in goods

Buyer- a person who purchases the property in goods for consideration.

In case the payment is not made, then the seller may go to court and file a case against the buyer for the damages and price too. Similarly, if a seller does not deliver the goods for sale, then the buyer may go to court.

Agreement to sell

This is defined in clause 3 of the said provision, the agreement to sale also is a type of sale but the different thing here is that the transfer of goods takes place in the future subject to fulfillment of some conditions. The contingent contracts can be considered as an example of an agreement to sell. In simple words, agreement to sell can be called a confirmation of the future event which may take place depending on the fulfillment of the terms and conditions placed in the present.


Important precedents

Cehave N.V. v Bremer Handelgesellschaftm.B.H. (The Hansa Nord)[1]

The facts stated that a written contract to sell fruit pellets contained the express stipulation, “shipment to be made in good condition.” In fact, some of the pellets were not in good condition when shipped. However, they were, on arrival, still fit to be used for the purpose the buyer intended and although they were worth less than they should have been, they could have been re-sold at a reduced cost.


It was held in this case there was no breach of condition and the buyer was not entitled to repudiate the contract and to reject the goods. But the buyer is entitled to the damages.

The reasoning behind the judgment was the seller was not in breach of the implied conditions as to the fitness and merchantable quality. The express stipulation in the contract was not a condition and the seller’s breach of it had not been serious enough to go to the root of the contract. Therefore the buyer is entitled only to the damages.


Rowland v Divall[2]

The facts stated that Rowland bought a motor vehicle from Divall and used it for four months. Divall had no title to the car, and consequently, Rowland had to surrender it to the true owner. Rowland sued to recover the total purchase price that he had paid to Divall.

it was held in this case that there is a breach of the implied condition as to the title on which the sale and agreement to sell were based. Therefore the buyer is entitled to recover the purchase price in full, notwithstanding that he had used the car for four months. The rationale behind the judgment was the consideration on the part of the seller had failed as there was a breach of condition.


Major differences


  • In the sale, the goods are transferred immediately and in agreement to sell the transfer of goods takes place in the future which is subject to fulfillment of some conditions.

  • In the sale, the seller cannot re-sell, but in agreement, to sell, the seller can re-sell the goods if the buyer does not fulfill the conditions.

  • Sale creates jus in rem and agreement to sell creates jus in personam.In the sale, the nature of the sale is absolute, in agreement to sell the nature is conditional.


Conclusion

We can conclude by this article that sale and agreement to sell are two sons of a single mother i.e. contract. The sale of goods act is not exhaustive it is read with many other statutes such as transfer of property act, etc.

[1] (1976) Q.B. 44 [2] 2. K.B. 500


References

· http://comtax.up.nic.in/Miscellaneous%20Act/the-sale-of-goods-act-1930.pdf

· https://keydifferences.com/difference-between-sale-and-agreement-to-sell.html

· https://blog.ipleaders.in/sale-agreement-sell/#:~:text=Difference%20Between%20Sale%20And%20Agreement%20To%20Sell,-As%20already%20described&text=Risks%20are%20transferred%20immediately%20in,sell%20is%20an%20executory%20contract.

· https://swarb.co.uk/rowland-v-divall-ca-1923/

· https://accountlearning.com/sale-agreement-sell-meaning-differences/

· http://comtax.up.nic.in/Miscellaneous%20Act/the-sale-of-goods-act-1930.pdf

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