2. • Introduction
• Sale and Agreement to Sale
• Conditions and Warranties
• Hire Purchase Agreement
• Pledge
• Mortgage
• Remedies for the Breach
3. Sale and Agreement to Sale
Contract of Sale of Goods :
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.
• Such a contract of goods may be absolute or
conditional. There may be contract of Sale
between one part –owner and the other
4. Sale of Goods (Defn)
• When under a contract of Sale the property in
the goods is transferred from the Seller to the
Buyer, the Contract is called as a Sale of
Contract.
5. Essentials of Valid Sale
1. There must be two parties for eg Buyer and
the Seller . The Parties must be competent to
Contract : (Sec 11 of the Contract Act).
2. There must be mutual consent
3. There must be a transfer of property ie
transfer of general property in goods
4. The Buyer must pay or promise to pay a Price
in money
6. • 5. Form : No particular form is necessary to
constitute a contract of sale. A contract of Sale
may be in writing or by the word of mouth for
eg may be express of may be implied from the
conduct of parties or from the course of
dealings between the parties
7. • In sale transfer of ownership must take place.
• For eg:
• A customer who picks up goods in Self service
shop is merely offering to buy them, and the
sale is not complete until they are being paid
for.
8. Agreement to Sell
• Where the transfer of property for eg transfer
of ownership in the goods is to take place at a
future date or subject to some condition
thereafter to be fulfilled the Contract is called
as an Agreement to Sell.
9. When agreement to sell becomes
agreement of sale ?
• An agreement to sell does not involve any
immediate transfer of property in the goods.
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.
10. Examples of Sale and Agreement to
Sell
• X agrees to buy 50 tons of oil from Y’s
Cisterns. Y has several cisterns with more than
50 tons of oil in them. This is merely an
agreement to sell the oil.
11. Eg 2
• X agrees to sell to Y 100 tons of Soda nitrate
which is to arrive in England by a particular
ship. This is merely an agreement to sell at a
future date, subject to the condition that the
specified ship arrives in England and the
further condition that it carries the specified
cargo on board.
12. Eg 3
• X agrees to lend an instrument to Y on the
terms that if it is damaged whilst in Y’s
possession, Y must pay an agreed sum as its
value and keep the instrument. This is a
conditional sale and if the instrument is so
damaged X may recover the agreed sum as
the price of the goods sold.
13. Sale and Agreement to Sale (Distn)
• 1. Nature of Contract :
• Sale is an Executed Contract While an
agreement to Sale is an executory Contract.
• In executed contract one of the parties has
already performed his part of Contract
• On the other hand in executory Contract both
the parties are yet to perform their mutual
promises
14. Sale and Agreement to Sale (Distn)
Contd
• 2. Creation of Right
• Sale affects a transfer of General property in
the goods to the Buyer in other words it
creates “jus (right) in rem”. (Right in rem
means right against the whole world)
• An Agreement to sell creates “Jus (right) in
personam” For eg personal right only against
the person for any default in fulfilling his part
of the Agreement
15. Sale and Agreement to Sale (Distn)
Contd
• 3. Passing of the Property :
• In case of Sale , the property in goods passes
to the Buyer with the risk while in case of
agreement to Sale, the risk and property does
not pass to the Buyer immediately
16. • 4. Remedies in Case of Breach of Contract by the
Buyer :
• In an agreement to sell, in case of breach of
contract by the Buyer the Seller is entitled to
damages since the ownership has not passed to
the Buyer. In sale since the ownership has passed
to the Buyer the Seller is entitled to sue for the
price of the goods sold even though the goods
may still remain in Seller’s possession and also
has a right of lien , stoppage in transit and resale
17. • In other words if there has been a sale, and
the buyer fails to pay for the goods, the seller
may sue for the price. But where there is
merely an agreement to Sell and the Buyer
fails to accept and pay the goods the Seller
can only sue for damages
18. Remedies in Case of breach of
Contract by the Seller:
• If there is an agreement to Sell , and the Seller
commits any breach the buyer has only one
remedy a personal remedy against the Seller
namely claim for the damages. The goods are
still the property of the Seller and he can deal
with them as he likes. But if there is a Sale and
the Seller commits a breach the buyer has not
only personal remedy against the seller , but
also the remedies which an owner has in
respect of goods such as sue the Seller etc.
19. Right to Re-Sell
• In an Agreement to Sell since the ownership has
not passed to the Buyer the Seller is at liberty to
Sell the goods to the Third Parties and the Buyer
can claim damages from the Seller.
• In sale since the ownership has passed to the
Buyer the Seller will be guilty of Conversion if he
sells the goods to third parties and the Buyer can
sue and recover those goods as owner even from
the third person
20. Risk of Loss
• In an Agreement to Sell since the ownership
does not pass to the Buyer , if the goods are
destroyed by an accident, the loss will be the
Seller’s even though the goods happen to be
in the Buyer’s possession.
• In a sale since the ownership has passed to
the Buyer, even though the goods are lost by
an accident while is the Seller’s possession the
loss will be the Buyer’s.
21. Effect of Insolvency of the Seller
In an Agreement to Sell, if the Buyer who has
paid for the goods finds that the Seller has
become insolvent the buyer’s right would be
to prove the amount he has paid , in the
Seller’s insolvency.
In Sale since the ownership has passed to the
Buyer if the Seller becomes insolvent the
Buyer is entitled to recover the goods from
the Official Assignee or the Receiver
22. Effect of Insolvency of the Buyer
• In an Agreement to Sell if the Buyer becomes
insolvent without paying for the goods since the
ownership has not passed to the Buyer the Seller
may refuse to deliver the goods.
• In a Sale since the Ownership has passed to the
Buyer if the Buyer becomes insolvent without
having paid for the goods , the Seller must deliver
the goods to the Official Assignee or Receiver and
can claim a rateable dividend for the price of the
goods
23. Hire Purchase Agreement
• The possession of the goods passes to the
buyer who promises to pay the price of the
goods in certain instalments. Unless full price
is paid the ownership of the goods remains
with the Seller .
24. Contd : HPA
• Here the purchaser has an option to buy the
goods by the way of payment in Stipulated
instalments. After he pays all the installments
with the hire charges he becomes the owner
of the goods.
25. Important Feature
• Hirer Becomes the possessor of the goods and
has the right to terminate the Agreement at
his pleasure for eg he has the right to return
the goods.
26. Example 1
• B hires a piano from A under an Agreement
that B should pay Rs 1000/- a month as hire
Charges . The further stipulation is if he
regularly pays such hire charges for twenty
months the piano becomes his property at the
end of twenty months, but if B Likes he can
return the piano any time within 3 months
and he need not pay more. This is hire
purchase Agreement
27. Difference betw’n Agreement to Sell
and Hire Purchase Agreement
• 1. Contract of Sale includes Sale and
Agreement to Sale
• Hire Purchase Agreement is Bailment +
Agreement to Sell .
28. Difference betw’n Agreement to Sell
and Hire Purchase Agreement
• 2. An Agreement to Sell is a step to Contract of
Sale , but Hire Purchase Agreement becomes
Contract of Sale only on the fulfilment of the
Stipulated conditions .
29. • 3. In Agreement to Sell the Conveyance of
Goods is to take place subsequently.
• In case of Hire Purchase Agreement though
the possession is with the hirer , the
ownership always remains with the Seller
30. • 4. Under an Agreement to Sell , the Buyer can
enter into a Contract of Re-sale.
• But the hirer cannot enter into any such
contract of re-sale , similarly cannot pledge
the Goods
31. Pledge
• A pledge is quite different from the Contract
of Sale. When the goods are delivered to the
Pledgee , the General property in the goods is
retained by the pledgor and the pledgee
merely has the right to sell the goods , if the
agreed expires and after giving notice to the
pledgor.
• A pledge lies outside the Scope of Sale of
Goods Act
32. Mortgage
• Mortgage is governed by Transfer of Property
Act
• Essence of Mortgage is transfer of the General
property from one person,called mortgagor to
another called Mortgagee in order to Secure a
Debt.
33. Conditions and Warranties
• What is a Condition ??
• A condition is a Stipulation essential to the
main purpose of the Contract , breach of
which gives rise to treat the Contract as
repudiated or Broken
34. • Warranty :
• Warranty is a Stipulation collateral to the main
purpose of the Contract the breach of which
gives rise to claim for damages but not a right
to reject the goods and treat the contract as
broken or Repudiated.
35. Eg 1
• If ‘A’ sells food Stuff to ‘Y’ there is an essential
term of the Contract that the food will be fit
for human consumption . And if it is found to
contain any poisonous substance , y will be
entitled to reject the food and to repudiate
the Contract
36. Condition and Warranty Difference
• Condition is an Warranty is a
essential ingredient auxillary or
of the Contract subsidiary or
Collateral term of
the Contract
37. Contd
• Remedy :
• Breach of Condition Breach of Warranty
gives right to repudiate gives the right to
or treat the Contract as claim damages only.
broken and also to claim Buyer cannot reject
for the damages. And treat the
contract as
repudiated
38. When can the Breach of Condition be
treated a breach of Warranty?
• Where the Buyer elects to treat the Breach of
Condition as Breach of Warranty for eg he
claims damages and does not elect to
repudiate the Contract
39. Buyer Waives the Condition
• Once the Buyer waives his right he cannot
afterwards insist on the fulfillement. Waiver
may be express or implied
40. Remedies available to the Buyer on Breach of
Condition and Breach of Warranty
• Buyer may repudiate the Contract and reject
the goods
• Elect to treat the Breach of Condition as
Breach of Warranty and claim for the damages
• Waive the Condition
41. Remedies available to the Seller on Breach of
Condition and Breach of Warranty
• Seller may file a Suit in diminution or
extinction of the prices OR
• Claim for the Damages
