What are the essential characterstics of contract of sale of goods?
Answers
Essential characteristics of a contract of sale of goods are given below:
1. Two parties:
The first essential is that there must be two distinct parties to a contract of sale, viz., a buyer and a seller, as a person cannot buy his own goods. However, there may be a contract of sale between one part-owner and another, e.g., if A and B jointly own a computer, A may sell his ownership in the computer to B, thereby making B sole owner of the goods [Sec. 4(1)]. Similarly, a partner may buy the goods from the firm in which he is a partner and vice-versa.
2. Transfer of property:
‘Property’ here means ‘ownership’. Transfer of property in the goods is another essential of a contract of sale of goods. A mere transfer of possession of the goods cannot be termed as sale. To constitute a contract of sale the seller must either transfer or agree to transfer the property in the goods to the buyer.
3. Goods:
The subject-matter of the contract of sale must be ‘goods’. According to Section 2(7), “goods means every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale.”
Thus every kind of movable property except actionable claim and money is regarded as ‘goods’. Goodwill, trademarks, copyrights, patents right, water, gas, electricity, decree of a court of law, are all regarded as goods. Shares and stock are also included in goods.
‘Actionable claims’ means claims which can be enforced by a legal action or a suit, e.g., a book debt (i.e., a debt evidenced by an entry by the creditor in his Account Book or Bahi). A book debt is not goods because it can only be assigned as per the Transfer of Property Act but cannot be sold.
‘Money’ means current money:
It is not regarded goods because it is the medium of exchange through which goods can be bought. Old and rare coins, however, may be treated as goods and sold as such.
It may be mentioned that sale of immovable property is governed by the Transfer of Property Act, 1882.
4. Price:
The consideration for a contract of sale must be money consideration called the ‘price.’ If goods are sold or exchanged for other goods, the transaction is barter, governed by the Transfer of Property Act and not a sale of goods under this Act. But if goods are sold partly for goods and partly for money, the contract is one of sale (Aldridge vs Johnson).
5. Includes both a ‘sale’ and ‘an agreement to sell:
The term ‘contract of sale’ is a generic term and includes both a ‘sale’ and an ‘agreement to sell’ [as is clear from the definition of the term as per Section 4(1) given earlier)].
Sale. Where under a contract of sale the property in the goods is immediately transferred at the time of making the contract from the seller to the buyer, the contract is called a ‘sale’ [Sec. 4(3)]. It refers to an ‘absolute sale’, e.g., an outright sale on a counter in a shop.
There is immediate conveyance of the ownership and mostly of the subject-matter of the sale as well (delivery may also be given in future). It is an executed contract.
An agreement to sell:
Where under a contract of sale the transfer of 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’ [Sec. 4(3)]. It is an executory contract and refers to a conditional .