Contents of sale contract: Goods, Price, Condition and Warranty
Contents of a Sale Contract: Goods, Price, Condition, and Warranty
A sale contract outlines the terms under which goods are sold from one party to another. The key components of a sale contract include goods, price, conditions, and warranties. Each element has specific legal implications and requirements.
1. Goods
Definition: Goods refer to the subject matter of the sale contract. According to Section 2(7) of the Sale of Goods Act, goods encompass every kind of movable property, including:
- Stock and shares
- Growing crops, grass
- Things attached to or forming part of the land that can be severed
Example:
- A agrees to sell wheat crops grown in his field to B. B will cut and take the crops upon payment. Since growing crops are considered goods, this constitutes a valid contract of sale.
Key Points:
- Movable Property: Only movable property is considered goods under the Act.
- Specific Items: Stock, shares, crops, and severable parts of land qualify as goods.
2. Price
Definition: Price is the monetary consideration for the sale of goods. As per Section 2(10) of the Sale of Goods Act, the price must be in terms of money.
Example:
- A delivers 10 cows to B, valued at Rs. 2,000 per cow. B delivers 20 bags of rice to A, valued at Rs. 750 per bag, and pays Rs. 5,000 in cash. This is a valid sale contract as the price is partly in money and partly in goods.
Key Points:
- Monetary Consideration: The price must be expressed in money.
- Partial Payment: Price can be partly in money and partly in goods.
- Not Exchange: If no money is involved, it is an exchange, not a sale.
3. Conditions and Warranties
Conditions: A condition is a stipulation essential to the main purpose of the contract. Its breach allows the aggrieved party to treat the contract as repudiated.
Warranties: A warranty is a stipulation collateral to the main purpose of the contract. Its breach entitles the aggrieved party to claim damages but not to repudiate the contract.
Caveat Emptor: This doctrine implies that the buyer assumes the risk for the quality and condition of goods purchased unless specified otherwise. The buyer must inspect the goods to ensure they meet their needs.
Exceptions to Caveat Emptor:
- Purpose Known: If the buyer makes the purpose known to the seller and relies on the seller's expertise, the goods must be fit for that purpose.
- Description: Goods sold by description must match the description and be merchantable.
- Fraud/Concealment: The seller is responsible if defects are hidden or if fraud is involved.
- Trade Name: No implied warranty if goods are bought under a trade or patent name.
Example:
- A sells a horse to B, warranting it as quiet to ride. If the horse is vicious, B can claim damages but cannot reject the horse unless specifically reserved.
Express and Implied Conditions and Warranties:
- Express: Stated explicitly in the contract.
- Implied: Attached by law unless expressly excluded by the parties.
When Conditions are Treated as Warranties:
- Buyer Waives the Condition: The buyer may choose to treat a breach of condition as a breach of warranty.
- Acceptance of Goods: If the buyer accepts the goods, any breach of condition can be treated as a breach of warranty.
Example:
- A promises to deliver 100 bales of cotton to B by August 1st. If delivered on August 10th, B can either reject the delivery or accept it and claim damages for the delay.
Warranties from the Seller
Review Warranties: Buyers should closely review the seller’s promises. Terms like "as-is" or disclaimers of merchantability or fitness for a particular purpose can negate verbal assurances.
Key Points:
- Varies by Industry: Warranties differ across industries and companies.
- Seller's Promises: Understand the explicit and implied warranties offered by the seller.
Conclusion
Understanding the essential elements of a sale contract—goods, price, conditions, and warranties—is crucial for both buyers and sellers. Each component ensures that the contract is clear, enforceable, and protects the interests of both parties. Buyers must be vigilant and ensure that the terms meet their requirements while sellers must fulfill their obligations as stipulated in the contract.