Sale contract: Definition, Features

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Contract of Sale: Definition and Features

Definition of Contract of Sale

A contract of sale of goods is an agreement where the seller transfers or agrees to transfer ownership of goods to the buyer for a price. It can be between full owners or part-owners of the goods.

Key Points:

  • Seller (Vendor): The owner or part-owner of the goods.
  • Buyer (Purchaser): The individual who agrees to buy the goods for a price.
  • Price: The agreed value in money (or its equivalent) paid or promised to be paid.

A contract of sale can be either absolute or conditional based on the desires of the contracting parties.

Essential Elements of a Contract of Sale

  • Two Parties:
    • Bilateral Nature: A contract of sale involves two distinct parties—a seller and a buyer. One cannot be both seller and buyer in the same transaction.
    • Example: If a grocery shop owner supplies goods from the shop to his family, it does not constitute a sale since there are no separate seller and buyer entities.
  • Goods:
    • Definition: The subject matter must be goods, which include all kinds of movable property except actionable claims and money.
    • Exclusions: Services and immovable property are not considered goods for a contract of sale.
  • Transfer of Ownership:
    • Property in Goods: Refers to the ownership of goods. The contract must involve the transfer of general ownership from the seller to the buyer.
    • Example: In a sale, the ownership of goods is transferred, unlike in a pledge where only possession is transferred.
  • Price:
    • Monetary Consideration: The buyer must pay a price, which is the money consideration for the goods. Consideration must be in money for it to be a sale.
    • Example: Barter or exchange of goods does not amount to a sale, nor does a gift or charity where goods are given without consideration.
  • All Essentials of a Valid Contract:
    • Requirements: The contract must fulfill all essential elements of a valid contract, including free consent, lawful consideration, competency of parties, and lawful object.
    • Example: A sale contract made under undue influence or coercion is not valid as it lacks free consent.
  • Includes Both ‘Sale’ and ‘Agreement to Sell’:
    • Sale: An executed contract where ownership is transferred immediately.
    • Agreement to Sell: An executory contract where ownership is to be transferred at a future date or upon fulfillment of certain conditions.
    • Example: Offering to buy or sell goods for a price and acceptance forms the contract. Payment and delivery can occur later unless otherwise specified.

Detailed Explanation of Each Point

Two Parties

A contract of sale requires two parties: a seller and a buyer. These must be distinct entities as one cannot sell goods to oneself. However, part-owners can engage in a contract of sale among themselves.

  • Example: A and B jointly own a television set. A can sell his share of ownership to B, making B the sole owner.

Goods

Goods include every kind of movable property except actionable claims and money. Services and immovable properties do not fall under the contract of sale of goods.

  • Example: A contract involving the sale of machinery (movable property) is a contract of sale, whereas a contract for providing repair services is not.

Transfer of Ownership

The transfer of ownership, or property in goods, is crucial. It means the general ownership of goods, not just special property as in pledges.

  • Example: Selling a car involves transferring ownership, whereas pledging it involves transferring only possession.

Price

The consideration in a contract of sale must be in money. If goods are exchanged for goods, it is a barter, not a sale.

  • Example: Selling a book for $10 is a contract of sale, but exchanging a book for another book is a barter.

All Essentials of a Valid Contract

A contract of sale must meet all the requirements of a valid contract, including free consent, lawful consideration, and competent parties.

  • Example: If a car is sold under duress, the contract is invalid due to lack of free consent.

Includes Both ‘Sale’ and ‘Agreement to Sell’

A contract of sale includes both immediate sales and future sales agreements. The distinction lies in the timing and conditions of ownership transfer.

  • Example: An agreement to sell a house once the buyer secures financing is an executory contract, whereas handing over the keys upon receiving payment is an executed sale.

Additional Information

  • Formality: A contract of sale can be made orally, in writing, or implied through conduct.
  • Flexibility: Neither immediate payment nor delivery of goods is essential at the time of making the contract unless agreed otherwise.