Page 137 - DCOM103_COMMERCIAL_LAW

Commercial Law

Notes Sale and Agreement to Sell–distinction

1. Transfer of property: In a sale, the property in the goods passes from the seller to the buyer
immediately so that the seller is no more the owner of the goods sold. In an agreement to
sell, the transfer of property in the goods is to take place at a future time or subject to certain
conditions to be fulfilled. In this sense, a sale is an executed contract and an agreement to

sell is an executory contract.

2. Type of goods: A sale can only be in case of existing and specific goods only. An agreement
to sell is mostly in case of future and contingent goods although in some cases it may refer
to unascertained existing goods.
3. Risk of loss: In a sale, if the goods are destroyed, the loss falls on the buyer even though the
goods are in the possession of the seller. In an agreement to sell, if the goods are destroyed,
the loss falls on the seller, even though the goods are in the possession of the buyer.
4. Consequences of breach: In a sale, if the buyer fails to pay the price of goods or if there is a
breach of contract by the buyer, the seller can sue for the price even though the goods are
still in his possession. In an agreement to sell if there is a breach of contract by the buyer,
the seller can only sue for damages and not for the price even though the goods are in the
possession of the buyer.
5. Right to re-sell: In a sale, the seller cannot re-sell the goods (except in certain cases, as for
example, a sale by a seller in possession after sale under Sec.30, or a sale by an unpaid seller
under Sec. 54). If he does so the subsequent buyer does not acquire title to the goods. In an
agreement to sell, in case of re-sale, the buyer, who takes the goods for consideration and
without notice of the prior agreement, gets a good title. In such a case, the original buyer
can only sue the seller for damages.
6. General and particular property: A sale is contract plus conveyance, and creates jus in
rem, i.e., gives right to the buyer to enjoy the goods as against the world at large including
the seller. An agreement to sell is merely a contract, pure and simple and creates jus in
personam, i.e., gives a right to the buyer against the seller to sue for damages.
7. Insolvency of buyer: In a sale, if the buyer becomes insolvent before he pays for the goods,

the seller, in the absence of a lien over the goods, must return them to the official Receiver or
Assignee. He can only claim a rateable dividend for the price of the goods. In an agreement
to sell, if the buyer becomes insolvent and has not yet paid the price, the seller is not bound
to part with the goods until he is paid for.
8. Insolvency of seller: In a sale, if the seller becomes insolvent, the buyer, being the owner, is
entitled to recover the goods from the Official Receiver or Assignee. In an agreement to sell,

if the buyer, who has paid the price, finds that the seller has becomes insolvent, he can only

claim a rateable dividend and not the goods because property in them has not yet passed
to him.

13.4 Goods and their Classifi cation

13.4.1 Meaning of Goods

‘Goods’ means every kind of movable property, other than actionable claims and money; and
includes stocks 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, things like
trade marks patents, copyright, goodwill, water, gas, electricity are all goods and therefore, may
be the subject matter of a contract of sale. In general, it is only the movables, i.e., things which
can be carried from one place to another that form ‘goods’. Landed property, therefore, does not
constitute goods.

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