Page 185 - DMGT512_FINANCIAL_INSTITUTIONS_AND_SERVICES

Financial Institutions and Services

Notes Essential Ingredients of a Sale: A contract of sale is constituted of following elements:
1. Two parties namely the buyer and the seller, both competent to contract to effectuate the
sale.

2. Goods: The subject matter of the contract.
3. Money consideration: price of the goods.
4. Transfer of ownership of the general property in goods from the seller to the buyer.
5. Essentials of a valid contract under the Indian Contract Act.

Sale and Agreement to Sell

The distinction between an agreement to sell and a sale is fundamental. The former is a contract
pure and simple. At the time of the contract the property in the goods does not pass, but the
buyer acquires a right in person to the transfer of the property upon the happening of an event
or the fulfilment of a condition. A sale on the other hand is more than a contract. Its effect is to
transfer to the buyer forthwith a right in the property in the goods. Under an agreement to sell
the seller remains the owner until the agreement to sell becomes a sale, under a sale the buyer
becomes the owner forthwith. In details:

1. 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. There may be a contract of sale between one
part-owner and another.

2. A contract of sale may be absolute or conditional.
3. Where under a contract of sale the property in the goods in transferred from the seller to
the buyer, the contract is called a sale, but where the transfer of the 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.
4. 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.

Example:
1. Contract for the Sale of Goods
Paragraph 1. ……………………………., hereinafter referred to as Seller, and
……………………………., hereinafter referred to as Buyer, hereby agree on this
……………… day of ……………………………., in the year ……………………………., to
the following terms.
A. Identities of the Parties
Paragraph 2. Seller, whose business address is ……………………………., in the city of
……………………………., state of ……………………………., is in the business of
…………………………….. Buyer, whose business address is ……………………………., in
the city of ……………………………., state of ……………………………., is in the business of
……………………………. .
B. Description of the Goods

Paragraph 3. Seller agrees to transfer and deliver to Buyer, on or before
……………………………. [date], the below-described goods:
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