1. Define & Distinguish Contract of sale & Agreement to Sell.

Contract of Sale: -
A contract of sale, sales contract, sales order, or contract for sale is a
legal contract for the purchase of assets (goods or property) by a buyer (or purchaser)
from a seller (or vendor) for an agreed upon value in money (or money equivalent).

Agreement to sell: -
An agreement of sale constitutes the terms and conditions of sale of
a property by the seller to the buyer. These terms and conditions include the amount at
which it is to be sold and the future date of full payment.

Distinguish Contract of sale & Agreement to Sell.

Comparison Chart
BASIS FOR AGREEMENT TO SELL
SALE
COMPARISON

Meaning When in a contract of When in a contract of sale, the

sale, the exchange of parties to contract agree to
goods for money exchange the goods for a price
consideration takes place at a future specified date is
immediately, it is known known as an Agreement to
as Sale. Sell.

Nature Absolute Conditional

Type of Contract Executed Contract Executory Contract

Transfer of risk Yes No

Title In sale, the title of goods In an agreement to sell, the

transfers to the buyer title of goods remains with the
with the transfer of seller as there is no transfer of
goods. goods.

Right to sell Buyer Seller

Consequences of Responsibility of buyer Responsibility of seller

subsequent loss or
damage to the goods

Tax VAT is charged at the No tax is levied.

time of sale.
 BASIS FOR AGREEMENT TO SELL
SALE
COMPARISON

Suit for breach of
contract by the seller
The buyer can claim Here the buyer has the right to
damages from the seller claim damages only.
and proprietary remedy
from the party to whom
the goods are sold.

Right of unpaid seller Right to sue for the price. Right to sue for damages.

2. Define goods its various kinds price of goods how to determine the price
perishing of goods before agreement & after contract.
Goods: -
The goods include every kind of movable property other than actionable claim or
money.
Types of Goods: -
 Existing goods.
 Special goods.
 Ascertained goods.
 Unascertained goods.
 Future goods.
 Contingent goods.
Existing good: -
Goods owned and possessed by the seller at the time of making of the contract of
sales are called existing goods.
Example: -
If A sells his horse to B, believing it to be in existence but in fact the horse is dead, no
contract will arise.
Specific goods: -
These are goods identified and agreed upon at the time a contract of sales is made.
Example: -
A has two horses, one black and one white. He agrees to sell white horse to B. In this
case, the subject matter is specific. But if A has two white horse, unless that particular horse is
identified and individualized from the remaining horses, it will not become specific one.
Ascertained goods: -
It means goods identified in accordance with the agreement after the contract of
sale is made.
Example: -
If A had 30 chairs of the same kind and offers to sell 15, the goods are ascertained
only when 15 particular chairs be appropriated towards the contract.
Difference: -
The only point of difference is that specific goods are ascertained before or at the time
of making a contract, but ascertained goods are identified and individualized after the formation
of a contract of sales.
Unascertained goods: -
It means generic goods, good defined by description or even samples.
Example: -
Where a dealer has only one car and he make a sale of it, the sale is complete because
there is no uncertainty about the subject matter of sales.
Future goods: -
It means goods to be manufactured or produced or acquired by the seller after making
of the contract of sale.
Example: -
A contract to sell oil not yet pressed from seeds, in his possession, is a contract for
the sale of future goods.
Contingent goods: -
These are types of future goods, the acquisition of which by the seller depends upon
a contingency which may or may not happen.
Example: -
Future crops, eggs etc. A agrees to sell 100 bags of cement provided the lorry carrying
the cement reaches safely.
Perishing of goods: -
Perishing of specific goods before making of the contract – Where there is a
contract for the sale of specific goods and if they perish without the knowledge of the seller,
even before the contract is made, the contract becomes void.
Example: -
X agrees to sell a cow to Y. The cow is ill at the time of the agreement and
subsequently dies. Both X and Y are ignorant of this fact. The agreement is void.
Perishing of goods • Goods perishing before sales but after agreement to sell – Where contract
is only an agreement to sell and goods without any fault of either the seller or the buyer perish
subsequent to the contract, then also the agreement becomes void.
Example: -
In one case, A had agreed to erect machinery on B’s premises. The price was to be paid
on completion. During the course of the work, the premises and machinery were completely
destroyed by fire. It was held that both parties were excused from further performance and A
was not entitled to the price of machinery as the specific sum was payable only on the
completion of the entire work.
Perishing of goods: -
Perishing of unascertained goods: Where the contract is for unascertained
goods, the perishing of the good will not avoids the contract and the seller will be liable for
damages for the breach of contract.
Example: -
X agrees to sell to Y 10 bags of grain from 50 bags stored in his go down. The go down
had been destroyed by fire at the time of the contract. X is unaware of this fact. But in this case,
the contract is not void as the sale is not of specific goods but of a certain quantity of
unascertained goods. Hence X must supply 10 bags of rice or pay damages for the breach of
contract.
Price: -
Price is the money consideration of the sales of goods. It is a fundamental principle that no
sales can take place without a price.
Fixation of price: -
The price must be fixed by both parties at the time of contract itself. Both the
parties may enter into an agreement regarding the manner in which the price may be fixed.
Fixation of price: -
Where the price is not fixed, it can be determined in the course of dealings
between the parties or as it is called market price of goods. Where the price has not been fixed
by the parties, the buyer should pay a reasonable price.
Mode of payment: -
In the absence of agreement to the contrary, the seller is not bound to accept
any kind of payment other than the currency of the country. By common consent, the seller
may accept payment by a cheque or a draft, bank guarantee, a letter of credit or by any other
mode.
Mode of payment: -
In the absence of agreement to the contrary, the seller is not bound to accept
any kind of payment other than the currency of the country. By common consent, the seller
may accept payment by a cheque or a draft, bank guarantee, a letter of credit or by any other
mode.
Examples
Team 1 • A agrees to sell a Maruti car to B for Rs. 1.5 lacs. Before making agreement, the car
was stolen and it was in the knowledge of the parties. Is A bound to deliver Maruti Car to B?
No
Team 2 • Ritesh makes contract sales for selling heavy machine costing Rs. 2 Lacs to Hitesh
on a condition that Hitesh will pay Rs. One lac in cahs and will deliver a second-hand car
valued at Rs 1 lac. Is contract of sale valid? Yes. Payment of price is made partly in cash and
partly in goods.
Team 3 • Ram enters into a contract of sales with shyam for selling Photostat machine to him
for Rs 30,000. Invoice of the machine has been made in favor of shyam, payment has not been
made. The machine is lying in the go down of the seller. Meanwhile, his go down sets on fire
and machine is destroyed. Can shyam claim loss of machine from ram? No. Ownership of
machine has been transferred to Shyam and machine get destroyed without any fault of ram.
Team 4 • A transport company has resolved and transferred 10 buses to a partnership firm,
which consists of certain people who are owners of the company. Transfer was made at a
particular price. Is it a contract of sale? No person can sell his goods to himself.
Team 5 • A is an agent of foreign currency. B makes an agreement with him for purchasing
100 pounds for Rs 7500. is contract of sales valid? No. Currency cannot be sold or purchased.
Team 6 • Mohan and sohan agree that Mohan will sell his second-hand car to Sohan at a price
which will determined by a particular car mechanic. But the car mechanic refused to do the job
of price fixation. On such refusal, can sohan compel Mohan to sell that car for any other price?
No.
Team 7 • A purchased a machine for Rs. 50,000 from B on installment payment basis. The
payment is to be made in five equal monthly installments. A default in making the 3rd
installment. Is B entitled to get back the machine from A? No.
Team 8 • X agrees to sell a horse to B on a condition that, B will keep it for six days on trial
basis and have the option to return on the expiry of 6-day period, if he does not find it suitable.
Three days after, the horse dies due to illness without the fault of A or B. Can this agreement
be avoided? yes

3. Define & Distinguish b/w conditions & warranties in a contract of sale.

Explain the implied conditions & warranties in a Sale Contract.

Condition: -
A requirement or event that should be performed before the completion of
another action, is known as Condition.
Warranty: -
A warranty is an assurance given by the seller to the buyer about the state of the
product, that the prescribed facts are genuine.

Distinguish b/w conditions & warranties in a contract of sale

Comparison Chart

BASIS FOR WARRANTY

CONDITION
COMPARISON
Meaning A requirement or event
that should be performed
before the completion of
another action, is known
as Condition.
A warranty is an assurance
given by the seller to the
buyer about the state of the
product, that the prescribed
facts are genuine.

Defined in Section 12 (2) of Indian Section 12 (3) of Indian

Sale of Goods Act, 1930. Sale of Goods Act, 1930.

What is it? It is directly associated It is a subsidiary provision

with the objective of the related to the object of the
contract. contract.

Result of breach Termination of contract. Claim damages for the

breach.

Violation Violation of condition Violation of warranty does

can be regarded as a not affect the condition.
violation of the warranty.

Remedy available to Repudiate the contract as Claim damages only.

the aggrieved party on well as claim damages.
breach

Implied Conditions and Warranties under the Sale of Goods Act

Section 14-17 of the Sale of Goods Act, 1930 deal with the implied conditions and
warranties attached to the subject matter for the sale of a good which may or may not be
mentioned in the contract.
Implied Condition
Condition as to Title [Section 14(a)]
Section 14(a) of the Sale of Goods Act 1930 explains the implied condition as to title as
‘in the case of a sale, he has a right to sell the goods and that, in the case of an agreement
to sell, he will have a right to sell the goods at the time when the property is to pass’.
This means that the seller has the right to sell a good only if he is the true owner and holds
the title of the goods or is an agent of the title holder. When a good is sold the implied
condition for the good is its title, i.e. the ownership of the good. If the seller does not own
the title of the said good himself and sells it to the buyer, it is a breach of condition. In
such a situation the buyer can return the goods to the seller and claim his money back or
refuse to accept the good before delivery or whenever he learns about the false title of the
seller.
CASE LAW: Rowland v Divall, 192210 – The plaintiff had purchased a car from the
defendant and was compelled to return it to the true owner after having used it for a while.
The plaintiff then sued the defendant for the purchase money, since the defendant didn’t
receive the consideration as per the condition of the title of ownership.
Sale by Description (Section 15)
Section 15 of the Sale of Goods Act, 1930 explains that when a buyer intends to buy
goods by description, the goods must correspond with the description given by the buyer
at the time of formation of the contract, failure in which the buyer can refuse to accept the
goods.
Sale by Sample (Section 17)
When the goods are to be supplied on the basis of a sample provided to the seller by the
buyer while the formation of a contract the following conditions are implied:
 Bulk supplied should correspond with the sample in quality
 Buyer shall have a reasonable opportunity to compare the goods with the sample
 The good shall be free from any apparent defect on reasonable examination by the
buyer.
Sale by sample as well as Description (Section 15)
When the sale of goods is by a sample as well as a description the bulk of the goods should
correspond with both, i.e. description and sample provided to the seller in the contract and
not only sample or description.
Condition as to Quality or Fitness (Section 16)
The doctrine of Caveat Emptor is applicable in the case of sale/purchase of goods, which
means ‘Buyer Beware’. The maxim means that the buyer must take care of the quality
and fitness of the goods he intends to buy and cannot blame the seller for his wrong
choice. However, section 16 of the Sale of Goods Act 1930 provides a few conditions
which are considered as an implied condition in terms of quality and fitness of the good:
 When the buyer specifies the purpose for the purchase of the good to the seller, he
relied on the sound judgment and expertise of the seller for the purchase there is an
implied condition that the goods shall comply with the description of the purpose of
purchase.
 When the goods are bought on a description from a person who sells goods of that
description (even if he doesn’t manufacture the good), there is an implied condition
that the goods shall correspond with the description. However, in case of an easily
observable defect that is missed by the buyer while examining the good is not
considered as an implied condition.
 Implied Warranty
Enjoy Possession of the Goods [Section 14(b)]
Section 14(b) of the Act mentions ‘an implied warranty that the buyer shall have and
enjoy quiet possession of the goods’ which means a buyer is entitled to the quiet
possession of the goods purchased as an implied warranty which means the buyer after
receiving the title of ownership from the true owner should not be disturbed either by the
seller or any other person claiming superior title of the goods. In such a case, the buyer is
entitled to claim compensation and damages from the seller as a breach of implied
warranty.
Goods are free from any charge or encumbrance in favour of any third party
[Section 14(c)]
Any charge or encumbrance pending in favour of the third party which was not declared
to the buyer while entering into a contract shall be considered as a breach of warranty,
and the buyer is be entitled to compensation and claim damages from the seller for the
same.

4. Explain the doctrine of caveat & emptor the buyer. Are there any
exceptions to this rule?

The maxim Caveat Emptor means let the buyer beware. In other words, the buyer must take
care of his own interest while purchasing the goods.
 Buyer in a contract of sale of specific goods will purchase them at his own risk with
regard to the quality or fitness of the goods except in case of fraud or where a condition
to that effect is laid down in the contract itself.

 Buyer cannot hold the seller liable if the goods turn out to be defective or do not suit his
purpose or if the buyer makes a mistake in assessing the quality of the goods. It is for
the buyer to ensure at the time of purchase that the goods conform to his requirements.

When a person buys some goods, it is his duty to examine them thoroughly. Generally,
goods are purchased when the buyer is satisfied with its quality and need. Hence, the goods
are purchased by the buyer at his own risk and to his best judgement. If the goods do not
suit the purpose, he cannot blame anybody except himself. The buyer has to bear the
consequences of his wrong selection of goods.

Example to Doctrine of Caveat Emptor

There was a sale by sample by a woolen manufacturer of cloth to merchant, who was also
a tailor. The cloth was required for making liveries but the fact was not made known to the
seller. On account of the latent defect in the cloth, liveries could not be made out of it. But
there was nothing to show that it was unfit for other purposes. Held the buyer was without
remedy due to non-communication of the purpose for which the cloth was required.
Exceptions to the Doctrine of Caveat Emptor
The following are some of the exemptions to doctrine of Caveat Emptor.
 1. Implied Condition regarding Quality or Fitness: -
When the seller is aware of the
purpose for which the buyer requires the product and when the buyer relies on the
judgement and skill of the seller, there is an implied condition that the product purchased
serves the purpose for which it was bought. When the goods are sold under a trade name
or patent mark, this condition does not apply.

2. Sale of Goods by Description: -

When the buyer purchases products from the seller who sells
such class of goods, there is an implied condition that the product is of merchantable
quality.

3. Usage of Trade: -
Proof of reasonable usage or custom of trade may also establish an
implied condition with regard to quality or fitness of goods for a particular purpose.

4. Consent by Fraud: -
The doctrine of Caveat Emptor shall not apply to all those purchases,
which have been made by a buyer under a contract where the seller obtained his consent by
fraud. A seller, who is guilty of fraud, shall have no protection of the doctrine of caveat
emptor.

5. Sale under a Patent or Trade name: -

In the case of a contract of sale of specified goods
under its patent or trade name, there is an implied condition that the product is fairly fit for
any specific purpose.

6. Sale by Sample: -
When a buyer, having satisfied with the quality of the sample offered by
the seller, purchases in bulk, the Doctrine of Caveat Emptor will not apply when he finds
defects in the bulk or if the bulk does not correspond with the product sample offered to
him. The Doctrine of Caveat Emptor will not apply if the buyer did not have a chance to
verify the bulk with the sample, of if there is any hidden damaged product.

7. Misrepresentation: -
Where the seller has made a false representation relating to the goods
and the buyer has relied upon it, the doctrine of Caveat Emptor will not apply. Such a
contract being voidable at the option of the innocent party, the buyer has a right to rescind
the contract.

5. What are the rules regarding delivery of goods?

Rules as to Delivery of Goods: -
1. Delivery may be either actual or symbolic or constructive. (sec. 33) Delivery of goods sold
may be made by doing anything which the parties agree shall be treated as delivery or which
has the effect of putting the goods in the possession of the buyer or of any person authorized
to hold them on his half. Thus, the delivery of the goods may be either actual or symbolic or
constructive.
2. Delivery and payment are concurrent conditions (sec. 32.) unless otherwise agreed, delivery
of the goods and payment of the price are con-current conditions, that is , the seller should be
ready and willing to deliver the goods to the buyer in exchange for the price and the buyer
should be ready and willing to pay the price in exchange for possession of the goods
simultaneously, just like in a cash sale over a shop counter.
Illustration A contracts to sell to B 10 bags of sugar for Rs. 9,000. A need not deliver the goods
unless B is ready and willing to pay for the goods on delivery, and B need not pay for the goods
unless A is ready and willing to deliver them on payment.
3. Buyer to apply for delivery. Apart from any express contract, the seller of goods is not bound
to deliver them until the buyer applies for delivery (sec.35). where the goods are subsequently
acquired by the seller. He should intimate this to the buyer and the buyer should then apply for
delivery. Unless otherwise agreed, the buyer has no cause of action against the seller if he does
not apply for delivery.
4. Effect of part delivery, when property in goods is to pass on delivery (sec.34). A delivery of
part of the goods, in progress of the delivery of the whole, has the same effect, for the purpose
of passing the property in such goods, as a delivery of the whole. In other words, when delivery
of part of the goods has been made with the intention of delivering the rest also, the property
in the whole of the goods is deemed to pass to the buyer as soon as some portion is delivered.

6. What is the Right & Duties of unpaid Seller?

Rights of Unpaid Seller Against Buyer

When the buyer of goods does not pay his dues to the seller, the seller becomes an unpaid
seller. And now the seller has certain rights against the buyer. Such rights are the seller
remedies against the breach of contract by the buyer. Such rights of the unpaid seller are
additional to the rights against the goods he sold.
1. Suit for Price: -
Under the contract of sale if the property of the goods is already passed but he refuses to pay
for the goods the seller becomes an unpaid seller. In such a case. the seller can sue the buyer
for wrongfully refusing to pay him his due.
But say the sales contract says that the price will be paid at a later date irrespective of the
delivery of goods, and on such a day the if the buyer refuses to pay, the unpaid seller may sue
for the price of these goods. The actual delivery of the goods is not of importance according to
the law.
2. Suit for Damages for Non-Acceptance: -
If the buyer wrongfully refuses or neglects to accept and pay the unpaid seller, the seller can
sue the buyer for damages caused due to his non-acceptance of goods. Since the buyer refused
to buy the goods without any just cause, the seller may face certain damages.
 The measure of such damages is decided by the Section 73 of the Indian Contract Act 1872,
which deals with damages and penalties. Take for example the case of seller A. He agrees to
sell to B 100 liters of milk for a decided price. On the day, B refuses to accept the goods for no
justifiable reason. A is not able to find another buyer and the milk goes bad. In such a case, A
can sue B for damages.

3. Repudiation of Contract before Due Date: -

If the buyer repudiates the contract before the delivery date of the goods the seller can still sue
for damages. Such a contract is considered as a rescinded contract, and so the seller can sue for
breach of contract. This is covered in the Indian Contract Act and is known as Anticipatory
Breach of Contract

4. Suit for Interest: -

If there is a specific agreement between the parties the seller can sue for the interest amount
due to him from the buyer. This is when both parties have specifically agreed on the interest
rate to be paid to seller from the date on which the payment becomes due.
But if the parties do not have such specific terms, still the court may award the seller with the
interest amount due to him at a rate which it sees fit.
Comparison between the Rights and Duties of a seller
For a better and thorough understanding of other duties of seller, whether paid or unpaid here
is a comparative study of his right and duties:

RIGHT DUTIES

He can reserve the right of disposal of the

He is liable to make necessary arrangements for the
1. goods until certain conditions are fulfilled. 1
transfer of property in the goods to the buyer.
[sec 25 (1)]

He can assume the acceptance of the goods

by the buyer in following cases:
(i) The buyer conveys his acceptance;
(ii) Does an act adopting the sale; or To ascertain and appropriate the goods to the contract of
2. 2.
(iii)Retains the goods without giving a sale
notice of rejection, beyond the specified
date (or reasonable time), in a sale on
approval. (sec 24)

To deliver the goods only on an application To pass the title of the goods absolutely and effectively
3. 3.
of delivery by the buyer (sec 35) to the buyer.
 Delivery of the goods can be made in
Delivery of goods in accordance with the terms of the
4. instalments, when so agreed [Section 39 4.
contract (Section 31)
(1)]

Exercise of right to lien and retain

Ensuring that the goods supplied conform to the
5. possession of the goods, until payment of 5.
implied/express conditions and warranties.
the price is made. [Section 47 (1)]

Exercise the right of stoppage in transit and

resume possession of the goods, until To put the goods in a deliverable state and to deliver the
6. 6.
payment of the price (Section 49 clause 2 goods when applied for by the buyer (Section 35)
and Section 50)

To deliver the goods within the time specified in the

To resell the goods under certain and
7 7 contract or within a reasonable time and a reasonable
suitable circumstances. (Section 54)
hour. [ sec 36 (2) and (4)]

To withhold delivery of the goods when the To bear all expenses of and incidental to making a
8 property in the goods has not passed to the 8 delivery (that is up to the stage of putting the goods into
buyer [sec 46 (2)] a deliverable state [Section 36(5)]

To sue the buyer for price when the

property in the goods has passed to the
To deliver the goods in the agreed quantity. [Sec. 37
9 buyer or when the price is payment on a 9
(1)].
certain day, in terms of the contract, and the
buyer fails to make the payment (sec 55)

To deliver the goods in instalments only when so desired

10
by the buyer. [Sec 38 (1)]

To arrange for insurance of the goods while they are in

11
transmission or custody of the carrier. [Sec. 39 (2)].

To inform the buyer in time, when the goods are sent by

12 a sea route, so that he may get the goods insured [Sec.
39 (3)]

7. What are the Remedies for breach of Contract of Sale?

Remedies for Breach of Contract: -

When a promise or agreement is broken by any of the

parties, we call it a breach of contract. So, when either of the parties does not keep their end of the
agreement or does not fulfil their obligation as per the terms of the contract, it is a breach of
contract. There are a few remedies for breach of contract available to the wronged party. Let us
take a look.
1. Recession of Contract: -
When one of the parties to a contract does not fulfil his obligations, then the other party can rescind
the contract and refuse the performance of his obligations.

As per section 65 of the Indian Contract Act, the party that rescinds the contract must restore any
benefits he got under the said agreement. And section 75 states that the party that rescinds the
contract is entitled to receive damages and/or compensation for such a recession.

2. Sue for Damages: -

Section 73 clearly states that the party who has suffered, since the other party has broken promises,
can claim compensation for loss or damages caused to them in the normal course of business.

Such damages will not be payable if the loss is abnormal in nature, i.e. not in the ordinary course
of business. There are two types of damages according to the Act,

 Liquidated Damages: Sometimes the parties to a contract will agree to the amount payable
in case of a breach. This is known as liquidated damages.

 Unliquidated Damages: Here the amount payable due to the breach of contract is
assessed by the courts or any appropriate authorities.

3. Sue for Specific Performance: -

This means the party in breach will actually have to carry out his duties according to the contract.
In certain cases, the courts may insist that the party carry out the agreement.

So, if any of the parties fails to perform the contract, the court may order them to do so. This is a
decree of specific performance and is granted instead of damages.

For example, A decided to buy a parcel of land from B. B then refuses to sell. The courts can
order B to perform his duties under the contract and sell the land to A.

4. Injunction: -

An injunction is basically like a decree for specific performance but for a negative contract. An
injunction is a court order restraining a person from doing a particular act. So, a court may grant
an injunction to stop a party of a contract from doing something he promised not to do. In a
prohibitors injunction, the court stops the commission of an act and in a mandatory injunction, it
will stop the continuance of an act that is unlawful.

5. Quantum Merit
Quantum merit literally translates to “as much is earned”. At times when one party of the contract
is prevented from finishing his performance of the contract by the other party, he can claim
quantum merit. So, he must be paid a reasonable remuneration for the part of the contract he has
already performed. This could be the remuneration of the services he has provided or the value of
the work he has already done.