Commerce · Ch 21 — The Sale of Goods Act, 1930
Sale vs Agreement to Sell, and the Essential Elements of a Contract of Sale
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Sale vs Agreement to Sell, and the Essential Elements of a Contract of Sale
Sale and "agreement to sell" are the two forms a contract of sale can take, distinguished entirely by WHEN ownership passes.
- Sale — where, under the contract, the property (ownership) in the goods is transferred from the seller to the buyer immediately, at the time the contract is made. Once a sale is complete, the buyer becomes the owner of the goods at once, even before the goods are physically delivered or the price is fully paid.
- Agreement to sell — where the transfer of property in the goods is to take place at a future time, or is made subject to some condition being fulfilled later (e.g. the goods still need to be manufactured, weighed, or the buyer's cheque needs to be cleared first). Ownership stays with the seller until that future time arrives or that condition is satisfied; an agreement to sell becomes a sale automatically once the time lapses or the condition is fulfilled.
| Basis | Sale | Agreement to Sell |
|---|---|---|
| Transfer of ownership | Immediate, at the time of contract | Postponed to a future date/condition |
| Nature | An executed contract | An executory contract |
| Risk of loss | Generally passes to the buyer at once (ownership and risk usually travel together) | Stays with the seller until ownership actually passes |
| Right if seller resells to a third party | Buyer, being the owner, can recover the goods or sue for conversion | Buyer can generally only sue the seller for damages (goods still belong to the seller until the sale is completed) |
| Seller's remedy on buyer's default | Seller can sue for the price, since the buyer already owns the goods | Seller can generally only sue for damages, unless the price was payable on a fixed day |
| Insolvency of seller (before delivery) | Buyer can claim the goods, since they already belong to him | Buyer can only claim a rateable dividend for the money paid, not the goods themselves |
| Insolvency of buyer (before payment) | Seller must hand over the goods and prove for the price with the buyer's other creditors | Seller can refuse to deliver the goods unless paid in full |
Essential Elements of a Valid Contract of Sale
- Two parties — a seller and a buyer, who must be different persons (a person cannot buy his own goods from himself, though a part-owner can sell to another part-owner).
- Goods — the subject matter of the contract must be goods, as defined and classified in the next section.
- A price — the consideration for the transfer must be money; if goods are exchanged only for other goods, it is barter, and if there is no consideration at all, it is a gift, not a sale. …