Unit II - Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA Sale of Goods Act, 1930 8/22/2018 Unit II - Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA

Formation of contract of sale A contract of sale of goods is a contract whereby the seller TRANSFERS or AGREES TO TRANSFER the property to goods to the buyer for a price. A contract of sale may be absolute or conditional. It includes both a sale and an agreement to sell. “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. Trade marks, copyrights, patent rights, goodwill, electricity, water, gas are all goods. 8/22/2018 Unit II - Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA

Formation of contract of sale Sale and Agreement to sell: SALE: Where the property in the goods is transferred from the seller to the buyer, it is a SALE AGREEMENT TO SELL: Where the transfer of property in the goods to take place at a future time or subject to some conditions to be fulfilled thereafter, it is an AGREEEMENT TO SELL. An AGREEMENT TO SELL becomes a SALE when the time elapses or the conditions subject to which the property in the goods is to be transferred are fulfilled. “TRANSFER OF PROPERTY” is the catch-point phrase. When the transfer of property takes place, ownership is transferred from the seller to the buyer. 8/22/2018 Unit II - Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA

Formation of Contract of Sale Essentials of a Contract of Sale: Two parties Goods (movable goods)—Immovable properties are covered under the Transfer of Property Act Price-money (consideration for the contract); barter is not a sale, However, consideration may be partly in money and partly in kind. Transfer of general property ( special property means where there is already a charge like pledge) Essential elements of a valid contract must be present in a contract of Sale also. 8/22/2018 Unit II - Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA

Sale and an Agreement to Sell Immediate transfer of property Specific and Existing Goods Risk of Loss falls on buyer though seller has possession In case of breach seller can sue for the price though he continues the possession Seller cannot re-sell ( except sale by a seller in possession or sale by an unpaid seller. The subsequent buyer does not acquire title. Agreement to Sell Transfer of property at a later date (subject to certain conditions) Unascertained existing goods, future goods and contingent goods Risk of loss is on the seller though buyer has possession The seller can only sue for damages and not for the price though the possession is with the buyer A buyer in case of resale having no knowledge of the prior agreement gets good title. Unit II - Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA 8/22/2018

Hire Purchase Agreement A hire purchase agreement is a contract whereby the owner of the goods lets them on hire to another person called the hirer or hire purchaser on payment of rent to be paid in instalments and upon an agreement that when a certain number of such instalments is paid, the property in the goods will pass to the buyer. Buyer may return the goods any time without any obligation to pay the balance rent. option to terminate the agreement and is bound to pay the price, the agreement is a contract of sale and not a hire purchase. Hire Purchase is governed by the Hire Purchase Act 1972. 8/22/2018 Unit II - Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA

Sale and Hire Purchase Agreement Ownership transferred from seller to the buyer immediately Buyer is the owner Buyer cannot terminate the contract and he is bound to pay the price Where the sale is by instalments, the buyers’ liability in terms of amount gets reduced. HIRE PURCHASE Ownership is transferred only when a certain agreed number of installments is paid The hirer is only a BAILEE Hirer can terminate the contract at any stage and cannot be forced to pay any further installments. Installments are treated as hire charges until the hirer uses the option of purchase. Unit II - Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA 8/22/2018

Formation of Contract of Sale Sale and Barter or Exchange Exchange of goods for goods is BARTER Exchange of goods for money is SALE Exchange of money for money is known as EXCHANGE If the Consideration for the transfer of property in goods is partly in goods and partly in money, it is SALE 8/22/2018 Unit II - Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA

Unit II - Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA Sale and Bailment In a Sale, the property in goods is transferred from the seller to the buyer immediately In a Bailment, there is only transfer of possession from the bailor to the bailee but not the ownership. Bailment is for a specific (one) purpose—Safe custody, single use, carriage from one place to another etc. In a Sale, the buyer can deal with the goods as per his will because he is the absolute owner once the price is paid. In case of Bailment, the bailee can deal with the goods only according to the directions of the bailor. 8/22/2018 Unit II - Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA

Subject matter of Contract of Sale Goods is the subject matter—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. Trade marks, copyrights, patent rights, goodwill, electricity, water, gas are all goods. Actionable claim means a claim to a debt or any beneficial interest in movable property not in possession (which can be enforced by action in a court. A debt from one person to another is an actionable claim and cannot be bought or sold as goods but they can only be assigned. ( UNDERSTAND THE WORDS FACTORING AND FORFAITING—HERE) 8/22/2018 Unit II - Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA

Subject matter of Contract of Sale Classification of Goods—Existing Goods (Specific Goods, Ascertained goods, unascertained goods or generic goods); Future Goods; Contingent Goods and contingent and future goods. Document of title to goods: Document is the proof of title to the goods—proof of possession and ownership. The documents can be endorsed or simply delivered to transfer the property (depending on the nature of contract) Important documents of title to goods: Bill of Lading; Dock Warrant, Warehousekeeper’s or Wharfinger’s Certificate (dockside), Railway Receipt, Lorry Receipt, Airway Bill, Delivery order. Other terms of Sale are the Price (ascertainability and agreement to sell at valuation) and Stipulation as to time (time of delivery and time of payment) 8/22/2018 Unit II - Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA