Small Business Sales

Where the right of ownership in the goods is transferred from the seller to the buyer the contract is called a sale.

For example:

1st August X sells 5 bags of sugar to Y for a sum of Rs.1000/-. This transaction if called a sale since the ownership of 5 bags of sugar is transferred from X to Y.

What is Meant by an Agreement to Sell:

Where the transfer of ownership in the goods is to take place at a future time or subject to some conditions there after to be fulfilled the contract is called an agreement to sell.

For example: On 1st August X and Y agree that X should sell 5 bags of sugar to Y on 15th August for a sum of Rs.1000/-. It is an agreement to sell, since X agrees to transfer ownership of the 5 bags of sugar to Y in future on the 15th. In other words, the date of agreement is 1st August. But actual sale would take place only on 15th August.

Essential Elements of Sale:

Following essential elements are necessary to constitute a sale.

1. Existence of two persons namely buyer and seller The sale requires the existence of two person namely, the seller and the buyer. The seller is a person who sells or agrees to sell goods. The buyer is a person who buys or agrees to buy foods. Both the seller and the purchaser must be competent to enter into a contract, since the transaction of sale involves two persons namely, a seller and a buyer. It necessarily follows that the same person cannot be both a seller and a purchaser. But it is however definitely stated that a joint owner of goods can sell the same to the other owner. For example a transistor belongs to A and B jointly. In this case, A is a joint owner and B is another joint owner. Now A can sell his part of ownership to B.

2. Price The consideration for sale of goods must be money called as price. The term price has been defined as money consideration for a sale of goods. The presence of money consideration is an essential element in a transaction of sale. If goods are exchanged for goods the transaction is not a sale, but it would only be an exchange or barter. Likewise if money is exchanged for money, it is an exchange and not a sale. On the other hand where goods are exchanged partly for goods and partly for money, it is a sale.

3. Subject matter of sale The subject matter of sale must only be movable properties and not immovable properties like land and house. Transactions involving purchase and sale of immovable property are regulated by a separate Act called the Transfer of Property Act, 1882.

4. Transfer of ownership The transfer of ownership from the seller to the buyer is the most important ingredient in contract of sale. It is this element which distinguishes a sale from several other calluses of contract like bailment, lease. Hence in a sale, ownership must be transferred from the seller to the buyer.

5. Presence of essential elements of a valid contract All the essential elements of a valid contract must be present.

Formation of a Contract of Sale:

Just as every contract is formed by an offer and acceptance and has to be supported by consideration the contract of sale also, is made by an offer to buy or sell goods for money consideration, which is known as the price. In other words it must satisfy all the essentials of a valid contract as laid down. It may be in oral or in writing.

But in the English law, a contract of sale of goods must be evidenced by a memorandum in writing if the value thereof exceeds 10 pounds.

Subject Matter of Contact:

The subject matter of the contract of sale must only be goods. The goods may be either,

1. Future goods or

2. Existing goods

The goods which form the subject of a contract of a sale may be either existing goods, owned or possessed by the seller or future goods.

1. What are future goods The goods to be manufactured or produced or acquired by the seller after making of the contract of sale.

Thus goods to be manufactured, produced or acquired after entering into a contract are called future goods. Hence under the present Act, it is responsible for a person to sell goods even though he is not in possession of them at the time of the contract. Even though, the subject matter of sale may have to present existence, yet it be the natural product to which the seller has a present right the sale will be valid.

2. What are existing goods Existing goods are those goods which are owned and possessed by the seller at the time of sale. Existing goods may be

a. Specific or ascertained goods and

b. Unascertained goods or genetic goods.

Specific or ascertained goods Specific or ascertained goods are those which are specifically identified and agreed upon at the time of sale. Specific goods means goods identified and agreed upon at the time of contract of sale is made. Unascertained goods are those which are described but not specifically identified. Contingent goods The acquisition of goods by the seller depends upon an uncertain contingency. Such goods are called contingent goods.

Sale by Non-owners:

Passing of ownership as between the seller and the buyer on the assumption that seller is the owner of the goods and as such competent to transfer the ownership from himself to the buyer. Suppose where the seller is not in fact the owner and a person buys the goods from such a person believing that the seller is the real owner, the question naturally arises as to what would be the rights of the buyer under such a sale. The general rule is that if a person, who has no right or title to the goods, sold the same the buyer cannot obtain any right or title to the goods which he purchased even though he may have acted honestly and paid the value for the goods.

Exceptions:

The principle of protecting bonafide buyers is given effect to by engrafting a number of exceptions. Thus there are exceptions to the general rule that no one can transfer a better title than what he himself has. In some cases buyer will get a better title to the goods even though the seller is not the owner. They are as follows:

1. Sale by a Mercantile Agent:

The first and most important exception is the case of bonafide purchase of goods by the buyer from a mercantile agent. The mercantile agent is a person who has authority, in the customary course of business, either to sell goods or to consign goods for the purpose of sale or to buy goods or to raise money on the owner for sale is a mercantile agent.

The second part of the Sale of goods act provides an exception to the general rule that no one can sell the goods and the buyer who purchases the same from mercantile agents get a good title if the following conditions are satisfied.

a. The person who sells the goods must be a mercantile agent.

b. He must be in possession of the goods.

c. Such possession must be with the consent of the owner.

d. He must sell in the ordinary course of business as a mercantile agent.

e. The buyer must be a person acting bonafide and in good faith and

f. The buyer must have no notice that the seller has not authority to sell.

2. Sale by Co-owner:

If a property, either movable or immovable belongs to one or more persons, they are called co-owners. If a person purchases goods from one of the co-owners, the buyer will get a valid title over the goods.

In order to get a valid title to the buyer the goods from one of the co-owner, the following conditions should be satisfied.

a. The co-owner must be in the sole possession of the goods.

b. The possession must be with the consent of another or other co-owners.

c. The buyer should purchase the goods for consideration and in good faith and

d. The buyer must be without notice that the seller has not authority to sell.

3. Sale by a Person with Voidable Title:

If a person has obtained possession of goods under a contract which is void able on the ground of fraud misrepresentation, coercion or undue influence and he sells the same to another person the buyer will get a good title of the Sale of Goods Act deals with this subject.

In order to get valid title from the seller, who has obtained the goods under a void able contract, the following conditions should be fulfilled.

a. The seller must be in possession of the goods.

b. The possession must be under a contract.

c. The buyer must purchase the same for value and in good faith and

d. The buyer must purchase the same before the contract, which is void able, is set aside.

4. Re-sale by Seller who is in possession After Sale:

Where a seller, having already sold the goods, is in possession of the goods resells the same again to another person who buys the same in good faith and for value and without notice of previous sale the new buyer bets good title.

5. Sale of Proposed buyed who is in Possession of Goods:

Where a person who has agreed to buy the goods in his possession with the consent of the seller, sells the same to another person who purchases the same in good faith, subsequent buyer gets a good title.

6. Unpaid Vendors Right of Resale:

An unpaid vendor, who is in possession of goods, is given a right of re-sale. The buyer on such re-sale gets an absolute title to the goods even if the re-sale may not be justified in circumstances.

7. Sale Under the Provisions of Other Acts:

There are other laws providing that the seller, even though he is not the owner, might have a right to give a better title to the goods and this also expressly saves by the use of the words subject to the provisions of any other law for the time being in force of the Sale of Goods Act.

8. Sale on Market Overt:

Market overt means open, public and legally constituted market where sale is made at certain prescribed places and times in which case a good title is passed to the buyer even though the seller is a non-owner of the goods. According to English law, where a purchase is made in market overt, the buyer is absolutely protected and ownership passes to the buyer, so that the true owner cannot recover from the buyer.

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