Formation of The Contract

2.
1 Formalities of a contract of saleAccording to Section 5of the Sale of

Goods Act, 1930lays down the rule as to how a contract of sale may be made
and has nothing to do with the transfer or passing of the property in the goods,
a contract of sale is made when-Clause (1)There should be an offer to buy or
sell goods for a price.Acceptanceof such offer.The contract may provide for
immediate delivery or payment or both. In case payment or delivery by
instalment, both delivery or payment can be postponed.For instance, in the
case of MP Laghu Udyog Nigam v Gwalior Steel Sales Branch,these
essentials were neither proved nor pleaded, so, the court of law held that
these essentials are mandatory and have to be pleaded in the complaint.
Clause (2)Should be in writing or word of mouth or partly in writing and word
of mouth or implied by the conduct of parties, according to clause (2)of section
5underThe Sales of Goods act.When all these essential conditions are fulfilled
a contract of sales is considered as valid.52.2 Sale of Goods in
Flowingchart 5www.blog.ipleaders.inSale of GoodsFormation of ContractEffects
of the ContractPerformance of ContractSuit for breach ofContractUnpaid Seller
7Formation of the ContractGeneralSubject-matterPriceCondition
&WarrantiesContract of SaleFormalities of the contractSaleAgreement to
sellAscertainment of PriceAgreement to Sell at ValuationExisting or Future
goodsGoods perishing before making of contractGoods perishing before sale
but after agreement to sell
82.3 Contact of sale As defined under section 4(1),contact of sales of goods
is a contract under which seller transfers or agrees to transfer certain goods in
exchange for some consideration preferably money. According to
Blackstone,when ownership of any goods transferred in exchange for money,
then a sale has been made. This contract can be absolute or conditional.
When a person buys goods out rightly it is considered as absolute but when a
person buys goods on approval or trial basis then it is termed as a conditional
contract.62.4 Essentialof contact of sale There are five essentialfeatures of
a contract of sale are as discussed below:1) Two partied.2) Subject matter to
be goods.3) Transfer of ownership of goods.4) Consideration is price.5)
Essential elements of a valid contract.1.Two partiesA sale has to be bilateral
because the goods have to pass from one person to another. There must be a
buyer –a person who buys or agrees to buy the goods and a seller –a person
who sells or agrees to sell goods. The seller and the buyer must be different
persons. A part owner can sell to another part owner. A partner may,
therefore, sell to his firm or a firm may sell to a partner. But if joint owners
distribute property among themselves as per mutual agreement, it is not ‘sale’.
A person cannot be the seller of his own goods as well as the buyers of
them.However, when a bankrupt person’s goods are sold under an execution
of decree, the person may buy back his own goods from his trustee.2. Subject
matter to be goodsThe term ‘goods’is defined in Section 2(7). It states that
‘goods’“means every kind of movable property other than actionable
claimsand money; and includes stock 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”.6www.blog.ipleaders.in
9Money cannotbe sold because money means legal tender and not the old
coins which can be sold and purchased as goods. Actionable claimsare things
that a person cannot make use of, but which can be claimed by him by means
of legal action such as a debt.Sale of immovable property is not covered
under this Act. As per Section 3of the Transfer of Property Act, 1882,
‘immovable property’ does notinclude standing timber, growing crops or grass.
They are considered movable property and thus goods. Standing timber is
taken as movable property while trees are immovable prope

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1 Formalities of a contract of saleAccording to Section 5of the Sale of

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