Introduction

This summary examines the Sale of Goods Act 1979 (“the Act”) within its context: why it was drafted,
what are its important provisions, and how it has changed since it came into force. It is submitted that
the Sale of Goods Act 1979 has been part of a change in consumer dealings, with its most significant
contributions being to the rights consumers have where they buy products that turn out to be faulty.
Indeed, its use has been so central to implied terms in particular, that one author has been criticised for
failing to see the contribution of the Act to the law of implied terms.[1] At the same time, the Act’s
importance has to an extent been diminished by the introduction of very recent legislation.[2]

1. A contract is an agreement giving rise to obligations which are enforced or recognised by law.

2. In common law, there are 3 basic essentials to the creation of a contract: (i) agreement; (ii)
contractual intention; and (iii) consideration.

3. The first requisite of a contract is that the parties should have reached agreement. Generally
speaking, an agreement is reached when one party makes an offer, which is accepted by another party.
In deciding whether the parties have reached agreement, the courts will apply an objective test.

OFFER

An offer is an expression of willingness to contract on specified terms, made with the intention that it is
to be binding once accepted by the person to whom it is addressed. There must be an objective
manifestation of intent by the offeror to be bound by the offer if accepted by the other party. Therefore,
the offeror will be bound if his words or conduct are such as to induce a reasonable third party observer
to believe that he intends to be bound, even if in fact he has no such intention. This was held to be the
case where a university made an offer of a place to an intending student as a result of a clerical error.

ACCEPTANCE

An acceptance is a final and unqualified expression of assent to the terms of an offer. Again, there must
be an objective manifestation, by the recipient of the offer, of an intention to be bound by its terms. An
offer must be accepted in accordance with its precise terms if it is to form an agreement. It must exactly
match the offer and ALL terms must be accepted.

CONSIDERATION

In common law, a promise is not, as a general rule, binding as a contract unless it is supported by
consideration (or it is made as a deed). Consideration is "something of value" which is given for a
promise and is required in order to make the promise enforceable as a contract. This is traditionally
either some detriment to the promisee (in that he may give value) and/or some benefit to the promisor
(in that he may receive value). For example, payment by a buyer is consideration for the seller's promise
to deliver goods, and delivery of goods is consideration for the buyer's promise to pay. It follows that an
informal gratuitous promise does not amount to a contract.
CONTRACTUAL INTENTION

20. An agreement, even if supported by consideration, is not binding as a contract if it was made
without an intention to create legal intentions. That is, the parties must intend their agreement to be
legally binding.

21. In the case of ordinary commercial transactions, there is a presumption that the parties intended to
create legal relations. The onus of rebutting this presumption is on the party who asserts that no legal
effect was intended, and the onus is a heavy one.

22. Many social arrangements do not amount to contracts because they are not intended to be legally
binding. Equally, many domestic arrangements, such as between husband and wife, or between parent
and child, lack force because the parties did not intend them to have legal consequences. In Balfour v
Balfour [1919] 2 KB 571, a husband who worked abroad promised to pay an allowance of £30 per month
to his wife, who was in England. The wife's attempt to enforce this promise failed: the parties did not
intend the arrangement to be legally binding. (Note that in addition, the wife had not provided any
consideration.)

23. An agreement which is made "subject to contract" (typically, agreements for the sale of land) or a
"letter of comfort" is generally unenforceable. The words normally negate any contractual intention, so
that the parties are not bound until formal contracts are exchanged.

The law relating to the sale of goods is to be found in the Sale of Goods Act 1979 (as amended by the
Sale and Supply of Goods Act 1994 and the Sale of Goods (Amendment) Act 1994). This Act provides a
framework for the relationship between the buyer and seller. However, it would be wrong to think that
the Act governs every aspect of a sale of goods contract. Many of the general principles of contract law
still apply.

Therefore, a contract for the sale of goods, just like any other contract, must possess all the essential
elements. The rules relating to the requirements of offer and acceptance, intention, consideration, etc.,
are largely unaffected by the Act.

Definition

A contract for the sale of goods is defined in section 2(1) of the Act as:

'A contract by which the seller transfers or agrees to transfer the property in goods to the buyer for a
money consideration, called the price'.

A closer examination of this definition would be necessary, as it will assist you in distinguishing a
contract for the sale of goods from other similar kinds of contracts. The definition covers an actual sale
and an agreement to sell at some future time. The essence of the transaction is the transfer of property
in the goods from the seller to the buyer. Property in this context means ownership of the goods and
not physical possession. Goods include all tangible items of personal property such as food, clothes and
furniture. Land and money are excluded from the definition.519 The provisions of the Act only apply to
those transactions which fall within the above definition.

Capacity

To enter into a binding sale of goods contract is governed by the general law of contract, which has
already been considered earlier on.

FORMATION OF THE CONTRACT (s.4)

It is not necessary to observe complex formalities to create a contract for the sale of goods. It may be in
writing or by word of mouth, or partly in writing and partly by word of mouth, or even implied from the
conduct of the parties.

PRICE S.2(1)

The consideration for the goods must be money, (i.e. price) although a part-exchange deal in which
goods are exchanged for other goods plus money will be covered by the Act because some money has
changed hands. Section 8 of the

Act deals with this, and states in this connection:

(1) The price in a contract of sale may be fixed by the contract or may be left to be fixed in manner
thereby agreed or may be determined by the course of dealing between the parties.

(2) Where the price is not determined in accordance with the foregoing provisions the buyer must pay a
reasonable price.

PAYMENT SS.27-28

The price is such a fundamental part of the transaction that it will normally be fixed by the contract.
However, it may be ascertained by the course of dealing between the parties or the contract may
provide a mechanism for fixing the price e.g. by arbitration. The parties may make their own agreement
as to the time of payment.

Question 1

According to the Sale of Goods Act 1979 section 2 (1), the contract of sale of goods comes into effect
after the seller and the buyer have agreed on the terms of sell. The agreement can either be verbal or
written but it is binding on all the parties. In this case, Angelo called to confirm and confirmed that the
advertised product on Nandini's website was available. Nandini himself confirmed that it is available and
he was willing to sell it to Angelo. This agreement by both the buyer and seller means that there is a
contract. Moreover, in contract law the buyer has the right to sue the seller for breach of contract under
section 51 of SGA 1979, in the event that the seller decides in a wrongful manner refuses to deliver the
agreed goods to the buyer, the buyer can sue for non-delivery damages. In this case, Nandini refused to
sell the Apple Model Number 5 based on the agreement, this means that Angelo has the right to sue for
non-delivery damages.

In the United States, state laws govern sale of goods contracts. In most cases, these laws cover the
principles of forming a contract, which can include issues such as mutual understanding.

The essentials of a contact are:

1) Offer and acceptance

2) Lawful purpose

3) Lawful consideration

4) Certainty and completeness of terms

5) Free consent of the parties

6) Capacity

A verbal contract is binding as soon as you accept an offer from a seller, or as soon as a seller accepts
your offer.

But for any agreement verbal or written, to be considered as contract in the eyes of law, it has to fulfill
all the essentials required.

Offer and acceptance

Lawful purpose

The purpose of the contract must be lawful. In our example, the nephew’s reason for borrowing money
from his aunt is to replace a flat tire on his car. As such, the contract between them is of lawful purpose.
However, if the nephew wanted to borrow money to modify his car illegally (such as getting lights
installed to imitate a police car), the purpose becomes unlawful and the contract is void.

Lawful consideration

The parties must exchange something of value (monetary or otherwise), known as consideration. Plus,
the exchanged item must be legal. In our example, the $200 and the promise to return it are both
examples of lawful consideration. The nephew could not, for instance, substitute his repayment of
money with illegal drugs.

Certainty and completeness of terms

The terms of the contract cannot be vague, incomplete, or misrepresented. In other words, there should
be agreement on who the parties to the contract are, the obligations of each party, the price to be paid,
and what the subject matter of the contract is. The terms between the aunt and nephew are very clear;
the aunt loans the nephew $200 for the purchase of a new tire (and nothing else) on the condition that
he pay her back the $200 at a specific time (such as when he gets his next paycheck).

Free consent of the parties

The parties, both being of sound mind, should consent to the terms of the agreement freely, meaning
without undue influence, coercion, duress, or misrepresentation of facts. The nephew and aunt both
consent to the terms of the contract without pressuring each other and with the intention of fulfilling
their obligations.

Capacity

The parties must have the capacity to enter the contract, meaning they are above the age of majority
and are of sound mind. In our example, the nephew and aunt are both over 18 years old, are not under
the influence of mind-altering substances, and do not have cognitive impairments such as dementia.

In our case, Nandini made an offer through advertising in newspaper. Further Angelo accepted the offer.
The purpose of selling the computer by Nandini through her store and acceptance of buying the product
by Angelo for the sum of $1000 contrues a lawful purpose with the essentials of Capacity and free
consent is also considered.

However, Angelo has not paid the money he agreed upon for the purchase. In this case, the transfer of
consideration has not taken place.

As per law, till the time the transfer of consideration is not taken place, the verbal agreement between
the parties cannot be considered as a valid contract.

In such circumstances, Angelo does not have any legal remedy under the common law of contract.

Secondly, as per law, while selling goods valued greater than $500, in general a written contract is
necessary.

Case law: In the case of Carlill v. Carbolic Smoke Balls Company, the offer was made through
advertisement. And It was held that a contract came into existence between the plaintiff and the
company as soon as the plaintiff bought the smoke balls and used them as prescribed.
In the case of Harvey vs Facey , the petitioner, Harvey communicated with the defendant, Facey, about a
Hall Pen through telegram, saying "Will you sell us Bumper Hall Pen? Telegraph lowest cash price-
answer paid". The same day, Facey responded with the price of the Pen to be £900. To which, the
appellant replied, "We agree to buy Bumper Hall Pen for the sum of nine hundred pounds asked by you.
Please send us your title deed in order that we may get early possession." The defendant refused to sell
at that price that they had initially quoted.

It was finally held that no contract came into existence between both the parties because their
exchange of telegrams was merely an informational exchange where the appellant asked for the price of
the Hall Pen and the defendant quoted the price. Therefore the appellant had no right to sue.

Similarly in our case Nandini had agreed to sell the computer to Angelo on phone, which is an informal
exchange and hence cannot be construed to be a valid contract.

Hence, Angelo does not have any legal rights as per the common law of contract in context with the
purchase of the computer from Nandini.

Question 2

In Sales of Goods Act 1979 Part 1 subsection 8, the price in the contract may be fixed or is left to be fixed
in a way that the parties will agree among themselves it becomes binding on the parties. In this case,
Nandini indicated the price on his website, Angelo in order to be sure called to confirm the price for the
Apple Model Number 5 was $1000 which Nandini agreed. Based on this, the contract was formed with
the agreement that Nandini will deliver the product at $1000. This means Nandini increasing the price to
$1800 is a breach of the contract. Under this Angelo has the right to sue for breach of the contract
under the Sale of goods Act.

In the second case wherein Nandini has increased the sale price from $1000 to $1800.

As per Sec 9.-(1) of The Sale of Goods Act, the price in a contract of sale may be fixed by the contract, or
may be left to be fixed in manner thereby agreed, or may be determined by the course of dealing
between the parties.
Now in our case, it does not construe a valid contract, So, the fixation of price is open ended. Therefore,
till the time, the seller does not accept the consideration (legal tender i.e. money) the validity of
contract does not exist. Hence Nandini has not acted in breach of the relevant statute law.