Contract of Sale of Goods Act

"Any seller agreeing to transfer the ownership of goods to the buyer immediately or at a later time in exchange for payment shall be deemed to have concluded a contract relating to the sale of goods."

According to the definition, a sale of goods is a contract between a seller and a buyer in which the seller agrees to give the buyer ownership of the products in exchange for payment. A contract for the sale of goods may be made with a clause calling for the sale of products that the seller already owns or will soon manufacture or obtain, or it may be made unconditionally. In other words, the phrase "selling of products" refers to both a sale and an agreement to sale.

Two parties—the seller and the buyer—are involved in a contract for the sale of goods. The individual who transfers or consents to transfer the ownership of commodities to another is known as the seller. And the person to whom ownership of the products transfers is the buyer. As a result, a contract for the sale of goods is an agreement between the seller and the buyer under which the seller agrees to transfer the property in the products in exchange for a fee.

Essential Components of a Goods Sale Contract

A contract for the selling of products must include the following elements:

• Two parties:
  • There are two people involved: a buyer and a seller. A seller is a person who transfers ownership of things or promises to do so. A buyer, on the other hand, is a person who decides to purchase the items or actually does so. The seller or the buyer may not always have to be the offeror or the offeree. Therefore, the seller may be an offeror in one circumstance or an offeree in another. The buyer is subject to the same rules.
• Goods: 
  • Goods must be the subject of a selling agreement. All movable assets that are not securities, legal tender, or actionable claims are considered goods. Therefore, the sale of other immovable properties do not come within the contract of sale of goods and the principles do not apply here in the contracts of sale of immovable property or service.
• Transfer of property or ownership:
  • The ownership of the commodities, also known as property, must be transferred from the seller to the buyer. The transfer of a right of possession over goods that occurs in bailment or pledge is not the same as that. A contract for the sale of commodities must inevitably have the buyer as the owner of the goods. It is not necessary for the contract to transfer any right to possession immediately. The title transferred under it must be absolute and not just possessory; this is crucial. A sale is a translative fact that entails the transfer of the seller's whole ownership stake in the object being sold.
• Price:
  • A deal is only a sale if real estate is transferred under a contract for sale in exchange for money. Therefore, when goods are exchanged for goods, it is not a sale but a barter.
• Fulfillment of essential elements of a valid contract:
  • The sale of goods is a contract, so in order for it to be valid, it must include all necessary components, such as an offer and acceptance, the intent to create a legal obligation, consent, consideration, the capacity to enter into a contract, the legality of the object or the possibility of performance, etc. The sale cannot be legally enforced if one or more of these conditions are not met.

Difference between Sale and Agreement to Sale:

Condition and Warranty

A seller may state something about the facts of the items when entering into a contract for the sale of goods that could persuade the buyer to sign the contract. These assertions, which vary in nature and significance, are classified as either conditions or warranties. In actuality, there are two categories of contractual promises.

Condition:

A condition is a requirement, representation, or promise that is thought to be so crucial that, in the event of a breach, the buyer would be free to reject the goods and treat the contract as discharged. It is fundamental to the agreement, and its breach upends the contract's foundation. It has been noted that the condition is a requirement that directly affects the essence of the agreement, or, to put it another way, is so crucial to it that the opposing party may justifiably view non-compliance as a significant failure to perform the agreement at all. Hence, a condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to a right to treat the contract as terminated or discharged.

Warranty:

A warranty is a clause that is ancillary or unrelated to the contract's primary clause and objective. A claim for damages may result from the violation of this clause, but the right to reject the products and treat the contract as broken is not affected. It doesn't have the same critical importance as a condition.

In each instance, the interpretation of the contract as a whole will determine whether a statement is a condition or a warranty. The language employed by the contract's parties is not to be regarded as a guide by the court. Despite being referred to in the contract as a warranty, a provision may constitute a condition.

Difference between Condition and Warranty:

Caveat Emptor

Let the buyer beware is how the Latin phrase "caveat emptor" is translated into English. The caveat emptor principle cautions buyers to carefully consider whether the things are appropriate for their intended use. As a result, in a contract for the sale of products, it is the buyer's responsibility to carefully inspect the goods and ensure that they are appropriate for his intended use. He cannot return the products or sue the seller for his loss if the goods he chooses turn out to be unsuitable for his intended use. This is how the caveat emptor tenet is expressed.

Ward V. Hobbs:

H sent 32 pigs to the market to be auctioned off. "With all flaws and inaccuracies of description," the pigs were sold to W. He was aware that the pigs had swine fever, but he never told W about it. After two days, a lawsuit was filed to seek damages for the loss of some of the pigs. It was decided that H did not provide any implied warranties, the sale was valid, and H was not responsible for any damages.

The seller of the items is free to set the best price for them and is not required to reveal any flaws while making the sale. The purchaser might feel duped in the circumstance.

Even in this situation, the buyer is barred from suing the seller. Caveat emptor is a legal doctrine that prohibits consumers from suing merchants when they purchase products that turn out to be unsuited for their intended use. However, consumers are still required to carefully inspect their purchases to ensure that they are suitable for their intended use.

Exceptions:

There is one exception to the maxim caveat emptor. The exclusion can be described as follows:

• When the customer discloses to the seller, either explicitly or implicitly, the precise reason why he needs the items and relies on the seller's expertise and judgment.
• When the buyer's assent was obtained by deceit or pressure, or when the vendor purposefully hides a flaw in the items that would not be apparent upon reasonable inspection, or a latent flaw,
• The caveat emptor rule does not apply when the indicated conditions are in effect.
• There is an implied requirement that items must be of merchantable quality when offered by description.
• Where trade practice or custom annex the quality or suitability of items.
• When the flaws in the products are difficult to spot even when they are checked with care and skill.

References:

• Business Law, Ram Prasad Shrestha;M.K Books, Bhotahity, Kathmandu,2013
• Merchantile law, ICAI, 2013