TRENDING – Sale or No Sale ? – 13-06-2019


1. What is the difference between sale and agreement to sell?

  • Section 4 of the Sale of Goods Act, 1930 (‘the Act’), contains the provisions distinguishing between a sale and an agreement to sell.
  • Where under a contract, the property in goods is transferred to the buyer the contract is called a sale and when the property in the goods is to pass at a later date or a future time or subject to fulfilment of some condition after the contract is made, the contract is called an agreement to sell.
  • An agreement to sell becomes a sale when pursuant to the agreement, the property in the goods is transferred to the buyer on the expiry of time or on the conditions stipulated in the agreement being fulfilled.

2. What are the essential requisites of sale?

  • A contract for sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. Thus, price is one of the essential conditions for a valid contract of sale.
  • Existence of an agreement between the parties for the purpose of transferring the property in goods and the actual passing of the property in the goods to the buyer are other essential conditions of a valid contract of sale.
  • The provisions of the Indian Contract Act, 1872, providing essentials of a valid contract which includes capacity to contract, free consent etc. are pre supposed to be essentials of a valid contract of sale.

3. What is meant by ascertainment and appropriation of goods in the context of Section 18 and Section 23 of the Act?

  • The words ascertained and appropriated are not defined in the Act. The dictionary meaning of the word ascertained is “identification of the goods”. According to Black’s
    Law Dictionary, the meaning of the word appropriation is “the exercise of control over property”.
  • Ascertainment is a part of the process of appropriation of goods. On appropriation of goods to a contract the goods are considered to be ascertained.
  • Section 23 of the Act, contains provisions for the transfer of property in unascertained goods and their appropriation. The Section envisages that the property in goods shall pass to the buyer once the goods are unconditionally appropriated to the contract by the seller with the assent of the buyer or by the buyer with the assent of the seller. Additionally, the goods should also be in a deliverable state
    to be said to be unconditionally appropriated to the contract.

4. Under Section 23 of the Act, the goods have to be in a deliverable state for unconditional appropriation to the contract. In this context, when are the goods considered to be in deliverable state? Does co-mingling of goods of a peculiar nature (gas, oil etc.) render them in an undeliverable state?

  • As per the provisions of Section 2(3) of the Act, goods are said to be in a deliverable state when they are in such state that the buyer would be required to take delivery of the goods under the contract.
  • No, the comingled goods (oil, gas etc.) are not considered to be in an undeliverable state because of the peculiar nature of the goods. Such goods are different in characteristic and nature from other tangible goods and thus the mode of transportation and carriage is also different which results in comingling of goods of one supplier with goods of other suppliers.
  • The Hon’ble high Court of Gujarat in B.G. Exploration and Production India Limited and Ors. Vs. State of Gujarat and Ors., MANU/GJ/0750/2015, held “Merely because the natural gas upon being delivered at the delivery point was commingled with other gases, does not mean that it was not in a deliverable state because having regard to its unique physical properties, large volumes of natural gas can be transported only in a continuous stream and once delivered in the pipeline for transportation, it becomes commingled with other natural gas. Individual molecules are not separately identified and cannot
    be accurately tracked or traced. As a result, natural gas is sold and purchased on a "quality and quantity" basis.”

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