Formation of Contract of Sale

Goods are classified into three main types: 1. Existing Goods (owned or possessed by the seller at the time of the contract), which can be Specific (identified and agreed upon), Ascertained (identified after the contract), or Unascertained (not identified at the time of contract). 2. Future Goods (to be manufactured or produced by the seller after the contract). 3. Contingent Goods (a type of future goods, the acquisition of which by the seller depends upon a contingency which may or may not happen).

The essential elements of a valid contract of sale include: two distinct parties (buyer and seller), goods as the subject matter, a price (money consideration), transfer of property (ownership) in goods, and all other essential elements of a valid contract as per the Indian Contract Act, 1872 (e.g., free consent, lawful object, capacity of parties).

A 'Sale' is an executed contract where the property (ownership) in goods is transferred immediately from the seller to the buyer. The risk of loss also passes to the buyer. An 'Agreement to Sell' is an executory contract where the transfer of property in goods is to take place at a future time or subject to certain conditions. The risk remains with the seller until the property passes.

As per Section 2(7) of the Act, 'goods' means every kind of movable property other than actionable claims and 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.

A 'Contract of Sale' is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. It includes both an actual sale (where property is transferred immediately) and an agreement to sell (where property transfer is to take place at a future time or subject to some condition thereafter to be fulfilled).

No specific formalities are generally required for the formation of a contract of sale. As per Section 5, a contract of sale may be made in writing or by word of mouth, or partly in writing and partly by word of mouth, or may be implied from the conduct of the parties.

If the contract of sale does not specify the price, and it is not determined in any agreed manner or by the course of dealing, the buyer is bound to pay a 'reasonable price'. What constitutes a reasonable price is a question of fact, depending on the circumstances of each particular case, such as the nature of the goods, market conditions, and the time of sale.

A 'condition' is a stipulation essential to the main purpose of the contract, the breach of which gives the aggrieved party a right to repudiate the contract and claim damages. A 'warranty' is a stipulation collateral to the main purpose of the contract, the breach of which gives rise to a claim for damages but not a right to reject the goods and treat the contract as repudiated.

No, a minor is generally not competent to enter into a valid contract of sale, as per the Indian Contract Act, 1872, which applies to the Sale of Goods Act, 1930. An agreement with a minor is void ab initio (from the very beginning). However, if a minor is supplied with 'necessaries' suited to their condition in life, the seller can be reimbursed from the minor's property, but the minor is not personally liable.

According to Section 9, the price in a contract of sale may be fixed by the contract itself, or it may be left to be fixed in a manner thereby agreed, or it may be determined by the course of dealing between the parties. If the price is not determined by any of these means, the buyer must pay a reasonable price, which is a question of fact dependent on the circumstances of each particular case.

Generally, only the owner of the goods can sell them, as encapsulated by the maxim 'nemo dat quod non habet' (no one can give what he doesn't have). However, there are exceptions to this rule where a non-owner can pass a good title, such as a mercantile agent, a co-owner, or a seller in possession after sale, but these relate more to the transfer of title than the formation of the contract itself. For formation, any person with legal capacity can enter into a contract to sell goods.

'Property in goods' refers to the general property or ownership of the goods, not merely a special property or possession. The transfer of this general property from the seller to the buyer is the essence of a contract of sale, distinguishing it from other transactions like bailment or pledge where only possession might be transferred.

No, 'delivery' does not necessarily mean physical transfer of goods at the time of contract formation. Delivery, as defined in Section 2(2), means voluntary transfer of possession from one person to another. It can be actual (physical handing over), constructive (acknowledgement by a third party), or symbolic (e.g., handing over keys). The property in goods can pass even without immediate physical delivery.

The significance of 'ascertained goods' lies in the principle that where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained (Section 18). This means that ownership cannot pass until the specific goods intended for the buyer are identified and set aside.

If specific goods, without the knowledge of the seller, have perished at the time when the contract is made, the contract is void (Section 7). If there is an agreement to sell specific goods, and subsequently the goods, without any fault on the part of the seller or buyer, perish before the risk passes to the buyer, the agreement is thereby avoided (Section 8).