The law relating to sale of goods is contained in the Sale of Goods Act,1930. This law came force on 1st July 1930. The Act contains 66 sections and extends to the whole of Pakistan.

Sale of Goods Act defines a contract of sale of goods as “A contract whereby the seller transfer or agrees to transfer the property in goods to the buyer for a price”.

In the other words, a contract to transfer the ownership of goods from the seller to the buyer is known as contract of sale.

The Following are essentials of a contract of sale of goods:1: Contract The word contract means an agreement enforceable by law. All the

essential of a valid contract like capacity of parties, free consent, legality of object, etc. should also be present in a contract of sale. It may be verbal or in writing. It may be express or implied.

2: Two Parties There should be two parties to a contract of sale, i.e. a buyer and

seller. One person cannot act as a buyer and seller because a person cannot buy his own goods and similarly a person cannot sell his goods to himself.

However, an owner of a one part can sell his share to the owner of other part. Similarly, a partner may buy the goods from the firm in which he is a partner and vice-versa.

Example: A sells his computer to B for Rs. 40,000. A is seller and B is buyer.

3: Transfer of Property: Transfer of property is another essential of contract of sale. Property here means ownership. A mere transfer of possession of the goods cannot be termed as a sale. To constitute a contract of sale the seller must either transfer or agree to transfer the property (ownership) in the goods to the buyer.

Example: “A” sells his car to “B” for Rs 8,000,000. The ownership and possession of the car will be transfer from “A” to “B”.

4: Goods: Goods means every kind of movable property other than actionable claims and money; and includes electricity, water, gas, stock and shares, growing crops, car etc.

Every movable property is regarded as goods. The trees, fruits etc. are regarded as goods because they can be separated from land. An actionable claim means a debt or a claim for money which a person may have against another and which can be recovered by filing a suit. Money is not regarded as goods. However, old coins are treated as goods

5: Price: The consideration in a contract of sale must be the price. When goods are sold or exchanged for other goods, the transaction is barter, and not a contract of sale of goods. If goods are sold partly for goods and partly for money, the contract is sale.

Example: A sell his Car to M for Rs 3 lac. It is a contract of sale because here the subject matter is car which is moveable thing.

6: Sale and Agreement to sell: The term contract of sale includes both sale and an agreement to sell. When the property in the goods is transferred from the seller to the buyer at the time of formation of contract, the contract is called a sale. Where under a contract of sale the transfer of ownership in the goods is to be transferred from seller to buyer at some future date, the contract is called an agreement to sell.Example:“A” buys a book from “S” and pays the entire price on a counter and received the goods, it’s a sale.“A” agree to buy “B’s” car for Rs 2 lac, but deliver will be take placed after a month, it’s a agreement to sale.

The following are the kinds of goods.

1. Existing Goods: The good which are owned or possessed by the seller at the time of contract of sale are called existing goods. In other words the goods which are physically in existence and in seller’s possession, at the time of contract are called existing goods.

These goods can be divided into following kinds

a. Specific Goods: The goods identified and agreed upon at the time of the contract of sale are called specific goods. In other words these are the goods which can be clearly identified and recognized as separate things at the time of contract.

a. Unascertained Goods: The goods which are not identified and agreed upon at the time when a contract of sale is made are called unascertained goods.Example: A has 100 bags of sugar. A promise to sell 10 bags of sugar out of them, it is a contract of unascertained goods.

2. Future Goods: The goods which a seller does not possess at the time of contract but will be manufactured, produced or acquired by the seller after making the contract of sale are called future goods. The seller can just make an agreement sell about future goods.

Example:“A” agrees to sell to “B” all the wheat which will be produced in his farm next year, it is a contract of future goods.

3. Contingent Goods: Though a type of future goods, these are the goods the acquisition of which by the seller depends upon a contingency, which may or may not happen

Example:

“X agrees to sell to Y 25 bales of Egyptian cotton, provided the ship which is bringing them reaches the port safely. It is a contract for the sale of contingent goods. If the ship in sunk, the contract becomes void and the seller is not liable.

A agrees to sell specific goods in a particular ship to B to be delivered on the arrival of the ship. If the ship arrives but with no such goods on board, the seller is not liable, for the contract is to deliver the goods should they arrive.

› The money consideration for sale of goods is known as price. Price is an essential element in every contract of sale of goods, a valid sale cannot take place without a price. The price should be paid or promised to be paid.

Modes of Fixing Price:

1.Parties: This is most usual mode of fixing the price. The parties are free to fix any price. The price may be stated in a contract by the parties of the contract.

Example: “Y” agrees to sell his car to “Z” for Rs 5 lac, Here the price is fixed in the contract it self.

2. Agreed Manner:The price is fixed in a manner agreed upon in a contract it

may be the price prevailing on any particular date.Example: “A” agrees to sell 1,000 share of PIAA to “B” at

the rate prevailing on the 20th day after the deal.

3. Course of Dealings: Where price is neither expressed in the contract nor any manner of fixing the price is agreed, the price would be determined by the course of dealings between the parties.Example: “A” agrees with “B” to buy 100 shares of XYZ company, In general course of dealings the accepted price of shares is the price prevailing on date of contract, it is the price prevailing in the marker on date of sale.

Reasonable Price:If the price is not capable of being fixed in by any of the above modes, the buyer is bound to pay to the seller a reasonable price, what is the reasonable price depends upon the circumstances of each case.

Example: “B” orders “C” to supply 1500 kg of Sugar without fixing the price. Price of sugar in the market on day of order would be considered as reasonable price “C” must supply sugar to “A” at this market rate.

Conditions and Warranties .

A contract of sale of goods contains various terms or stipulations regarding the quality, price, mode of payment, delivery of goods, time of performance and place where the goods are to be sent. The major terms are called conditions and minor terms are called warranties.

Conditions and Warranties

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 repudiated.

Thus, a condition is essential for the main purpose of the contract. Its non fulfillment causes massive losses to the suffered party. In case of violation of condition, the suffered party can cancel the contract.

Examples:

“A” contract to deliver 100 fans of GFC fans to “B”, but “A” delivers Millet Fans, it is breach of condition, B can accept or reject them and claim for damages.

“C” contract to delivery 50 laptops of HP to “D”, but “B” delivers 50 laptops of Dell, its breach of condition.

Warranty is a stipulation to the main purpose of the contract, the breach of which gives rise a claim for damages but not the right to reject the goods and treat the contract as a repudiated.

In other words , a warranty is not essential for the main purpose of the contract, The breach of warranty gives the suffered party a right to recover damages only but not to reject the contract.

Examples:

“A” promise to deliver to “B” 100 fans at his office, but “A” delivers them at his home, it is breach of warranty, B can claim damages only but cant reject the contract.

CONDITION WARRANTY1. Value A condition is a stipulation essential to the

main purpose of the contract.

1. Value A warranty is a stipulation not essential to

the main purpose of the contract.2. Basis It forms the basis of a contract and goes

direct to the root of the contract.

2. Basis It doesn’t forms the basis of a contract and

doesn’t goes direct to the root of the contract.

3. Breach The breach of a condition gives the suffered

party the right to reject the contract.

3. Breach The breach of a warranty doesn’t gives the

suffered party the right to reject the contract.

4. Treatment The treatment of condition may be treated

as a breach of warranty.

4. Treatment The treatment of warranty cannot be

treated as a breach of condition.5. Option In the breach of condition, the suffered

party has an option to claim damages instead of rejecting the contract.

5. Option In the breach of warranty, the suffered

party has no option to reject the contract. He can only claim for damages

The condition and warranty which are included in contract are called express. The conditions and warranty which are not included in the contract but the law presumes their existence in the contract are called implied.

Whether any express condition is made or not law presumes certain standards which are to be ensured by the seller before selling the any product .These presumptions as to nature, quality, and rightful ownership of the product are termed as implied conditions.

1. Sales by description: “If you contract to sell peas, you cannot oblige a party to take beans.” where there is a contract for the sale of goods by description, there is an implied condition that the goods shall correspond with the description. If the goods are not according to the description, the buyer can reject the goods. If the seller supplies different goods, the buyer is not bound to accept the goods.

Example: “A” advertised a car for sale as Corolla, 2014 model, B after buying the car, found it of an older model, B could return the car.

2. Sale by sample: In case of sale by sample, the goods must be supplied according to a sample agreed. Seller should supply the goods according to sample shown to the buyer.

3. Sale by sample and description: When the goods are sold by sample as well as by description, there is an implied condition that the bulk of the goods shall correspond with the sample and the description. If the goods supplied correspond only with the sample and not with description, so the buyer could reject.

Example: Mr. Ali agreed to sell Mr. Asif imported refined almond oil. The oil supplied corresponded with the sample but was mixed with grape oil, held, that the oil was not in accordance with the description, so the buyer could reject the oils.

4. Condition of Fitness and Quality: Where the buyer inform to the seller about the particular purpose for which goods are required, there is an implied condition that the goods shall be reasonably fit for such purpose. This condition applies if the following requirement satisfied.

Example:A enters into an agreement with B to buy 100 oil filters to be used for Suzuki Car, The oil filters were unfit, A reject them

5. Condition for wholesomeness: Wholesomeness means beneficial for health. This condition applies only in contract of sale of eatables. In such cases goods supplied must be in a suitable condition to be sold, its means good must be fit for consumption.

Example:“F” bought Milk for “E”, a dairy owner, but milk contained germs of typhoid fever, F’s wife after taking the milk became infected and died, “A” was held liable in damages

Implied Warranties:

Unless otherwise agreed, the law includes following implied warranties into the contract of sale of goods.

2. Disclosure of dangerous goods:The implied warranty on the part of the seller is that if the goods are of dangerous nature, seller should warn the buyer about the product and how it would be dangerous.

Example: C purchased a tin of insect killing powder from A, A knew that if tin is not opened with special care, it may be dangerous but told nothing to C, C opened the tin in the normal way and as a result the powder flied into his eyes and caused injury.

2. Quiet Possession: It is an implied assurance to the buyer that he shall have the possession and enjoyment of the goods sold to him without disturbance from the seller or any other person. If the buyer is disturbed in the enjoyment of the goods due to the seller’s defective title, he can claim damages from the seller.

Example: Mr. Waqar purchased a second hand car from Mr. Javed, Mr. Waqar spent money on its repair and used it for some months. The Car was found to be stolen and Mr. Waqar had to return it to its true owner, Held Mr. Waqar could recover damages and the price.

PERFORMANCE OF CONTRACT OF SALE

A contract of sale is said to be performed when each party to it fulfills his promise or does his duty. It is the duty of the seller to deliver the goods, and of the buyer to accept and pay them in accordance with the terms of the contract of sale.

Buyer’s Rights ( or seller’s duty):The most important duty of the seller is to deliver the goods to the buyer according to the terms of the contract of sale. Delivery simply means transfer of possession from one person to another.

A. Part Delivery: A delivery of part of goods, in progress of the delivery of the whole, has the same effect for the purpose of passing the property in such goods as a delivery of the whole.

B. Time of Delivery: In the absence of any express contract, the seller of goods is not bound to deliver them until the buyer applies for delivery. Where under the contract of sale the seller is bound to send goods to the buyer but if no time for sending them is fixed, the seller is bound to send them within reasonable time.

C. Place of Delivery: Goods must be delivered where it is mentioned in the contract by the buyer to the seller or manufacturer of the goods.

Seller’s Rights ( or Buyer’s Duties ):The buyer must accept the goods delivered to him at

the proper place and at a reasonable time and must pay to the seller in accordance with the terms of the contract.

A. Delivery of Wrong Quantity: Where the seller delivers to the buyer a quantity of goods less than he contracted to sell, the buyer may reject the them, but if the buyer accepts the goods so delivered, he shall pay for them at the contract rate. Again, where the seller delivers to the buyer a quantity of goods larger than he contracted to sell, the buyer may accept the goods included in the contract and reject the excess quantity to the contract. If the buyer accepts the entire goods, so delivered, he shall pay for them at the contract rate.

B. Delivery of the Goods of Wrong Description: Where the seller delivers to the buyers the goods he contracted to sell mixed with goods of a different description not included in the contract, the buyer may accept the goods which are in accordance with the contract and reject the rest, if he accepts the goods he must pay the seller according to contract.

C. Neglect or refusal of delivery: Where the seller is ready and willing to deliver the goods and request the buyer to take the delivery and the buyer does not within a reasonable time after the request take delivery of the goods, he is liable to the seller for any loss occur due to his neglect or refusal to take the delivery.

Where under a contract of sale of the property in goods has passed to the buyer and buyer intentionally refuse to pay for the goods according to the terms of the contract, the seller may sue him for the goods. If the buyer wrongfully neglects or refuse to accept and pay for the goods, the seller may claim for damages.

Where under a contract of sale the price is payable on a certain day irrespective of delivery and the buyer wrongfully neglect to refuse to pay such price, the seller may sue him for the price although the property in goods has not passed or it may be passed to the buyer. If the seller wrongfully neglect or refuse to deliver the goods to the buyer, the buyer may claims for damages.