ESSENTIAL ELEMENTS OF A CONTRACT OF SALE

Goods are tangible or movable personal property other than money or things that have value whether tangible or not . Section 2(1) of the law of sales of goods Act  defines the term good to include all personal chattels that are tangible and being capable of being moved, and the provision exclude all emblements (growing crops produced annually), money and things that are permanently affixed or attached to the land such as the land, trees and houses.

The united nation convention on contract for the international sales of goods , defines the term goods to exclude among other things  goods bought for personal, family or household use, things bought by auction, stocks, shares, investment securities, negotiable instruments or money and ships, vessels, hovercraft or aircraft just to mention a few. In economic terms, a good is a material that satisfies human wants and provides utility, for example, to a consumer making a purchase while getting an enough-satisfying product .

The case of Mills v Stokman , draws a distinction of what are goods and what are not goods, and according to this case a quantity of state which had been quarried and then left on some land as waste material for many years was held to be part of the land. Things like goodwill, copyright, trademark, patents, water, gas, electricity are all goods. In the case of Commissioner of Sales Tax v Madhya Pradesh Electricity Board , the Supreme Court observed that electricity can be transmitted, transferred, delivered, stored, possessed, in the same way as any other movable property. If there can be sale and purchase of electric energy like any other movable object, we see no difficulty in holding that electric energy was intended to be covered by the definition of “goods”.

As far as goods are concerned they can be categorized into two major forms that is existing goods which includes all goods that are in possession of the seller and which have been agreed upon by the parties at the time of making a contract of sale where as the future goods are those that are not yet in possession of the seller but such goods will be available after making a contact of sale that is in future date as per section 7(1) of the law of sales of goods Act . 

The existing goods may be either specific goods or ascertained goods that is are goods that have been identified at the time of making a contract of sale, where as future goods can either be unascertained or contingent goods. Unascertained goods are those which have not yet identified at the time of making a contract of sale where as contingent goods are those which their availability depend upon occurrence or non-occurrence of certain event as defined under section 7(2) .

Generally, the term goods can be defined to include all things that are capable of being moved from one place to another, being tangible, and those which can satisfy the human needs and normally people make effort to acquire them.

Contract of sale is first and foremost the contract that is consensual transaction based on an agreement to bay and an agreement to sale . The provision of section 3(1) of the law of sales of goods Act , defines a contract of sale as when the seller agrees to transfer the property in goods that is ownership to the buyer for a consideration called price.

Consideration (price), this is the most essential element of ingredient of any contract of sale. The provision of section 25 of the law of contract Act , place an emphasis that any agreement without a consideration is null and void abi initio. The term consideration was defined in the case of Thomas v Thomas , to mean anything that is of value in the eyes of the law.

Price as an essential element of the contract of sale is provided under section 10 and 11 of the law of sales of good Act , Where the wording of these sections are to the effect the price in a contract for sale of goods may be fixed by the contract or may be determined by the course of dealing between the parties. In the absence of either of these, the buyer must pay a reasonable price, the amount of which will be determined by the circumstances of each particular case.

However, there some authority that, once the price is not fixed by the contract itself it will be a concluding remark that no agreement was reached or contract was concluded as it was held in the following cases:-

May and Butcher v The King , in this case May & Butcher wanted to buy surplus tentage from the Disposals Board. In June of 1921, the Board defined terms of agreement, the Board agrees to sell (and May & Butcher agree to purchase) all old tents and the price and dates on which payment will be made shall be agreed on by the parties as the tents become available. An agreement contained the provision price and date of payment shall be agreed upon from time to time. It was held that an agreement between two parties to enter into an agreement in which some critical part of the contract matter is left undetermined is no contract at all.

Transfer of property in goods, the term ‘property in goods’ means the ownership of the goods. In every contract of sale, there should be an agreement between the buyer and the seller for transfer of ownership . Thus, in a contract of sale there must be an absolute transfer of the ownership. It must be noted that the physical delivery of goods is not essential for transferring the ownership.

Parties to contract of sale, To make a contract of sale there must be at least two parties. These parties must be distinct, that is, a buyer and a seller. These parties should be also competent to make a contact as per section 11(1) and (2) of the law of contract Act . In this context the word ‘buyer’ means any person who buys or agrees to buy the goods and the word ‘seller”’ means any person who sells or agrees to sell the goods as per section 2(1) of the law of sales of goods Act .

The parties to the contract of sale they must be competent to contract, and every person who is of the age of majority, of sound mind and being not disqualified by any law from contracting can enter into a contract of sale as per section 11(1) of law of contract Act . The effect of entering  of a contract of sales with a person who  is incompetent to contract render such contract void as per section 11(2) of the law of contract Act . For example undischarged bankrupt is precluded by the Bankrupt Act , under section 3 to enter into contract.

Subject matter of a contract of sale (goods), there must goods in any contract of sale which are the main subject of such contract, without which the contract cannot be made as there will be nothing to sale. The provision of Section 2(1) of the law of sales of goods Act  defines the term good to include all personal chattels that are tangible and being capable of being moved, and the provision exclude all emblements (growing crops produced annually), money and things that are permanently affixed or attached to the land such as the land, trees and houses. The goods which form the subject of a contract of sale may be either existing ot future goods as it was explained above.

Essential elements of a valid contract, finally all the essential elements of a valid contract must be present. The provision of section 10 of the law of contract Act , enumerate some of these essential element where among other things there must be a lawful consideration, lawful object, consent of the parties and party must have capacity to enter into a contact of sale.

Generally, any contract of sale must have the aforementioned element, and despite all that also any contract of sale must satisfy the essential element of valid contract as set out under section 10 of the law of contract Act so as to create some legal rights and duties thereto.

REFERENCE

BOOKS

Psatiyah, I.S (1982). The sales of goods, (6th Ed). GB publishers: London

Bridge, M (1998). The sales of goods. Oxford University Press: London

STATUTE

The Sales of Goods Act, [Cap 214 R.E 2002]

The Contract Act [Cap 345 R.E 2002]

Bankrupt Act [Cap 25 R.E 2002]

ELECTRONIC SOURCES

http://www.szczepankiewicz.net/microeconomics.pdf Retrieved on Thursday 5th January 2017 at 16:19HRS