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Tuesday, December 25, 2012

What is the formalities of a contract of sale?

According to section 5 of The Sale of Goods Act, 1930-
  • A contract of sale is made by an offer to buy or sell goods for a price and the acceptance of such price. A contract may provide for the immediate delivery of goods or immediate payment of the price or both, or for the delivery or payment by installments. Or that the delivery of payments or both shall be postponed.
  • Subject to the provisions of any law for the time being enforced, a contract of sale may be in writing or by the word of mouth or may be impliedly or may be implied from the conduct of the parties.
  • A statement or conduct inviting the making of an offer such as by display of goods in a shop does not buy itself bind the shopkeeper to accept the customer’s offer even at the price displayed or advertised. Such invitation to treat therefore differs from an offer, which is intended to be binding on the person making it and is capable of being accepted without any further negotiation. Where, however, the accessibility to goods in intended to an offer capable of acceptance by customer’s act such as filling the petrol tank of a car from a self service pump or choosing items in a self service shop or taking goods intended for sale for an automatic vending machine the question of obtaining seller’s assent does not arise.
  • Sub-section 1 emphasis the consensual nature of a contract of sale; the parties may agree to such terms as they think fit. A sale can be complete even without effecting immediate delivery and immediate payment. In a contract of sale, the title in goods passes immediately on the payment of price while in an agreement to sale the title in goods passes at a future time subject to conditions to be fulfilled thereafter however, when the goods are accepted by the buyer and the price is received by the  seller the sale is deemed to be complete.
  • Earnest :
  • The conclusion of a contract of sale is sometimes marked by the giving of earnest this was expressly referred to in Sec. 78 of the Contract Act with regard to the giving of earnest Fry L.J. said in Howe V.s Smith   (1884). The practice of giving something to signify the conclusion of the contract, sometimes a sum of money, sometimes a ring or other object, to be repaid or redelivered on the completion of the contract, appears to be one of great antiquity and very general prevalence….. It was familiar to the law of Roam ( where the rule was that a defaulting buyer forfeited the earnest money and a defaulting seller was bound to restore it two fold”.
  • Earnest whether given in money or not must be something of value really given by the buyer and kept by the seller … A mere symbolic ceremony such as one party drawing a coin across the other’s hand will not do.
  • When a deposit in the nature of earnest is paid for the same of immovable property in India, a vendor by whose default the sale goes off must return the sum so paid, but if the default is the purchasers the purchaser must loose it.

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