According to Sec. 4, 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.
A contract of sale includes both a sell and an agreement to sell. In a sell the property in goods is transferred from the seller to the buyer then a there or immediately whereas in agreement to sell, the property in goods is transferred at a future date or on the fulfillment of a certain conditions as given in section 4 (4). An agreement to sell is an executor or conditional contract and involves a contract pure and simple without conveyance or delivery of goods when the contract is made. The sale, on the other hand, is an executed, absolute and unconditional contract involving a contract plus conveyance.
An agreement to sell involves future goods, meaning goods yet to be manufactured or procured, whereas sale involves sale of existing goods, meaning goods which are within the control of the seller.
The essential elements of a contract of sale can be stated as follows :
1. Parties : There must be at least two parties in a contract of sale, means seller and the buyer, who should be competent to contract with the intention of creating legally binding relations. The seller is defined as a person who sells or agrees to sell goods and the buyer is a person who buys or agrees to buy goods.
2. Transfer of Property : The contract of sale involves transfer of general property in goods, means ownership. In sale, transfer of property takes place immediately where as, in an agreement to sell, it takes place at a future date.
3. Transfer of Risks : Risks (loss or damage to goods) follows property. In sale the buyer’s bears the risks and in an agreement to sell, the risk remains with the seller of because ownership is yet to transferred to the buyer.
4. Goods : Goods which form subject matter of a contract of sale, must be only moveable goods. Sale is concerned with existing goods while agreement to sell involves future goods.
5. Price : Price is the money consideration in a contract of sale. Price is defined as the money value of goods expressed in the currency of a country. Consideration in a contract of sale must always be in terms of money. A counter trade in which consideration is partly in money and partly in goods is a sale, but a barter where goods are exchanged for goods is not a sale.