Q.2 – Explain the meaning and elements of the Contract of Sale. When goods are supplied under statutory compulsion, whether that result in the sale or not? Discuss with case law.

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Meaning of Contract of Sale

According to Section 4 of the Sale of Goods Act, 1930, a contract of sale is an agreement whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price.
If the ownership is immediately transferred, it is a “sale”, and if it is to be transferred in future or subject to conditions, it is an “agreement to sell”.

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Essential Elements of a Contract of Sale

1. Two Parties – There must be a buyer and a seller, and they must be different persons.
2. Goods – The subject matter must be movable goods.
3. Transfer of Ownership – The ownership in goods must pass or be agreed to pass from seller to buyer.
4. Price – The consideration must be money.
5. Other essentials of a valid contract – There must be free consent, lawful object, and capacity of parties.

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Goods Supplied under Statutory Compulsion

When goods are supplied not because of mutual agreement but because of a statutory order or compulsion of law, it does not amount to a contract of sale.
The basic requirement of a sale is consent of the parties. If consent is absent and supply is only by compulsion of law, then there is no “contract of sale”.

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Case Law

1. New India Sugar Mills Ltd. v. Commissioner of Sales Tax (AIR 1963 SC 1207) – The mills were compelled by Government orders to supply sugar at a fixed price. The Supreme Court held that such supply was not a contract of sale as there was no free consent of parties.

2. State of Madras v. Gannon Dunkerley & Co. (1958 SCR 379) – The Court held that for a valid sale, there must be an agreement between the parties, transfer of ownership, and price. Without agreement, there can be no sale.

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Conclusion

Thus, a valid contract of sale requires an agreement between buyer and seller, transfer of ownership in goods, and price as consideration. Goods supplied under statutory compulsion do not amount to a contract of sale, since there is no free consent between parties.