Explain the meaning and elements of the Contract of Sale. When goods are supplied under statutory compulsion, whether it results in a sale or not? Discuss the position with the help of relevant case laws.”
⭐ QUESTION 2
“Explain the meaning and elements of the Contract of Sale. When goods are supplied under statutory compulsion, whether it results in a sale or not? Discuss the position with the help of relevant case laws.”
1. INTRODUCTION
The law relating to sale of goods in India is governed by the Sale of Goods Act, 1930, which is based on English law.
A contract of sale is a special type of contract in which ownership of movable goods is transferred from the seller to the buyer for a money price.
The concept is important because rights such as risk, ownership, remedies, liabilities depend upon whether a contract of sale has been created or not.
2. Meaning of Contract of Sale (Section 4, Sale of Goods Act, 1930)
Section 4(1): Definition
A contract of sale is a contract where the seller transfers or agrees to transfer the property in goods to the buyer for a price.
Important features of definition
- Transfer may be immediate → Sale
- Transfer may be in future or conditional → Agreement to Sell
- Only goods (movable property) can be sold
- Transfer must be for a price (money consideration)
3. ELEMENTS OF CONTRACT OF SALE (Detailed)
A contract of sale is valid only when all the following elements exist:
(1) Two Parties – Buyer and Seller (Section 2(1) & 2(13))
There must be:
- Seller – person who sells goods
- Buyer – person who buys goods
One person cannot be both.
Example: A cannot sell goods to himself.
(2) Goods (Section 2(7))
Goods include every kind of movable property except money and actionable claims.
Types of goods:
- Existing goods
- Future goods
- Contingent goods
Goods may be:
- Specific
- Ascertained
- Unascertained
Importance: Transfer of property cannot take place unless goods are identified.
(3) Transfer of Property (Ownership Transfer)
This is the heart of a contract of sale.
Transfer of:
- Ownership, not merely possession
- Buyer becomes the owner
- Even if delivery is postponed, sale may be complete if ownership has passed
Ownership transfer decides:
- Who bears risk
- Who can sue third parties
- Who has insurable interest
(4) Price (Section 2(10))
Price means money consideration.
If goods are exchanged for other goods → barter, not sale.
If services are exchanged → not a sale.
Price can be:
- Fixed by contract
- Left to be determined later
- Determined by course of dealing
- Fixed by a third party (Sec. 10)
(5) Elements of a Valid Contract
Since Sale of Goods Act is based on Contract Act, all essentials must exist:
- Offer + Acceptance
- Lawful consideration
- Competency
- Free consent
- Lawful object
- Certainty of terms
(6) Delivery of Goods Not Essential for Sale
Delivery may:
- precede sale
- follow sale
- happen at the time of sale
Sale is complete when ownership is intended to be transferred, not delivery.
⭐ 4. SUPPLY OF GOODS UNDER STATUTORY COMPULSION – IS IT A SALE?
This is the second part of the question.
Meaning of Statutory Compulsion
Sometimes law forces a person to supply certain goods:
- at a government-fixed price
- at a fixed quantity
- to a fixed authority or consumer
- without negotiation
Examples:
- Compulsory sugarcane supply
- Food grains supply orders
- Essential commodities
- Electricity distribution
- Coal supply orders
- Fertilizer or cement supplies under control orders
In such cases, the parties do not voluntarily agree.
Hence, the issue arises:
Is it a sale if the supply is made due to compulsion of law?
5. LEGAL PRINCIPLE
Courts have held that:
👉 Compulsion of law does not take away the character of sale,
if other essential elements of sale exist.
Therefore, even under compulsion, a sale takes place if:
- Property in goods passes
- Price is paid or promised
- Buyer gets ownership
- Goods are delivered
6. DETAILED CASE LAW DISCUSSION
**(1) Andhra Sugar Ltd. v. State of Andhra Pradesh (1968)
FACTS:
- Sugarcane Control Order made supply compulsory.
- Price, quantity, and buyer were fixed by law.
HELD:
✔ It is a sale
because:
- Property in goods transferred
- Price was paid
- Seller and buyer relationship existed
Court said:
👉 “Compulsion does not destroy the essence of sale.”
(2) Indian Steel and Wire Products Ltd. v. State of Madras
FACTS:
Price of steel was controlled; seller had to supply to specific buyers.
HELD:
✔ Still a sale
Price fixed by law is still price.
Ownership transferred, so sale takes place.
(3) Oil & Natural Gas Commission v. State of Bihar
FACTS:
Crude oil had to be supplied to government undertakings compulsorily.
HELD:
✔ It is a sale because element of “transfer for price” existed.
(4) Chittar Mal Narain Das v. State of UP
FACTS:
Compulsory levy of food grains to government.
HELD:
✘ Not a sale
Reason:
There was no intention to transfer ownership; it was only a statutory duty.
Principle:
If supply is compulsory without intention to transfer property, then it is not a sale.
7. Distinction: When Compulsory Supply IS a Sale & When NOT a Sale
| Condition | Sale | Not Sale |
|---|---|---|
| Transfer of ownership | ✔ Yes | ✘ No |
| Price paid (even if fixed by law) | ✔ Yes | ✘ No |
| Goods delivered as property | ✔ Yes | ✘ No |
| Mutual intention (even under compulsion) | ✔ Yes | ✘ No |
| Purely statutory duty without contract | ✘ No | ✔ Yes |
8. ILLUSTRATIONS
Illustration 1 (Sale)
Government orders a mill to supply 500 kg wheat at fixed price.
Mill supplies wheat → buyer pays the amount.
✔ Ownership passes
✔ Money is paid
→ This is a sale.
Illustration 2 (Not a Sale)
Government seizes paddy from farmers as part of minimum levy order.
Goods are taken without price payment.
✘ No price
✘ No ownership transfer by contract
→ Not a sale.
9. CONCLUSION
✔ A contract of sale under Section 4 requires:
- two parties
- goods
- transfer of property
- price in money
- valid contract elements
✔ When goods are supplied under statutory compulsion,
→ It may still amount to a sale if the characteristics of sale exist.
✔ Courts have consistently held that even if price and quantity are controlled by law, the transaction is a sale when there is:
- transfer of ownership
- consideration
- delivery of goods
✔ But if the supply is only a statutory duty without a contract, then it is not a sale.
Comments
Post a Comment