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Essential elements of contract of sale

  • Essential elements of a valid contract: All the essential elements of a contract must be present in the contract of sale. If any of the essential elements like free consent, consideration, lawful object etc. is missing, then the contract of sale will not be valid.

Anil agrees to sell his cycle to Sunil without consideration. This contract of sale is not valid as it is made without consideration.

  • There must be two parties to the contract of sale: There must be two distinct parties to the contract of sale. The reason for the same is that in a contract of sale, the ownership is transferred from seller to buyer, thus the seller and buyer must be two different people. The two parties to contract of sale are:
    • Seller: A Person who sells or agrees to sell the goods
    • Buyer: A person who buys or agrees to buy the goods
  • There must be some goods as a subject-matter: The term ‘subject matter’ means the things for which a contract of sale can be made. Only goods can be the subject-matter of contract of sale. Goods have been defined under Sec. 2(7) as:-
    “Every kind of a movable property other than actionable claims and money; and includes stocks and shares, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale.”
    On analysing the above definition it is found that:-
    • Every movable property is a goods
    • Stocks and shares are goods
    • Growing crops and grass are goods because they can be severed from land and can be sold and purchased
    • Any other type of tangible or non-tangible assets like goodwill, trademarks, copyrights etc.
    • Actionable claims are not goods because such a claim can only be enforced by action in a Court of Law. E.g. debt due from one person to another is an actionable claim, and cannot be the subject-matter of contract of sale.
    • Money is not a good as money means current money and not old coins or paper money which can be sold or purchased for collection purposes


Actionable claim means that the person has a right to recover a thing by suit but does not have the enjoyment of the thing. Actionable claim has been explained in Sec 3 of transfer of property act 1882. Actionable claim means:
  • Any unsecured debt
  • Any beneficial interest in moveable property not in the possession of the person claiming it.
A claim for the arrears in rent or a claim in respect of salary or a claim on insurance are examples of actionable claims. Such actionable claims can be transferred by an assignment under the transfer of property act 1882.



B owes ₹ 50,000 to A. A sells this debt to C for ₹ 45,000. this is an unsecured debt and it can be assigned and not sold.

  • There must be some price for the goods: Price is the value of the goods expressed in monetary terms. Price is the consideration in a contract of sale, which is to be paid or promised to be paid in future, in terms of money sec 2(10). If a person has promised to give only the goods to another in return of some other goods, then, this exchange will be called as ‘barter’ and not a sale.
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  • The property in the goods must be transferred to the buyer: The term ‘property’ in the goods means the ownership of the goods. In every contract of sale, the ownership of the goods must be transferred by the seller to the buyer, or there should be an agreement by the seller to transfer the ownership to the buyer in future.
    The main purpose of contract of sale is to make the buyer the owner of goods. There must be a transfer of general property in the goods and not special property.
    If X owns certain goods, he has general property. But if he holds certain goods, which is pledged with him then he holds special property.

X is the owner of a type- writer. He entrusts his type-writer to Y for the purpose of repairs. Here X has the general property in the goods, and Y has special property in the goods (i.e. interest in the goods to the extent of the repair charges). This is a contract of bailment and not of sale of goods.

  • It may be expressed or implied: The contract of sale may be either expressed or implied. An express contract of sale may be written or oral.

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