5 Essential elements of a Valid Sale or a Contract of Sale

Essential elements of a valid sale or a contract of sale

The following are some of the essential elements of a valid sale or a contract of sale.

Essential elements of Valid Sale or Contract of Sale

Essential elements of Valid Sale or Contract of Sale

1. Essential Elements of a Valid Contract

All the requirements of a valid contract such as free consent, consideration, competency of the parties, lawful object and consideration must be fulfilled. If any of the essential elements of a valid contract is absent, then the contract of sale will not be valid.

For e.g., A agreed to sell an almirah to B without any consideration. Such a contract of sale is not valid because it is made without consideration.

2. Two Parties

Another essential element of a contract of sale is that there must be two parties to the contract of sale viz., seller and buyer.

In a contract of sale, the ownership of goods has to pass from one person to another. Hence the seller and the buyer must be different persons because one person cannot be both the buyer and the seller.

But there are certain exceptions to this – where a person’s goods are sold under an execution of decree he may purchase his own goods.

For e.g., A and B were partners. After some years, the firm was dissolved. On the dissolution, some goods were divided among all the partners. Such a distribution of goods among the partners was not a sale.

3. Goods

There must be some goods as a subject-matter. Goods must be one which is defined as goods in . As per the definition given in Sec. 2(7) of the Act, goods means every kind of movable property and it includes

  1. stock and share,
  2. growing crops, grass,
  3. the things attached to or forming a part of the land which can be severed from the land.

For e.g., A agreed to sell to B, wheat crops which is grown in his field. A and B agreed that B may cut the crop and take it away upon the payment of the price. As the growing crop is included in the term “goods”, this is a valid contract of sale.

4. Transfer of Ownership

In a contract of sale, ownership over goods has to be transferred to the buyer by the seller or there should be an agreement to transfer the ownership by the seller to the buyer.

The property in the goods means “all ownership rights” of the goods. In a contract of sale, all the ownership rights of the goods must be transferred by the seller to the buyer. However, the physical delivery of the goods is not required.

For e.g., A agreed to buy a new two wheeler from B an agent for Rs.25,000. A paid the price and got the two wheeler registered in his name and the registration book was delivered by B to A. This is a valid contract of sale because the ownership of the two wheeler has been transferred to A.

5. Price

Another essential element of a contract of sale is that there must be some price for the goods. That means, the goods must be sold for some price. According to Sec. 2(10) of the Sale of Goods Act, the term price means “the money consideration for a sale of goods“.

Thus the price is the consideration for contract of sale which should be in terms of money. If the ownership of the goods is transferred for any consideration other than the money, that will not be a sale but an exchange. However, consideration can be paid partly in money and partly in goods.

For e.g., A delivered to B 10 cows valued at Rs.2,000 per cow. B delivered to A 20 bags of rice at Rs.750 per bag and paid the balance of Rs.5,000 in cash in exchange of the cows. This is a valid contract of sale.


Leave a Reply

Recent Posts


Related pages

advantages and disadvantages of credit salesimportance of sole proprietorshipcharacteristics of socialist economic systemisi standardsplant layout pptdisadvantages and advantages of mixed economyfeatures of marginal costingdisadvantages of open office layoutcooperative company advantages and disadvantageswhat is the difference between a bond and a debenturesalient features of mixed economydisadvantages of franchisordefine reengineeringdu pont ratiosjoint hindu family business advantages and disadvantagesmbo managementsimilarities between management accounting and cost accountingamalgamate definemeaning of eximdefinition of voidable contractdefinition of inventory turnover ratioprecie writingfutures vs forward contractsnonperforming assetstamil nadu small scale industriesidbi share rateaccount receivable days outstandingdefinition of capital budgeting in financial managementinsurance peril definitioncrisil head officerate of inventory turnover formuladiscount factor calculation formuladefine the term bankerwhat is meant by eoqdefine chequesinventories turnover perioddefinition of attornmentcost variance calculationexample of exemplary damagesdefine endorserintra vires definitionmeaning of alphanumericwhat is valid contract with examplehow to calculate accounts payable turnovercluster sampling methodprobability sampling methods advantages and disadvantagesabsorption income statementrole of reinsurancedischarge of a contract by frustrationflexible budget definitionstock market futures definitionfund flow analysis in financial managementfigurehead role of managercharacteristics of caste systemadvantages and disadvantages of world bankhow to calculate the inventory turnoverdifference between fire insurance and marine insuranceadvantages and disadvantages of advertisementsjus in personam5 elements of a valid contractoverhead absorption costingcaveat definition legalrbi functiontqm process approachcharles babbage theory of managementdisadvantages of collusionbudgetary controlsrbi meansaccidental sampling techniquewhat is the meaning of performaprocess of securitization with exampleobjectives of deficit financingsebi guidelines for secondary marketresource allocator roleallotment of shares meaningbreach meaning in hindisole trading concern