In Indian law, particularly under the Sale of Goods Act, 1930, the terms “sale” and “agreement to sell” are distinct legal concepts, and the word “sell” is the verb form that describes the action of making a sale. The key distinction lies in the timing of the transfer of ownership (or “property in goods”).
Here is a breakdown of the distinction:
1. Sale
Definition: A “sale” is a completed transaction where the ownership of goods is immediately transferred from the seller to the buyer. It is an executed contract, meaning all obligations have been performed by both parties.
Legal Status: Under Section 4 of the Sale of Goods Act, 1930, when the property in the goods is transferred from the seller to the buyer, the contract is a sale.
Transfer of Property: Ownership passes instantly at the time the contract is made, even if the goods have not been physically delivered or the price has not been fully paid.
Risk: The risk of loss or damage to the goods passes to the buyer as soon as the sale is made, regardless of who has possession of the goods. This is based on the principle of Res perit domino (the loss falls on the owner).
Remedies for Breach: If the buyer defaults on payment, the seller can sue the buyer for the price of the goods, not just for damages. If the seller defaults after a sale, the buyer can sue for the delivery of the goods themselves (specific performance).
Insolvency: If the buyer becomes insolvent, the seller has to deliver the goods to the official receiver or assignee. The seller can only claim a proportionate dividend for the unpaid price. If the seller becomes insolvent, the buyer can recover the goods from the seller’s assets.
2. Agreement to Sell
Definition: An “agreement to sell” is a contract where the transfer of ownership of the goods is to take place at a future time or upon the fulfillment of certain conditions. It is an executory contract, as some obligations are yet to be performed.
Legal Status: Under Section 4 of the Sale of Goods Act, 1930, an agreement is an “agreement to sell” when the transfer of ownership is conditional on a future event.
Transfer of Property: Ownership of the goods remains with the seller until the specified time has elapsed or the conditions have been fulfilled.
Risk: The risk of loss or damage to the goods remains with the seller. If the goods are destroyed, the loss falls on the seller, as they are still the owner.
Remedies for Breach: If the buyer defaults, the seller can only sue for damages for the breach of contract, not for the price of the goods. The seller can resell the goods to a third party. If the seller defaults, the buyer can only sue for damages, not for specific performance (delivery of the goods).
Insolvency: If the buyer becomes insolvent, the seller can refuse to sell the goods. If the seller becomes insolvent, the buyer can only claim a proportionate dividend for any money already paid, as they do not have a claim to the goods.
3. “Sell” as a Verb
The word “sell” is the verb that describes the action of making a sale. In a legal context, when a person “sells” something, they are completing a sale transaction. The verb form is used to describe the act of transferring ownership for a price, whereas the noun “sale” refers to the completed transaction or the contract itself.
