In general terms, A contract of sale is a legally enforceable agreement between a buyer and seller involving the transfer or future transfer of ownership of goods for a monetary price.

Section 4(1) of the Sale of Goods Act, 1930, defines a "contract of sale of goods" as: "A contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price."

This definition highlights several essential elements:

1. Two Parties: There must be a seller and a buyer. A person cannot sell goods to themselves.

o Seller [Section 2(13)]: A person who sells or agrees to sell goods.

o Buyer [Section 2(1)]: A person who buys or agrees to buy goods.

o Illustration: A agrees to sell his car to B for ₹5,00,000. Here, A is the seller and B is the buyer.

2. Goods [Section 2(7)]: The subject matter of the contract must be goods.

o Explanation:

• Movable Property: This is the core. Immovable property is covered by the Transfer of Property Act, 1882.

• Exclusions:

• • Actionable Claims: These are claims that can only be enforced by a legal action or suit, e.g., a debt. They are not considered goods.
• • Money: Current legal tender is not goods. However, old or rare coins, if bought for their numismatic value, can be considered goods.

• Inclusions: Stock, shares, growing crops, grass, and things attached to land (like timber) are goods if they are agreed to be severed before sale or under the contract of sale.

3. Transfer of Property [Section 2(11)]: This refers to the ownership or "general property" in goods, not merely a "special property" (like possession).

o In a contract of sale, the seller either transfers the ownership immediately (a sale) or agrees to transfer it at a future time or upon fulfillment of certain conditions (an agreement to sell).

4. Price [Section 2(10)]: The consideration for the sale of goods must be a money consideration.

o Explanation: If goods are exchanged for other goods, it's a "barter," not a sale. If goods are given as a gift, there's no price.

o How Price May Be Fixed (Section 9):

• • By the contract itself.
• • By the course of dealing between the parties.
• • To be determined in some agreed manner.
• • By a third-party valuation (and if they fail to fix it, the agreement is voidable, unless goods are delivered and appropriated, then a reasonable price is payable).

Furthermore, The Contract of sale must be between two parties i.e., one seller and the other buyer. Therefore, a ‘Contract of Sale’ can be either Absolute or Conditional under Section 4(2).

Absolute Contract of Sale: Where the property is actually sold to the buyer and transferred completely, then it is considered as an Absolute.

Conditional Contract of Sale: in case, where the parties annex conditions to the contract, it is referred as Conditional.Hence, both situations can be either subsequent or preceding. As, when the sale is about to be completed subject to fulfilment of a specific condition, this specific condition is referred as “Condition precedent”.

Sale and Agreement to Sell:

Under Section 4(3) Contract of sale of Goods defines about both ‘Sale’ and ‘Agreement to Sell’.

‘Sale’ Ownership in the goods is transferred by the seller to the buyer immediately at the time of contract. Whereas ‘Agreement to sell’ The transfer of ownership in goods is to take place, at a future time or subject to fulfillment of some condition.

• Conversion of Agreement to Sell into Sale [Section 4(4)]: An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred.

• Illustration for Sale vs. Agreement to Sell:

• o Sale: A buy’s a book from a bookstore, pays cash, and takes the book. The ownership transfers immediately. If the book is damaged after purchase, the loss is A's.
• o Agreement to Sell: A agrees to buy a custom-made suit from a tailor, delivery in one month. The ownership will transfer only upon completion and delivery. If the tailor shop burns down with the incomplete suit, the loss is the tailors.