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CA Foundation · Business Laws · The Sale of Goods Act, 1930

Under a written contract, Naveen Mills agrees to sell to Omkar 500 metres of fabric for Rs 300 per metre, payment in full and delivery to follow within a month. The fabric is ready in Naveen's warehouse and is identified for Omkar. Naveen and Omkar also agree that property will pass only when Omkar pays the full price. Which statement is correct?

It is an agreement to sell until Omkar pays in full. The parties made the transfer of property conditional on payment, so the contract is executory. When the condition is fulfilled, the agreement becomes a sale and ownership passes to Omkar.

  1. AIt is a sale now, because the goods are existing and the price is fixed
  2. BIt is an agreement to sell until Omkar pays, because property is to pass on a conditionCorrect
  3. CIt is a sale now, because the contract is in writing
  4. DIt is void, because the transfer of property is made conditional

Explanation

Where the transfer of property is subject to a condition to be fulfilled later, the contract is an agreement to sell. It becomes a sale when the condition, payment of the full price, is fulfilled. Option A is wrong because existing goods and a fixed price do not override the parties' agreed condition on passing of property.

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