Agreement to sell and Hire Purchase Agreement Distinguished

1) Contract of sale includes both sale and agreement to sell. Hire purchase agreement is bailment plus agreement to sell.
2) Agreement to sell is a step, to the contract of sale. Hire purchase agreement becomes a sale only after the payment made in full.
3) In an agreement to sell conveyance of goods may take place subsequently. In a hire purchase agreement conveyance is immediately transferred while ownership remains with the seller.
4) In an agreement to sell, the buyer can sell or pledge the goods but in a hire purchase agreement, the buyer cannot exercise any ownership rights on the goods and, therefore, he cannot sell or pledge these goods.
5) In an agreement to sell the buyer can take advantage of implied conditions and warranties under the Act. In a hire purchase agreement the hirer cannot so claim the benefits if implied conditions and warranties unless it becomes a sale.
6) Agreement to sell is regulated by Sale of Goods Act 1930 while hire purchase is regulated by Hire Purchase act 1972.

Subject Matter of Contract: (Sec 6)

Section 6 provides that the goods which form the subject of a contract of sale, may be either:

1) existing goods owned or possessed by the seller, or
2) Future goods

There may be a contract for the sale of goods the acquisition of which by the seller depends upon a contingency which may or may not happen. If a condition is to be complied with before the seller comes, into the possession of the goods, then the contract of, sale off goods is performed only when the condition happens. For example if A agrees to sell the goods to B, if certain ship arrives with the particular goods contracted to be sold, then A will be liable to deliver goods only when the particular ship arrives with the goods contracted into be sold.

Where by a contract of sale the seller purports to affect a present sale of future goods, the contract operates as an agreement to sell. Future goods are goods which have to come into existence. A contract to sell or assign the future goods is an agreement to sell. It creates only a personal obligation at law.

Goods Perishing – Effect of Destruction of Goods (Sec 7 & 8)

In a contract for sale of specific goods, goods may perish before sale is gone through. Such a contingency may arise in any of the following two stages:

Goods perishing before making of contract: (Sec 7) Where there is a contract for the sale of specific goods, the contract is void if the goods without the knowledge of the seller have, at the time when the contract is made, perished or become so damaged as no longer to answer to their description in the contract.

In order the contract may be void the following conditions should be complied with

1) The goods must be specified goods. This section does not apply too unascertained goods.
2) The goods must have perished or so damaged as no longer to answer to their description in the contract.
3) The goods must have been so perished or damaged without the knowledge of the seller.
4) The goods must have been so perished or damaged before the making of the contract. If the goods are damaged but they answer to the description, the contract is valid and the buyer must pay the price.

Goods perishing before sale but after agreement to sell: (Sec 8) Where there is an agreement to sell specific goods, and subsequently the goods without any fault on the part of the seller or buyer perish or become so damaged as no longer to answer to their description in the agreement before the risk passes to the buyer, the agreement is thereby avoided.

Goods may perish before sale (for example, before the property in the goods has passed to the buyer), but after agreement to sell. Under section 8, the agreement is avoided, whereas under section 7 the contract is void. The contract can be avoided on the ground of impossibility of performance. In order that an agreement can be avoided the following essentials must be present:

1) the goods must be specified goods
2) the goods must have perished or become so damaged as no longer to answer to their description in the agreement before the property or risk passes to the buyer.
3) The goods must so perish or be damaged without any fault on the part of the seller or the buyer.

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