This research paper deals with the Contingent Sale of Goods Contract. It
discusses the nature of this type of contract and also critically analyzes the
issue and the regulatory gaps involved. It discusses the existing laws with
respect to the topic of contingent sale of goods contracts.
The regulatory gaps
are examined and the future prospects of this category of the contract have been
discussed. Contingent sale of goods contract deals with a situation of
contingent conditions that are required to be fulfilled before the sale of goods
actually takes place. It is an agreement to sell.
Nature And Scope
The contract of contingent sale of goods involves a contingency clause which has
to be fulfilled before the actual sale of goods takes place and the goods are
delivered to the buyer. Suppose there is a seller A who has an orange orchard
and he enters into a contract with person B to sell two hundred kilograms of
oranges to him, provided this given amount of oranges are grown in the orchard
and are ready to be sold on a specified date, this is a contingent contract as
it is dependent on the contingency clause that the oranges are grown and fit to
be sold on the date specified. This is a situation that may or may not happen.
There can be a situation when the trees do not produce enough oranges, or they
have been destroyed by a storm or a natural disaster, or maybe they are stolen.
Therefore, the oranges will only be sold to B when the contingency clause has
been fulfilled i.e. the oranges are grown in the orchard. Now, whether the
oranges are grown or not is an uncertain event that may or may not happen. So,
when the seller is dependent on a contingency regarding the goods that are to be
sold, then this type of contract becomes a contingent sale of goods contract.
Section 6(2) of the Sale of Goods Act, 1930 relates to the contingent sale of
goods contract. It says that it may happen that the seller is dependent on a
contingency that is uncertain. The goods involved in this type of contract are
called contingent goods. This type of contract is also an agreement to sell
under Section 4(3) of the same act. An agreement to sell is an agreement wherein
the transfer of the goods is dependent on some condition or a contingency in the
future. The delivery will only take place after the condition has been
fulfilled. The sale will be initiated when the contingent event has taken place.
Section 31 to 36 of the Indian Contract Act, 1872 deal with contingent
The definition of these types of contracts is given under Section 31
of the Act as:
A contract to do or not to do something, if some event, collateral to such
contract, does or does not happen
In the case of Bashir Ahmed & Ors. V Govt. of Andhra Pradesh
, the respondent
had purchased a book for starting a medical company. Only a part payment was
made in this respect. The company could not be started. This was not held to be
a contingent contract but an absolute one.
Non-happening of an Event
The Sale of Goods Act, 1930 provides for contingent contracts under Section 6(2)
of the Act. Thus, it is subject to those conditions and these conditions have to
be fulfilled before the seller delivers the goods. However, the Act does not
mention anything about the case of non-happening of an event, what if the
conditions are not fulfilled and the buyer has already paid some amount with
respect to the price of the goods. In this case, there would be no remedy for
the buyer as the contract would be of no value if the condition has not been
fulfilled. The above scenario is very much possible as the contract is subject
to a contingency which may or may not happen.
Right to Re-sell
Suppose a seller who is under an agreement to sell certain goods to a buyer
sells the goods to some other person other than the original buyer, in this
case, the subsequent buyer will have a good title and the original buyer can
only sue the seller for damages under Section 57. This is a regulatory gap as to
what if the original buyer was in urgent need for those goods and because of the
default of the seller, he could not have them on time.
Proper Care from the Seller
There is no provision to ensure proper and due care on the side of the seller.
For eg- if A and B enter into a contract according to which if C sells his farm
to A then A will sell 100 kgs of wheat from that farm to B. Now the happening of
the sale of wheat depends upon the sale of farms from C to A.
Thus, it is a
contingent contract. Now, if the required condition is fulfilled i.e. C sold his
farm to A but before he could give the produce to B, it got affected by the
disease due to which the crops were destroyed and could not sell the wheat to B.
In this case, even though the required condition was fulfilled the happening of
the event became impossible making the contract void. But there is no provision
to check or at least take into consideration whether the seller (A) took proper
care in ensuring that the crops don't catch diseases.
In case of a contingent sale of goods contract becoming void even after the
fulfillment of the condition due to the neglect of the seller the information of
which is being found quite some time after the contract was declared void, there
is no provision that specifies the time period up to which the buyer can sue the
seller in case of negligence from his side.
Impact Of The Regulatory Gaps And Future Prospects
The first regulatory gap deals with the non-happening of an event. If the buyer
pays a certain amount and the contingency does not take place, the buyer would
face a loss as the specific remedy has not been mentioned in the Act. There
should be a provision providing for this sort of uncertainty as this type of a
contract is uncertain which may or may not take place.
According to Section 32
of the Indian Contract Act, the contracts that are contingent on an event that
will happen in the future cannot be enforced until that event takes place. If in
case, the event has become impossible, the contract will be considered as void.
In the case of Jethalal C. Thakkar v R.N. Kapoor
, there was a contract to buy
shares of a bank only when the bank is converted into a financial enterprise.
This is contingent depending upon the condition of conversion into a financial
corporation, the contract can only be enforced when the contingency has been
fulfilled. In the case of Pym v Campbell
, there was a contingent contract to
buy the benefits of an invention only when it is approved by the engineer.
However, the contingency did not take place and hence the contract was void.
The second grey area deals with the right to re-sell. The Act gives the seller
the right to re-sell even when he contracted with another buyer. There was an
agreement to sell on his part, however, he transfers the title to a subsequent
buyer. Although, he can be sued for damages but what if the original buyer was
in urgent need of those goods and it is impossible for him to get them from
somewhere else in a short amount of time.
The third one is the proper care from the seller. There should be some
provisions under which the buyer has the right to check whether proper care is
being taken by the seller and he should be provided with the right to sue the
seller on the grounds of negligence in case of contingent sale of goods
Also, there should be provisions in the Sale of Goods Act specifying the time
period in which one party can sue the other party for negligence after the end
of the contract dealing with contingent goods.
Conclusion And Suggestion
The contingent sale of goods act is an agreement to sell. It is given under
Section 6 (2) of the Sale of Goods Act, 1930. Section 4(3) provides for
agreement to sell. The contingent contracts have also been provided under
Section 31-36 of the Indian Contract Act, 1872.
The regulatory gaps that have
been identified are-what if the happening of the event on which the contract is
dependent does not happen, then the buyer and seller can sue for damages only in
case of non-acceptance or non-delivery including re-selling of goods, the urgent
need has not been taken into consideration. Then, there is no provision that
provides for proper care of the goods from the seller and the time
specifications to sue in case of negligence from the seller's side. These
provisions should be provided for the smooth functioning of the contingent sale
of goods contracts.
- Section 31 of the Indian Contract Act, 1872.
- AIR 1970 SC 1089
- AIR 1956 Bom 74.
- (1856) 6 El&Bl 370, 119 ER 903
- Shambhavi Tripathi (3rd Year BBA-LLB]
- Muskaan Dalal (3rd Year BBA-LLB)