Indian Contract Law and Sale of Goods Act Provisions

Posted on Feb 13, 2026 in Law & Jurisprudence

This section covers the termination and enforcement aspects of contracts under the Indian Contract Act, 1872.

Termination and Enforcement of Contracts

Void Agreements Under Section 2(g)

🚫 Void Agreement (Section 2(g))

A Void Agreement is defined by Section 2(g) as:

“An agreement not enforceable by law is said to be void.”

This is distinct from a Void Contract (which was valid initially but later became void). A Void Agreement is void ab initio (from the very beginning) because it lacks one or more essential elements of a valid contract.

Categories of Void Agreements

The Indian Contract Act expressly declares certain agreements to be void:

• Agreements by Incompetent Parties: Agreements with a minor or a person of unsound mind (Sec. 11).
• Agreements with Unlawful Consideration/Object: (Sec. 23).
• Agreements Made Under Bilateral Mistake of Fact: (Sec. 20).
• Agreements Without Consideration: (Sec. 25), with some exceptions (like agreements based on natural love and affection).
• Agreements in Restraint of Marriage: (Sec. 26).
• Agreements in Restraint of Trade: (Sec. 27).
• Agreements in Restraint of Legal Proceedings: (Sec. 28).
• Agreements with Uncertain Meaning: (Sec. 29).
• Wagering Agreements: (Sec. 30).
• Agreements to do Impossible Acts: (Sec. 56) (Initial Impossibility).

Void Agreement vs. Voidable Contract

• Void Agreement (Sec. 2(g)): Never creates a legal obligation. It is void from the start.
• Voidable Contract (Sec. 2(i)): Initially valid, but can be set aside (rescinded) by the aggrieved party (e.g., due to coercion or fraud).

Performance of Contractual Obligations

🔨 Performance of Contract

Performance refers to the fulfillment of the contractual obligations by the parties involved.

Duty to Perform and Execution

Duty to Perform (Section 37): The parties to a contract must either perform, or offer to perform, their respective promises, unless such performance is dispensed with or excused under the provisions of the Act.

• Actual Performance: This occurs when a party completes its obligation exactly as per the terms of the contract. Once both parties have actually performed, the contract is discharged.
• Attempted Performance (Tender): When a promisor offers to perform their obligation, but the promisee refuses to accept the performance, it is called attempted performance or tender.
  • Effect of Valid Tender: If the tender is valid (unconditional, made at the proper time and place, and the whole quantity of goods/services is offered), the promisor is discharged from their obligation and can sue the other party for breach.

Who Must Perform (Section 40):

• Promisor Himself: If the contract involves personal skill, taste, or confidence (e.g., a painter or musician), the promisor must perform it personally.
• Agent or Representative: In most other cases, the promisor or their representative may employ a competent person (agent) to perform the promise.

Discharge of Contractual Relationships

🛑 Discharge of Contract

Discharge of contract means the termination of the contractual relationship between the parties. The rights and obligations under the contract come to an end.

Modes of Discharge

Remedies for Breach of Contract

💰 When a contract is broken (breached), the injured party is entitled to seek one or more remedies from the court against the defaulting party.

The Sale of Goods Act, 1930

The Sale of Goods Act, 1930 (SOGA), governs all contracts where the seller transfers or agrees to transfer the property (ownership) in goods to the buyer for a price. The formation of a contract of sale is covered primarily by Section 4 and Section 5 of the Act.

Essentials of a Contract of Sale

📝 Section 4(1) defines a contract of sale:

“A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price.”

The core essentials for the formation of a valid contract of sale are:

1. Two Parties (Bilateral Contract): There must be a Seller and a Buyer. A person cannot buy their own goods.
2. Goods as Subject Matter: Subject matter must be ‘Goods’ as defined in Section 2(7) (movable property other than actionable claims and money).
3. Transfer of Property (Ownership): The purpose must be the transfer of ownership, not just possession.
4. Price (Monetary Consideration): The transfer must be for a price. Pure barter is not a contract of sale under this Act.
5. All Essentials of a Valid Contract: Must satisfy general requirements like free consent, competency, and lawful object.

Sale vs. Agreement to Sell

⚖️ The definition in Section 4(1) differentiates transactions by the time of ownership transfer:

Conversion: An agreement to sell becomes a Sale when the time elapses or the conditions are fulfilled (Section 4(4)).

Formalities of the Contract of Sale

📄 Section 5 outlines the flexibility of contract formation:

• Offer and Acceptance: Made by an offer to buy or sell for a price and the acceptance of such offer.
• Manner of Contract: May be in writing, oral, partly both, or implied from conduct.
• Terms: May provide for immediate delivery, immediate payment, or postponement of either.

Accounting Classifications of Goods

Goods in accounting refer to tangible articles purchased by a business for resale or production of finished products, tracked through specific accounts to reflect inventory movements and profitability. [1]

Types of Goods Accounts

Purchase Account debits all goods incoming via purchases, recording credit or cash buys. Sales Account credits goods outgoing on sales, capturing revenue from disposals. [1]

Purchases Return Account credits returns to suppliers (outward), while Sales Return Account debits customer returns (inward). [1]

Broader Classifications

Goods divide into tangible (physical items like machinery or apparel) and intangible (non-physical like software). Consumer goods serve personal end-use, such as groceries, whereas capital or industrial goods support production, like factory equipment. [2][5][8]