DEPARTMENT OF LAW

BAHRIA UNIVERSITY ISLAMABAD

SIMILAR CONTRACTS WITH SALES OF GOODS

Submitted To: Mr. Adnan Khan

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Submitted By: Adam Khan (01-177181-055)

Fareeha Jamil (01-177181-010)

Due Date: Dec 9, 2019

Table of Contents
1. INTRODUCTION
2. SIMILAR CONTRACTS
a. Contract of Barter or Exchange
b. Contract of Hire Purchase
c. Contract of Supply of services
d. Contract of Loan on Security of goods
e. Contracts of Agency
f. Contract of currency transactions
3. CONTRACT OF EXCHANGE OR BARTER
3.1 PAYEMENT TERMS
3.2 REMEDIES
4. CONTRACT OF HIRE PURCHASE
4.1 TERMINATION OF HIRE-PURCHASE AGREEMENT
i. In terms of the agreement
ii. By performance
iii. By renewal
iv. Notice by either party
v. By acceptance of repudiation by other party
vi. By release
vii. By frustration
viii. By efflux of time
4.2. REMEDIES IN CASE OF BREACH
5. CONTRACT OF SUPPLIES OF SERVICES
5.1. CERTAIN STANDARDS APPLY TO EVERY CONTRACT OF SUPPLY OF SERVICES
i. The service must be carried out with reasonable care and skill.
ii. Information said or written to the consumer is binding where the consumer relies on it.
iii. The cost of the service must be reasonable.
iv. The service must be carried out within a reasonable time.

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 5.2. REMEDIES IN CASE OF BREACH
6. CONTRACT OF LOAN ON SECURITY OF GOODS
6.1. REMEDIES IN CASE OF BREACH
i. A waiver
ii. A forbearance agreement
iii. An amendment to the loan agreement
iv. An out-of-court restructuring of the defaulted loan
7. CONTRACTS OF AGENCY
7.1. TERMINATION OF THE AGENCY RELATIONSHIP
7.2. REMEDIES OF THE PRINCIPAL
8. CURRENCY TRANSACTIONS
9. CASE LAWS
10. CONCLUSION
11. BIBLOGRAPHY

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 SIMILAR CONTRACTS WITH SALES OF GOODS

1. INTRODUCTION

Sale of commodities constitutes one of the important types of contracts under the law. The Sale

of Goods Act, 1930 which defines and states terms related to the sale of goods and exchange of

commodities.

The Section 4 (1) of the Sale of Goods Act, 1930 states that – ‘A contract of sale of goods is a

contract whereby the seller either transfers or agrees to transfer the property in goods to the buyer

for a decided price.’

In Section 4(4) of the Act, it is maintained that for an agreement of sale to become a sale, the time

has to elapse or the conditions have to be fulfilled subject to which the property in the goods is to be

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is to be transferred. The point here is that a contract for the sale of goods can either be a sale or an

agreement of sale.

2. SIMILAR CONTRACTS

A contract of sale of goods must be distinguished from several other transactions which are

Normally quite different from a sale of goods but which, in particular circumstances, may

closely resemble such a contract.

“Contracts and transactions that resemble Sale of Goods contract but are not a sale of

goods contract.”

a. Contract of Barter or Exchange

b. Contract of Hire Purchase

c. Contract of Supply of services

d. Contract of Loan on Security of goods

e. Contracts of Agency

f. Contract of currency transactions

3. CONTRACTS OF BARTER OR EXCHANGE

In a sale of goods contract or in any sale, there must be a consideration and in the case of sale of

Goods it must meet all the criteria of a contract.  The consideration must be money

consideration.

Barter Exchange is a contract where goods are exchanged for goods or where the consideration is

anything but money.  No money is involved in barter.  It is a valid contact but it is not a Sale of

Goods Contract because it does not entail money.

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To effectuate the barter-like nature of the transaction. These are the payment terms and the

remedies for non-performance.

3.1. PAYMENT TERMS

The payment terms must reflect the intention that a minimum amount of money will actually

change hands. The easiest way for this to come about is for the party who performs first to

extend credit to the other party with an eventual reduction or elimination of the credit through

later performance by the other party. Many other formulas can be imagined which might be

better suited to the particular requirements of the individual transactions. Therefore, the means

by which the payment provisions in the several contracts would be linked together would have to

be a matter of negotiation between the parties.

3.2. REMEDIES

Each of the parties has the right to exercise all of the remedies for breach of contract which

would normally be available for breach of the type of contract in question. Among the remedies

which are normally available when one party fails to perform his obligations under a contract is

that the other party has a right to refuse to perform his obligations under the contract. One

application of this rule is to be found in article 54 of the draft Convention on Contracts for the

International Sale of Goods which provides that the seller of goods may make payment of the

price a condition for handing over the goods or the documents which control the goods.

When the failure to perform involves a more complex obligation than the obligation to pay the

price, it is often difficult to decide whether the failure to perform was sufficiently serious to

justify non-performance by the other party or whether the other party should be required to resort

to other remedies.4 It is particularly difficult when the non-performance has not as yet occurred,

but because of a serious deterioration in that party's ability to perform or in his creditworthiness

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or because of his conduct in preparing to perform or in actually performing the contract there are

good grounds to conclude that he will not perform a substantial part of his obligation.

The problem is even more difficult when the reciprocal obligations are as complex as the

construction of a plant on the one hand, and delivery of goods over a long period of time on the

other. Nevertheless, the parties will often wish to set out the conditions under which the failure to

perform by one party will justify a suspension or termination of the obligation to perform by

the other.

4. CONTRACTS OF HIRE-PURCHASE

A contract of hire-purchase resemble contracts of sale very closely and, indeed, in practically all

cases of hire-purchase the ultimate sale of the goods is (in a popular sense) the real object of the

transaction. A contract of hire-purchase is a bailment of the goods coupled with an option to

purchase them which may or may not be exercised. Only if and when the option is exercised is

there a contract of sale. A contract of Hire Purchase is a bailment of goods coupled with an

option to purchase those goods.  That option may or may not be exercised.  Only after the option

has been exercised does hire purchase become sale of goods contract.  

In a sale of goods contract there is no option to acquire property of goods you have no option of

whether to retain goods or not but in Hire Purchase you have the option to become the owner of

the goods by exercising the option of paying the nominal fee.  You are given possession and

enjoyment of the goods before you finish payment and even before you have expressed your

intentions to own.  The risk in Hire Purchase there is the intention that if the hirer opts to own the

goods, they can become owners but in Sale of Goods there is no option of owning or not owning,

you pay for the goods you own them. Possession is usually after payment.

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The owner of the goods in Hire Purchase undertakes the risk that the seller transfers or agrees to

transfer to the buyer and by virtue of possession of the goods the owner of the goods takes the

risk that the owner may sell the goods to a third person and the only safe area is with durable

goods such as a car where to sell the car again you need to transfer the logbook.

4.1. TERMINATION OF HIRE-PURCHASE AGREEMENT

The hire-purchase agreement can be terminated in any of the following ways:-

i. In terms of the agreement- The hire-purchase agreement stipulates the circumstances in

which the agreement can be terminated.

ii. By performance- The hire-purchase agreement is terminated by performance on the

exercise of the option to purchase the goods by the hirer.

iii. By renewal- The parties to an agreement may enter into a fresh agreement terminating

the hire-purchase agreement, which has not already been terminated.

iv. Notice by either party- The hire-purchase agreement can be terminated by notice given

by either party.

v. By acceptance of repudiation by other party- An agreement is terminated, when a

party to an agreement renounces his future obligations under the agreement or commits a

breach of the agreement.

vi. By release- Where one party to an agreement releases the other party from the

performance of the obligations by him under the agreement, the agreement comes to an

end.

vii. By frustration- When performance of the agreement becomes impossible by reason of

some act or event occurring subsequent to the formation of the agreement.

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viii. By efflux of time- When the hirer is given time to exercise option to purchase the goods

within a stated period and he does not exercise the option within the said period.

4.2. REMEDIES IN CASE OF BREACH

In case of breach of the hire purchase agreement, the owner is entitled to

i. Recover the goods by physical repossession; or

ii. To abandon any claim to the goods and sue for damages.

5. CONTRACTS OF SUPPLY OF SERVICES

Contracts for supply of services are divided into two:

Contracts for Skill and labour

Contracts for labour and material.

A contract in which one party is to manufacture goods and then supply the same as a finished

product. Is it a contract in Sale of Goods or is it a contract for services?

A more general reason, a contract of sale of goods and a contract for services is simply that

provisions of the Sale of Goods Act do not in general apply to contracts for services.  The other

reason concerns the implied duties of the seller or supplier as to the quality and fitness of the

goods or services supplied. If the contract was for the supply of services only then, insofar as the

services themselves were concerned, the supplier’s duties were generally duties of due care only

where in the contract for sale of goods the duties remain, prima facie duties of strict liability, that

is to say the seller is responsible for defects in the goods, even in the absence of negligence.

For supply of services, the measure is reasonable care.  The test in supply of services is due or

reasonable care but in Sale of Goods, goods are of a particular perceivable quality. They are

tangible.  If the substance of the contract is the skill and labour of the supplier, then the contract

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is one for services, whereas if the real substance of the contract is the ultimate result – the goods

to be provided, then the contract is one of sale of goods.

5.1. CERTAIN STANDARDS APPLY TO EVERY CONTRACT OF SUPPLY OF

SERVICES

i. The service must be carried out with reasonable care and skill. This means that the

trader must, as a minimum, work to the same standard as any reasonably competent

person in that trade or profession.

ii. Information said or written to the consumer is binding where the consumer relies on

it. This will include quotations and any promises about timescales or about the results to

be achieved.

iii. The cost of the service must be reasonable. A contract will often specify a price, or it

will be clear about how the price will be calculated (for example, an hourly rate). Where

the price is not agreed beforehand, the price must be reasonable.

iv. The service must be carried out within a reasonable time. Often, a contract will

specify a date or time for the service to be performed or completed. Where there is no

agreement about time, the timescale must nevertheless be reasonable.

5.2. REMEDIES IN CASE OF BREACH

If the trader breaches the contract for the supply of services by failing to meet the standards the

consumer is entitled to repeat performance of the service or to a price reduction.

6. CONTRACT OF LOAN ON SECURITY OF GOODS

This is a transaction that is designed to enable someone ‘A’ who owns some goods to borrow

money from ‘B’ and give possession of those goods to the money-lender.  The goods can only be

reclaimed upon completion of repaying the loan.  This transaction does not mean that the person

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borrowing the money has delivered the goods to the money-lender but only delivers the goods to

the money lender to hold as security.  He has not sold the goods but has only given them to

operate as security.  The understanding is that A will retain possession of the goods and the

borrower will repay the lender capital plus the agreed interest and lastly the borrower will have

the right to take back the goods if he has repaid or paid all the claims by the lender to him.  The

lender has no right at all to resell the goods unless the borrower has defaulted.  A loan on

security is designed to enable someone who already owns goods to borrow money on the

security of the goods.

6.1. REMEDIES IN CASE OF BREACH

Declaring an event of default and pursuing contractual and legal remedies is not the only option

available to lenders faced with a defaulting or troubled borrower. Instead, the parties may

negotiate:

i. A waiver, in which the lenders agree to waive the breach or event giving rise to the event

of default.

ii. A forbearance agreement, in which the lenders agree not to declare an event of default

with respect to the particular default or to exercise any remedies they may have under the

loan agreement for a certain period of time subject to certain conditions (for example, no

other events of default occurring).

iii. An amendment to the loan agreement, in which the lenders and borrower agree to

revise a provision that may no longer be appropriate or accurate because of changing

conditions (whether affecting the borrower specifically and/or the market generally) or to

prevent the borrower from repeatedly breaching the same provision.

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 iv. An out-of-court restructuring of the defaulted loan, in which the borrower and the

lenders typically renegotiate the loan agreement to restructure the terms of the borrower's

debt.

Other remedies that lenders can consider if an event of default exists under a loan agreement are:

 Refusing to make further loans or issue additional letters of credit.

 Accelerating the borrower's loan repayment obligations.

 Requiring the borrower to cash collateralize undrawn and unexpired letters of credit.

 Suspending the borrower's LIBOR interest rate option.

 Charging the borrower default rate interest.

 Exercising rights of set-off against deposits that the lenders hold for the borrower.

 For secured loans, exercising remedies contained in the security agreement or provided for in

the UCC against the collateral.

 Taking legal action against the borrower and any guarantors of the loan, including by

pursuing the borrower through the bankruptcy courts in some cases.

7. CONTRACTS OF AGENCY

Distinction between a Sales of Goods Contract and a contract of agency is a difficult one.  For

example where A asks B a commercial agent, to obtain goods for him from a supplier or from

any other source, and B complies by sending the goods to A, it may well be a fine point whether

this is a contract under which B sells the goods to A, or is a contract under which B acts as A’s

agent to obtain the required goods from other sources.  In an agency contract there may be

privity of contract between the buyer and the agent’s supplier, which will enable action to be

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brought between them.  On the other hand, if it is a sale, there will be no privity between the

buyer and the seller’s own supplier. 

The duties of a commission agent are less stringent than those of a seller and, in the event

of a breach of contract; the measure of damages may also be different.  Thus if a seller

delivers less than he is bound to under the contract, the buyer can reject the whole, but if despite

his best endeavors, a commission agent delivers less than his principal has ordered he has

committed no breach of contract and the principal is bound to accept whatever is

delivered.  Should the commission agent deliver goods of the wrong quality he will only have to

pay as damages the actual loss suffered by the buyer but should a seller be guilty of such a

breach he may have to pay damages for the buyer’s probable loss of profit.  The contract is not a

Sale of Goods.

7.1. TERMINATION OF THE AGENCY RELATIONSHIP

The agency relationship also may be terminated by events that are beyond the control of the

parties (by operation of law). These events include

i. Death of loss of capacity after the formation of the agency relationship of either party.

ii. Changes in business conditions.

iii. Changes in the value of the subject matter of the agency.

iv. Loss of destruction of the subject matter of the agency, or termination of the principal's

interest therein.

v. Legal changes which make the business of the agency illegal.

vi. Bankruptcy of the principal or agent.

vii. Impossibility of the agent performing his/her duties

viii. The agent seriously breaches his/her fiduciary duties

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7.2. REMEDIES OF THE PRINCIPAL

If the agent breaches a duty, either established in the contract or a fiduciary duty described

above, the following remedies may be available to the principal:

i. If the relationship was created by contract, the principal may recover damages fro breach

of contract.

ii. Injunctive relief may be obtained if the agent discloses, or threatens to disclose

confidential information or appropriates (or threatens to appropriate) the property of the

principal.

iii. The agency contract may be rescinded if the agent represents two principals with the

potential for conflicting interests without disclosing relevant facts.

iv. If money or property are retained by the agent when they are due to the principal, the

agent is liable for the full amount of unjust enrichment.

v. Various tort actions also can provide relief, allowing recovery for negligent actions (such

as failing to notify the principal or follow instructions) or misappropriating the principal’s

property (conversion) by theft, transfer, or destruction.

7.3. REMEDIES OF THE AGENT

Generally, the principal's breach of duties is contractual and the remedies available for contract disputes

are available except for specific performance (which might exacerbate the problems in the relationship

between principal and agent).

8. CURRENCY TRANSACTIONS:

This is the type of contract other than sale of goods contract in which money is exchanged for

money.

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EXAMPLE

A goes to B a money exchanger for the exchange of his 50$ into Pakistani rupees so B will

exchange the transaction (Money for money) so there is no such thing as like sale of goods here

there is only exchange of currency here..

9. CASE STUDIES

10. CONCLUSION

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