Key Takeaways

  • The performance of contract of sale requires three essential acts: delivery by the seller, acceptance by the buyer, and payment by the buyer.
  • Delivery can be actual, symbolic, or constructive, depending on the circumstances.
  • Both seller and buyer have reciprocal duties, including timely delivery, lawful transfer of title, and timely acceptance/payment.
  • Performance may be actual (completed as agreed) or attempted/tendered (offered in good faith but refused by the other party).
  • Special rules apply to the time and place of performance, installment deliveries, and consequences of late or defective performance.
  • Failure to perform may result in remedies such as damages, rejection of goods, or cancellation of the contract.

Performance of the contract of sale automatically comes into play any time the ownership of goods or products transfers from one person or legal entity to another in the form of a sale.

Performance of Sale of Goods Contract

A sale of goods contract is automatically created whenever a good or product is sold. The resulting contract imposes the duties that are required of both parties involved:

  • The seller.
  • The buyer.

If either of the involved parties fails in carrying out his or her respective duties under the contract's terms, the resulting consequences can have adverse effects. When it comes to performing a sale of goods contract, there are three general dimensions. These dimensions are outlined in the Sale of Goods Act of 1983, specifically in section 27, which states it is the seller's duty to deliver the purchased goods and it is the buyer's duty to pay for and accept them. These duties are in accordance with the contract of sale that comes into play when the transaction begins.

Simply put, the three dimensions of performing a sale of goods contract are as follows:

  • The seller delivers the goods.
  • The buyer accepts the goods.
  • The buyer pays for the goods.

Note that these elements do not need to happen in any particular order. They each deserve further individual consideration in their own right. In the event the claim is made that a sale of goods contract has been performed, it doesn't matter in what order these three events have occurred. It only matters that they have all three, in fact, taken place. In other words, to make a valid claim that a sale of goods contract has been performed:

  • The seller must have delivered the goods to the buyer.
  • The buyer must have accepted the delivered goods from the seller.
  • The buyer must have paid the seller for the delivered goods.

If one or more of these events has not occurred, a sale of goods contract has not been performed. These requirements can be seen in written law by referring back to section 27 in the Sale of Goods Act of 1983 that states the seller is required to deliver the goods in question and the buyer is required to pay for and accept those goods.

Again, however, the law does not have a specific requirement regarding the order in which these criteria are met. A typical sale will play out in order as follows:

  • Delivery.
  • Acceptance.
  • Payment.

If the sale plays out in a different order, though, the only thing that matters from a legal standpoint is that all three requirements are met.

Duties of the Seller and Buyer

For the performance of contract of sale to be valid, both parties must fulfill their legal obligations.

Seller’s duties include:

  • Delivering goods of the right quality, quantity, and description.
  • Ensuring goods are free from defects and conform to implied conditions or warranties.
  • Transferring ownership/title in accordance with the agreement.
  • Delivering goods at the agreed time and place, or within a reasonable period if not specified.

Buyer’s duties include:

  • Accepting delivery of goods once they meet contractual terms.
  • Paying the purchase price on delivery or according to the contract terms.
  • Taking reasonable steps to take possession, especially when delivery is made to a third party or carrier.

Delivery of Goods

Delivery of goods happens when one person or legal entity voluntarily transfers the possession of goods to another. There are no specific requirements surrounding how to determine when delivery of goods has occurred. Instead, it is left up to the involved parties to agree on what will be considered as delivery. By default, delivery results in the goods ending up in the possession of the buyer or some other person or entity who the buyer authorizes to receive the goods on his or her behalf.

Actual delivery refers to the act of physically transferring the goods from the seller's possession to the buyer's. Alternatively, an agent acting on behalf of the seller can make this delivery to an agent acting on behalf of the buyer. When goods are large or bulky, it's not uncommon for the seller to provide what is known as "symbolic delivery." For instance, if a large amount of lumber is sitting in a warehouse, delivering a key to that warehouse has the same effect as physically delivering the lumber.

However, the key must provide the buyer with total access to the goods he or she has purchased. Say, for example, the delivered key provides access to the specific section of the warehouse where the lumber is located, but the buyer is unable to get into the warehouse itself. Then, a valid delivery has not occurred.

There is a third type of delivery that may come into play without making any changes to actual or visible possession of the goods in question. Say, for instance, the goods involved in the sale are possessed by a third party. If that third party acknowledges they are now holding goods on behalf of the buyer and not the seller, a "constructive delivery" has occurred.

Time and Place of Performance

The time of performance is critical in contracts of sale. If the agreement specifies a delivery date or payment deadline, the parties must comply strictly unless otherwise agreed. Where no time is stated, performance must occur within a reasonable period, judged by the nature of the goods and trade practice.

The place of performance is typically the seller’s place of business unless specified otherwise. For bulky goods, delivery may occur at the location of the goods. When goods are shipped, performance may be tied to delivery to a carrier.

Types of Performance

Performance of contract of sale can take different forms:

  • Actual performance: When the seller delivers goods as promised and the buyer accepts and pays.
  • Attempted (or tender) performance: When one party offers to perform their part, but the other party wrongfully refuses to accept it. A valid tender is treated as equivalent to performance under the law.

For instance, if a seller tenders delivery of conforming goods but the buyer refuses them, the seller has discharged their duty and may pursue remedies for breach.

Consequences of Non-Performance

Failure to perform obligations under a contract of sale has legal consequences:

  • For the seller’s failure: The buyer may reject goods, sue for damages, or seek specific performance where appropriate.
  • For the buyer’s failure: The seller may sue for the price, claim damages for non-acceptance, or resell the goods after giving notice.
  • Partial or defective performance: If goods delivered do not conform to the contract, the buyer may reject them or accept at a reduced price depending on the circumstances.

Courts generally enforce remedies that restore the injured party to the position they would have been in had the contract been properly performed.

Frequently Asked Questions

  1. What is meant by performance of contract of sale?
    It refers to fulfilling obligations under a sale agreement—delivery of goods by the seller, acceptance by the buyer, and payment of price.
  2. What happens if a buyer refuses to accept delivery?
    If the goods conform to the contract, the buyer’s refusal counts as breach. The seller may claim damages or resell the goods.
  3. Is time always essential in a contract of sale?
    Not always. Time is essential when expressly stated or implied by trade usage. Otherwise, performance must occur within a reasonable time.
  4. What is the difference between actual and tender of performance?
    Actual performance means the contract is fully executed. Tender (or attempted performance) is when a party offers to perform but the other party refuses to accept.
  5. Can defective goods still count as performance?
    No. Delivery of goods that fail to match agreed quality, description, or quantity generally constitutes non-performance, giving the buyer rights to reject or claim damages.

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