Subject Matter of the Contract of Sale under Sections 6 to 8 of the Sale of Goods Act, 1930: Existing, Future and Contingent Goods, and the Effect of Specific Goods Perishing Before or After the Contract

Sections 6 to 8 deal with the thing sold. Section 6 says what kinds of goods may be the subject of a contract, and prevents a present sale of goods that do not yet exist. Sections 7 and 8 then deal with a problem that arises only with specific goods: what happens if the very goods identified in the contract are destroyed. The answer depends on timing. If they had already perished when the contract was made, Section 7 makes the contract void. If they perish afterwards but before the risk passes to the buyer, Section 8 avoids an agreement to sell. If they perish after the risk has passed, neither section applies and the loss falls on the buyer.

1. Existing, Future and Contingent Goods: Section 6

Section 6, Sale of Goods Act, 1930

(1) The goods which form the subject of a contract of sale may be either existing goods, owned or possessed by the seller, or future goods.

(2) 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.

(3) Where by a contract of sale the seller purports to effect a present sale of future goods, the contract operates as an agreement to sell the goods.

A sale of existing goods may be an immediate sale, if the goods are specific and the parties so intend, or an agreement to sell, if property is to pass later.
Future goods are goods to be manufactured, produced or acquired by the seller after the contract, under Section 2(6). A contract for them can only be an agreement to sell.
A purported present sale of future goods is not void. Section 6(3) saves it by treating it as an agreement to sell, so that property passes when the goods come into existence and are appropriated to the contract.
Contingent goods are future goods whose acquisition depends on an uncertain event, such as goods expected on a particular ship. If the contingency fails, the seller is not liable, unless he undertook to supply in any event.

2. Specific Goods Perishing Before the Contract: Section 7

Section 7, Sale of Goods Act, 1930

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 was made, perished or become so damaged as no longer to answer to their description in the contract.

📖 Couturier v. Hastie, (1856) 5 HLC 673 (HL)

Facts: A cargo of corn was shipped from Salonica for London. While it was at sea, the corn began to ferment, and the master put into Tunis and sold it there. Some days later, in London, the cargo was sold, neither party knowing that it had already been disposed of. The seller claimed the price.

Held: The House of Lords held that the buyer was not liable. The contract assumed that there was a cargo in existence to be sold. Since the corn had ceased to exist as a cargo capable of sale before the contract was made, there was nothing for the contract to operate on.

Ratio: A contract for the sale of specific goods which, unknown to the parties, have already perished when the contract is made is void. Section 7 gives statutory form to the rule.

Specific goods only. Unascertained goods cannot perish in law; the seller must supply other goods of the description.
At the time of the contract. The perishing must have occurred before the contract was made.
Without the seller's knowledge. A seller who knew the goods had perished and sold them anyway cannot rely on the section; he may be liable for fraud or for breach of an implied warranty that the goods existed.
Perished, or so damaged as no longer to answer their description. Goods need not be destroyed entirely. In Barrow, Lane & Ballard Ltd. v. Phillip Phillips & Co., [1929] 1 KB 574, a contract for 700 specific bags of nuts in a warehouse was void where, unknown to both parties, 109 bags had already been stolen, the contract being for an indivisible lot.

3. Specific Goods Perishing After an Agreement to Sell: Section 8

Section 8, Sale of Goods Act, 1930

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.

The timing of the perishing decides which section applies, if any

📖 Elphick v. Barnes, (1880) 5 CPD 321

Facts: A horse was delivered to a prospective buyer on eight days' trial, on the terms that he would buy it if it suited him. On the third day, and without any fault on his part, the horse died. The seller claimed the price.

Held: The buyer was not liable. The property had not passed, since the buyer had neither approved the horse nor kept it beyond the trial period, and the risk remained with the seller. The goods having perished without fault before the risk passed, the loss fell on the seller.

Ratio: Where specific goods perish without fault while property and risk remain with the seller, the agreement to sell is avoided and the seller bears the loss.

An agreement to sell, not a sale. If property has already passed, risk has ordinarily passed with it under Section 26, and Section 8 does not apply.
Specific goods only, as with Section 7.
Without fault of either party. If the seller's negligence caused the loss, he is liable for non-delivery; if the buyer's did, he bears the loss.
Before the risk passes. The parties may agree that risk passes before property, in which case perishing after that point falls on the buyer.
The agreement is avoided, so neither party is liable to the other for non-performance, and money paid in advance is recoverable under the general law.

4. Section 7 and Section 8 Compared

	Section 7	Section 8
Kind of contract	Any contract for sale of specific goods	An agreement to sell specific goods
When the goods perish	Before the contract is made	After the contract, before risk passes
Mental element	Without the seller's knowledge	Without the fault of either party
Effect	The contract is void from the start	The agreement is avoided from the perishing
Underlying principle	Common mistake as to the existence of the subject matter	Supervening impossibility, a particular case of frustration

5. The Position Stated Shortly

Section 6 permits contracts for existing, future and contingent goods, and turns a present sale of future goods into an agreement to sell.
Section 7: a contract for specific goods that had already perished without the seller's knowledge is void.
Couturier v. Hastie: a cargo sold after it had ceased to exist was no subject matter for a sale.
Barrow, Lane & Ballard: loss of part of an indivisible specific lot may make the whole void.
Section 8: an agreement to sell specific goods is avoided if they perish without fault before the risk passes.
Elphick v. Barnes: a horse dying on trial before approval was the seller's loss.
Neither section applies to unascertained goods, or to goods perishing after the risk has passed.