Section 5 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 5 says how a contract of sale of goods comes into being and in what form it may be made. Sub-section (1) is about the making: an offer to buy or sell goods for a price, and acceptance of that offer, with room for delivery and payment to be immediate, by instalments or postponed. Sub-section (2) is about the form: writing, word of mouth, both, or the conduct of the parties.
A contract of sale is made by an offer to buy or sell goods for a price and the acceptance of that offer. The contract may provide for immediate delivery or payment or both, for delivery or payment by instalments, or for either or both to be postponed. Subject to any law for the time being in force, it may be made in writing, by word of mouth, partly both, or be implied from the conduct of the parties.
Where the section sits
This article follows the consolidated text of the Act consulted (latest amendment shown: Act 28 of 1993); later amendments should be checked in the official text. Section 5 stands under the sub-heading "Formalities of the contract" in Chapter II, after the definition of a contract of sale in section 4. It is deliberately short and leaves the general law of offer and acceptance to the Indian Contract Act, 1872, which applies under section 3 so far as it is not inconsistent. If you want that general law, see Section 2 of the Indian Contract Act, 1872 (proposal, acceptance, promise) and Sections 7-9 of the Indian Contract Act, 1872 (absolute acceptance).
Putting the offer and its acceptance into a proper written agreement is the work of agreement drafting.
Section 5(1), first sentence: offer and acceptance
"A contract of sale is made by an offer to buy or sell goods for a price and the acceptance of such offer." Three things follow from the wording:
- The offer may come from either side: "an offer to buy or sell goods".
- The offer must be "for a price", the money consideration described in section 2(10).
- The contract is made by the offer and the acceptance of such offer. An offer alone does not make a contract.
Example (the writer's own, not printed in the Act): Madhavi Foods sends Sharma Retail a written quotation for 200 cartons of biscuits at an agreed rate per carton. Sharma Retail replies agreeing to buy on those terms. The quotation was the offer to sell for a price; the reply was the acceptance. A sale contract has been made.
Section 5(1), second sentence: when delivery and payment happen
The second sentence says the contract "may provide for" any of the following:
- the immediate delivery of the goods;
- the immediate payment of the price;
- both of these;
- delivery or payment by instalments; or
- that the delivery or payment, or both, shall be postponed.
So the making of the contract and the performing of it are different moments. A contract can be complete today while delivery or payment, or both, comes later. This ties in with section 4(3): a contract in which payment is postponed is still a contract of sale; whether it is a sale or an agreement to sell depends on when the property is to pass. The text uses the word "instalments" only in this sentence; it does not use phrases such as hire-purchase or instalment sale as categories, and none is described here.
Example (the writer's own): Alpha Pumps agrees on 1 June to supply Bright Farms with a pump set. The contract says delivery is to be in July and the price is to be paid in three parts. Section 5(1) allows exactly this: delivery postponed, payment by instalments.
Section 5(2): the form of the contract
"Subject to the provisions of any law for the time being in force, a contract of sale may be made in writing or by word of mouth, or partly in writing and partly by word of mouth or may be implied from the conduct of the parties."
Break this into its parts.
- "Subject to the provisions of any law for the time being in force": the freedom as to form is not absolute. If another law demands a particular form for a particular kind of contract, section 5(2) does not override it. The text does not name any such law, and this article does not either.
- In writing: a signed agreement, a purchase order or an exchange of letters.
- By word of mouth: an oral agreement. The sub-section says it may be made this way.
- Partly in writing and partly by word of mouth: for example, a written order with a telephone confirmation of the terms.
- Implied from the conduct of the parties: the contract need not be put into words by either side.
Example (the writer's own): A regular customer, Imran, walks into Dutta Provisions each morning, takes a packet of tea from the shelf, places the money on the counter, and the shopkeeper nods. No word is spoken. The conduct of both implies a contract of sale each day.
Table: what section 5 allows
| Question | Section 5 says |
|---|---|
| How is the contract made? | offer to buy or sell goods for a price, and acceptance (5(1)) |
| Can delivery be immediate? | yes (5(1)) |
| Can payment be immediate? | yes (5(1)) |
| Can delivery or payment be by instalments? | yes (5(1)) |
| Can delivery or payment be postponed? | yes (5(1)) |
| Must the contract be in writing? | not under this section; it may be written, oral, both, or implied from conduct, subject to any law for the time being in force (5(2)) |
Practical points for businesses
A contract that exists by word of mouth or by conduct is still a contract under the section; the difficulty is proof. A written order, a quotation and its acceptance, or a purchase order will show what was agreed on the goods, the price, the delivery and the payment. For a general explanation of the document many buyers use to make an offer, see what a purchase order is. Paperwork in which offer, acceptance, delivery and payment are all visible is the aim.
Where another law requires something (for example, a particular formality for a particular kind of contract), section 5(2) leaves that law untouched. The Act's text names no such law, so check the law for your type of goods or transaction.
Need help with the paperwork of a sale?
Whether your sale is made by quotation and purchase order or by a detailed supply contract, we can draft the agreement so that the offer, the acceptance, the price and the timing of delivery and payment are written clearly.
Key takeaways
- A contract of sale is made by an offer to buy or sell goods for a price and the acceptance of that offer.
- Delivery and payment may be immediate, by instalments or postponed.
- The contract may be in writing, oral, partly both, or implied from conduct.
- That freedom is "subject to the provisions of any law for the time being in force".
- Keep written proof: it is not required by this section but it settles later disputes.
Read next
- Section 4 of the Sale of Goods Act, 1930: sale and agreement to sell
- Sections 6-8 of the Sale of Goods Act, 1930: existing or future goods and goods that perish
- Sections 9-10 of the Sale of Goods Act, 1930: ascertainment of price and agreement to sell at valuation
- What is a purchase order
Disclaimer: Based on the consolidated text of the Sale of Goods Act, 1930 consulted on 2 October 2026, whose latest amendment shown is Act 28 of 1993. It explains the words of the statute only; later amendments and the way courts apply these sections should be checked. This article is general information, not legal advice; check the official text before acting.