Meaning of Future Goods
Under the Sale of Goods Act, 1930 (Section 2(6)), future goods are defined as goods to be manufactured, produced, or acquired by the seller after the contract of sale is made. This means they do not exist or are not owned/possessed by the seller at the time of the contract. A contract for future goods is essentially an agreement to sell, and it becomes a sale only when the goods come into existence and ownership passes to the buyer. Future goods are different from existing goods since they are not yet identified or in a deliverable state at the time of agreement.
Example of Future Goods
Suppose a farmer enters into a contract with a buyer to sell the wheat crop that will be harvested after three months. At the time of the agreement, the wheat does not exist in a usable or identifiable form—it is yet to be produced. This contract is for future goods because the subject matter will come into existence later. Similarly, an automobile manufacturer agreeing to supply a car model that is still under production is also a contract for future goods. In both cases, the ownership transfers only after the goods are manufactured or harvested.
Importance and Legal Effect
Contracts relating to future goods protect business expectations and allow planning for trade and commerce. However, since ownership cannot be transferred immediately, they are considered agreements to sell and not absolute sales. If the seller fails to produce or deliver the goods, it is treated as a breach of contract. Future goods play an important role in commerce, especially in agriculture, manufacturing, and technology industries, where production takes time. Courts have consistently upheld the principle that such agreements are conditional upon the goods coming into existence, safeguarding the interests of buyers and sellers.
Mnemonic to Remember (Nature of Future Goods)
“NIA” = Not existing, Identified later, Agreement to sell
- N → Goods are Not yet in existence
- I → Goods are Identified in the future
- A → It is an Agreement to sell, not an immediate sale
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