Contract for sale or works contract: property passing on completion and delivery made the wagon supply agreement a sale.

The Supreme Court held that a contract for manufacture and supply of wagons was a contract of sale, not a works contract, because the agreement had to be read as a whole and the decisive factor was when property in the completed goods passed. The wagons became the purchaser's property only on payment of 90% of the price, with the balance payable on delivery and certification, while the advance-payment and material clauses did not transfer ownership of raw materials. Clauses on inspection, surplus materials, defects, and tax were consistent with the seller retaining ownership until completion. Sales tax therefore applied, and the purchaser had to reimburse the company under the contract.

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Issues: Whether the contract for manufacture and supply of wagons was a contract of sale of goods or a works contract.

Analysis: The contract had to be construed from its terms as a whole. The crucial stipulation provided that completed wagons would become the property of the purchaser only on payment of 90 per cent of the vehicle price, and the balance would be paid on delivery and certification of due fulfilment. The special conditions governing advance payment for raw materials did not transfer ownership of those materials to the purchaser. The clauses dealing with sales tax, surplus materials, inspection, and liability for defects were consistent with the company remaining owner of substantially all materials until completion. The presence of supervision, indemnity, and advance payment terms did not alter the essential character of the bargain.

Conclusion: The contract was a contract for sale of wagons and not a works contract. The sales tax liability attached to the transaction, and the purchaser was liable to reimburse the company under the contract.

Ratio Decidendi: In determining whether a contract is one of sale or works, the decisive test is the true intention of the parties gathered from the contract as a whole, particularly the stage at which property in the finished article passes; if the finished goods remain the seller's property until completion and delivery for price, the contract is one of sale.

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