Barter agreement
panchajanya borthakur
(Querist) 03 November 2011
This query is : Resolved
Hi Friends!!Our company wants to enter into a Barter Agreement.As per the Agreement the other party will provide us some services worth Rs. 1 lakh and instead of money we will give them our manufacturing materials of Rs. 1 lakh. Kindly let us know whether these types of Agreements are valid under Indian law if yes these transections will be covered under which Indian law??
ajay sethi
(Expert) 03 November 2011
your company can afford legal fees of lawyer . consulat a lawyer
M.Sheik Mohammed Ali
(Expert) 03 November 2011
yes, your agreement valid under indian contract law and transfer of property law.
Sankaranarayanan
(Expert) 03 November 2011
yes i do agree with mr sheik , according to the agreement you can do.
sanjeev murthy desai
(Expert) 03 November 2011
Yes i agree with all the opinions. The Sale of Goods act and Contract act are applicable.
R.Ramachandran
(Expert) 03 November 2011
Dear Mr. Sethi, I agree with your view, which I have always been consistently holding myself.
But, in the peculiar circumstances where Mr. Sheik and Mr. Sankar Narayanan have replied, I would like to put the record straight and therefore would like answer the query, lest the querist should get wrong impression.
While no one can falter the answers given by Mr. Sheikh and Mr. Sankar that these transactions are perfectly ok under the contract Act, I am afraid, that both of them did not even understand and appreciate the true import of the query and its full implications.
Since Mr.Sanjeev Murthy says that he agrees with all the opinions, but then also says that Sale of Goods Act and Contract Act are applicable, I am not able to make out as to really what he wants to say.
It is the understanding of the querist Mr. Panchanjanya that since he/his company is not receiving any money for the manufactured products that he is giving away against receipt of service, he is not in fact selling any goods for any consideration and as such they are not ‘sale’ and consequently it will not entail sales tax (VAT) etc. etc.
But that understanding is quite wrong. This is for the reason that the moment any goods or services are monetised (i.e. reduced/valued in terms of money) there cannot be any 'BARTER' at all. The monetary value will be regarded as consideration and as such when the querist gives 1 lakh worth manufactured goods, it will be treated as sale of Rs. 1 lakh worth goods and not a barter in exchange of any service.
