Sale of Goods Agreement

What is a Sale of Goods Agreement?

A Sale of Goods Agreement is a contract between two parties governing the terms for the sale and purchase of goods. It defines the responsibilities of the buyer and the seller and establishes the terms on which a seller sells and transfers goods to a buyer.

A Sale of Goods Agreement also sets out the exact nature of the goods, as well as price and payment terms and what happens at the end of the contract.

What are the implied terms in a Sale of Goods Agreement?

Implied terms refer to those terms which are not expressly stated in an agreement but as assumed to be included. For instance, implied terms in a Sale of Goods Agreement can be defined as a buyer buying goods from the seller assuming it will serve the purpose and will be defect-free. In case of any disputes in the future, the court will take implied terms into consideration even though it is not mentioned or written on the contract.

Who should use a Sale of Goods Agreement?

Whenever any business is being conducted where there is a buying and selling of some goods a Sale of Goods Agreement should be used. It can be used by individuals engaging in any business, such as startups, small businesses, and enterprises.

What are the components of a Sale of Goods Agreement?

A Sale of Goods Contract is a formal contract or agreement between buyer and seller to regulate the buying and selling of goods in a legal manner to avoid disputes in the future. This will help both parties to protect their rights and prevent fraud in day-to-day business. These are the main things that should be included in a Sale of Goods Agreement.

Buyer & Seller: In any valid Sale of Goods Agreement, there must be two parties involved. One is responsible for selling the goods known as sellers and another is the purchaser of those goods known as buyers.

Date of the Agreement: This is the date on which the agreement is signed by both parties. I.e.; buyer and seller.

Description of goods: A proper description of goods along with the quantity that has been already discussed in the agreement should be clearly written to avoid any confusion.

Purchase price: This is the purchase price of the goods that have been agreed upon by both parties. Once the agreement is signed, the purchase price will remain fixed and cannot be changed throughout the agreement period.

Shipping Details: Shipping and delivery details are important to serve the buyer and transfer the ownership of the goods. Normally bulk or regular purchase order requires shipping and delivery details.

Risk of loss: Once the goods are shipped from the seller side, if anything happens in the transit then it will come under buyer responsibility.

Inspection of goods: The buyer has the right to inspect the goods and can ask for an exchange or refund if the goods are not as per the standard that has been agreed upon.

Taxes: after shipping the goods from the seller’s side, it is the buyer’s responsibility to pay all the taxes. so clear information regarding those taxes should be mentioned in a sale of goods agreement.

Payment method and deadline: The information about payment method, deadline for making payment, and interest accrued for late payments should be clearly written in a Sale of goods contract.

Termination of contract: Termination arrangement and provision should be clearly discussed while creating a sale of goods contract. This will help both parties to terminate the contract legally if they are not satisfied with the service offered. Normally a notice period is decided by both parties before terminating the contract.

Types of Sale of Goods Agreement

There are numerous types of Sale of Goods agreements. A few are: 

General Sales Agreement or Contract: All Sale agreements are some variation of this contract. This includes the basic essential information such as the terms of the agreement, the delivery details of the goods, and other notable details.

Conditional agreement: These agreements are put in place when a buyer takes a good and is now in possession of it but does not have full exclusive rights to own them. The full rights are reserved by the seller until the full price is paid for it

Contract for Sale of Business: Also known as a ‘Business Transfer Agreement’, these are bilateral agreements between parties who intend to buy or sell a business. It clarifies all the details for the business sale. 

International sales agreement: These contracts are legally binding and identify all parties and also mentions what is being sold, the payment conditions for it and so on. It is drafted to govern trade relations between companies based in different countries.

How to determine the price of goods in sales of Good Agreements?

Both parties need to agree to the set price in a contract before moving ahead. An uncertain contract can be deemed invalid. A few things to consider while setting a price is as follows.

Price lists

Mention the order of priority for the price lists and state which will be the most relevant one. It is also important to mention that the prices are subject to changes under certain conditions.  

Extra charges and expenses

Any and all extra charges, as well as expenses that might arise during the time period of the contract, should be named, and responsibility should be assigned to them. The clauses should clarify that if any extra charges arise, the buyer can decline the offer and reject the order thereafter. 

VAT, service charges and others

It is important to mention whether all prices are inclusive or exclusive of costs such as VAT and service charges. This should be clear in the quotations itself and mentioned in the contract as well. 

Why is it important to get a Sale of Goods Agreement?

Among numerous other factors, one key element that determines the success of a business is a prediction of the need for the supply of goods and selling the right products at the right time. This helps them stay ahead as they know how much or how many products they need. A Sale of Goods Agreement helps ensure that you have the goods when you really need them at the right time of sales as it is a legally binding document where the seller agrees to supply a certain amount of products at a predetermined time and amount and so, you are able to maximise profits.

It also protects the buyer’s interest by ensuring that the prices are not played upon by sellers during peak times when there is a much greater need for it. However, it also protects sellers by guaranteeing that the buyer will buy a certain amount of product at the specified time as agreed upon, regardless of the situation as they are obligated to.

What are the warranties in the Sale of Goods Agreement?

Warranties are legal guarantees to assure that the mentioned details about goods are in fact true. There are two kinds of warranties:

• Express Warranties: Here, the seller grants an express warranty when they agree to replace or repair an item if it is different from what was promised whether that is in the performance or the quality of the goods. For instance, When Apple customers find their electronic purchases to be faulty, the company replaces or repairs it under reasonable circumstances. This is an Express Warranty. In a Sale of goods agreement, the seller’s description of the goods has to match the expectation as well the description of goods and so an express warranty is automatically created.
• Implied Warranties: These are not written promises, rather they are an assurance that the goods will meet the requirement as per the sale of the Agreement contract. 

What are the essential elements of a Sale of Goods Contract?

Buyer & Seller: In any valid contract that is drafted for the Sale of Goods, there must be two parties involved. One is responsible for selling the goods known as sellers and another is the purchaser of those goods known as buyers.

Goods: Goods are basically things that are traded in exchange for money. Things like money or immovable property are not governed through this contract.

Transfer of Ownership: When a seller sells the goods in exchange for money, the ownership of that goods is automatically transferred to the buyer of that goods.

Shipping Details: Shipping and delivery details are important to serve the buyer and transfer the ownership of the goods. Normally bulk or regular purchase order requires shipping and delivery details.

Payment method and deadline: The information about payment method, deadline for making payment, and interest accrued for late payments should be clearly written. Notification of defective goods: Whenever a buyer buys some product it is a natural course of action that some goods can be found defective because of shipping, mishandling, or manufacturing fault. So, it is very important for the buyer to notify the seller about the damaged goods and ask for a return. To safeguard return policy and minimize the loss, it is very crucial to include notification of defective goods clause in a sale of goods contract.

Termination of contract: Termination arrangement and provision should be clearly discussed while creating a sale of goods contract. This will help both parties to terminate the contract legally if they are not satisfied with the service offered. Normally a notice period is decided by both parties before terminating the contract.

What to include in a Sales of Goods contract

A Sale of Goods contract will typically include:

• Type of the goods;
• Length of contract period;
• Details of delivery;
• Purchase price and payment terms;
• Method of payment;
• Basic warranties;
• Limitations on the seller’s liabilities;
• When will title and risk pass; and
• Notice period required to terminate this contract.

What are the implied terms in a Sale of Goods Contract?

Implied terms refer to those terms which are not expressly stated in a contract but as assumed to be included. For e.g.: When a buyer buys goods from the seller, they assume it will serve the purpose and will be defect-free. In case of any disputes in the future, the court will take implied terms into consideration even though it is not mentioned or written on the contract.

Features of Sale of Goods Contract 

• Goods or movable property has to be the main topic or subject matter of a sale of goods contract.
• Two parties are required for a contract of sale of goods. The good has to be handed over from one party to another. 
• Transfer of a property’s ownership is also an important part of this contract. 
• Price has to be discussed. Transaction or trade of goods and use of money has to be reflected.
• Must have all elements of a legal valid contract.

Create a Sale of Goods Contract

A Sale of Goods Contract is a formal contract or agreement between buyer and seller to regulate the buying and selling of goods in a legal manner to avoid disputes in the future. This will help both parties to protect their rights and avoid fraud in day-to-day business.

Create one now with Zegal.

Create a Sale of Goods Agreement with a Zegal template

A well-drafted Sale of Goods Agreement acts as a guarantee for both buyer and seller by providing them a strong legal footing in case of any dispute in the future. So, it is crucial for every business to have a valid sale of goods agreement before buying and selling goods.