WHAT IS A SALE OF GOODS CONTRACT

WHAT IS A SALE OF GOODS CONTRACT?

Introduction

When you are in business you are providing, Goods, services or both.

If you deal in goods then the agreement between you and the parties you are dealing with will be summarized by a contract, specifically sale of goods contracts.

The question then, I suppose, is WHAT IS A SALE OF GOODS CONTRACT?

The answer to WHAT IS A SALE OF GOODS CONTRACTS

A contract of sale of Goods can be defined as contract in which the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration called a price.

What exactly does it mean by “goods”?

Ok imagine you have developed a formula to help cure a given type of cancer. From a business perspective you have two choices assuming you have the formula’s patent

  1. Put the formula into production, basically manufacture the drugs and sell them
  2. License the formula out, have other people manufacture and sell the drugs while you enjoy royalties they pay you

So if you sell the actual drugs then you are selling goods but if you license your formula then you have what is called “thing in action” or chose in action to be precise

The term goods as used in the definition include all chattel personal, other than “things in action” and money.

By “thing in action” am talking about a right of property which can only be enforced by action and not taking physical possession. In short incapable of being grasped and which although of value may require legal action to convert to cash.

Example patents, trademarks and goodwill

These kind of things (chose in action) and money do not form part of “goods” in sale of goods contracts.

You cannot have a sale of goods contract in which the goods to be sold are money…By money I mean currency used in the given realm

TYPES OF GOODS

Goods can classified as,

  • Specific or Ascertained Goods

These are goods that have specifically been identified and agreed upon by the parties at the time when the contract of sale is made. Other goods which haven’t been identified are unascertained goods

  • Existing Goods

These are goods owned or possessed by the seller at the time when the contract of sale is made.

  • Future Goods

These are goods to be manufactured or acquired by the seller after the contract of sale is made.

Now that you know what goods in sale of goods contracts are, let’s continue.

Sale of goods contracts can be separated into two:

  1. Sale contract – in which goods passes to the buyer once the contract is concluded, basically you pay you get what you want and that’s it
  2. Agreement to sell– goods or property passes on the fulfillment of a particular or upon the expiration of a specified condition

It is important to distinguish a contract of sale of goods from a contract for work and materials;

This is because, what we expect in a contract of sale of goods is delivery of goods.

If, however, the substance of the contract is for the exercise of skills and the delivery of the goods is only subsidiary there is not a sale of goods.

Look at this example:

Robinson v. Graves (1935) 1 K.B. 570

G. commissioned R., an artist, to paint a portrait of X. for 250 guineas. R. supplied the canvas and other materials.

Held, this was a contract for work and not sale of goods

Things would have been different in the case if G had just viewed one of R’s paintings and contracts to buy it. That would have been a contract for sale of goods.

CONCLUSIONS

In conclusion the Nature of sale of goods contracts is as follows

  1. There is a Seller– This is the person who sells or agrees to sell goods.
  2. There is Property –This is the general property in goods or ownership. It signifies the bundle of rights that a person has in relation to a subject matter .Eg. Right to use, misuse and to dispose
  3. Goods
  4. Buyer- This is the person who buys or agrees to buy goods
  5. Price– This is the consideration that passes from the buyer to the seller to support the contract of sale of goods. The consideration must be monetary.

Let me know if you any question. CHECK OUT VIDEOS HERE!

Get WEEKLY updates on Business, Finance & Legal aspects

Confirm Sign Up via the Email you provided