When do you need a Contract for the Sale of Goods?
A contract of sale of goods is a legal agreement whereby the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration called the price.
Essential Elements of a Contract for the Sale of Goods
The following elements are required for the formation of a legally binding sale of goods contract and are included in our template:
1. Two parties
There must be two distinct parties to the contract, the buyer and the seller.
2. Transfer of property
Transfer of ownership of the goods. Mere transfer of possession is not sufficient.
The subject-matter of the contract of sale must be ‘goods’, which means every kind of movable property other than actionable claims and money.
Goodwill, trade marks, copyrights, patents right, water, gas, electricity, decree of a court of law, are all regarded as goods. Shares and stock are also included in goods.
Actionable claims are claims which can be enforced by a legal action or a suit for example a bill of exchange or a promissory note represent a debt and are not considered a “good”.
The consideration required for a contract of sale must be money, known as the price. If goods are sold or exchanged for other goods, the transaction is considered barter.
4. Includes both a ‘sale’ and ‘an agreement to sell:
Sale refers to an absolute sale where there is immediate conveyance of ownership in the goods.
An agreement to sell refers to situations where the transfer of property in the goods is to take place at a future time or after some condition has been fulfilled.
If you are entering into an arrangement for the sale of goods with anyone, it is good business practice to either provide or obtain a contract for the sale of goods. It allows you to legally cover your bases and for each party to clearly know and understand the terms of the agreement. Should a dispute arise down the track, having the agreement in writing means your rights are more likely to be upheld and should legal action be required, the written agreement is proof of the terms.
Are you buying or selling Goods?
Protect your interests and ensure the Agreement is legally binding for both parties.