Sale of Goods Contract Essentials

Sale of Goods Contract

• A seller is obliged to sell and deliver goods of a certain description and quality.
• A buyer is obliged to pay the price.

Representations and Conditions

• Fundamental terms of the contract, breach of which will entitle a party to terminate.
• Warranties are less important terms, breach of which normally gives rise to damages only.

Indemnities

• One party promises to make good another's loss on the happening of a particular event.

Limitations and Exclusions

• The contract may seek to limit or exclude a party's liability for a particular event.
• Such limitations and exclusions will be subject to reasonableness under UCTA 1977.

Boiler-Plate Clauses

• Standard clauses common to agreements of a certain type.
• Address the mechanics of an agreement and common legal points relevant to most transactions.
• Examples include an Entire Agreement Clause.

Execution Clause and Signature

• The end of the contract will normally provide for the signatures of the parties.
• Formalities required for execution depend on the identity of the parties and the type of contract.

Agreements to Agree

• An agreement to enter into a contract at a later date, or an agreement that a certain provision will be agreed between the parties after the commencement of the contract.
• Such agreements are void.

Lock-In Agreements

• A lock-in agreement is where A is contractually obliged to negotiate with B and no-one else.
• These are distinct from lock-out agreements, where A is not obliged to negotiate with B, but agrees not to negotiate with anyone else.
• Lock-out agreements may be enforceable, but lock-in agreements will not be.

Cancellation Clauses

• If a cancellation clause in the contract is too wide, it may have the effect of invalidating the contract altogether.

Mistake

• An erroneous belief, at contracting, that certain facts are true, may render the contract void.
• To have an effect on the contract, the mistake must have occurred before the contract was made.

Drafting to Prevent Unauthorised Variation

• No-Authority Clauses are intended to prevent unauthorised variations to contracts by limiting who within a business is able to agree to a valid variation.
• These clauses may restrict the grant of variations or waivers to certain members of staff or prevent oral variations.

Method of Payment

• The seller is entitled to be paid in cash (s28).
• It is advisable to include a provision ensuring that payment by cheque is treated as a conditional payment.
• Payment by credit card is an absolute payment, so a failure by the credit card company to pay the seller does not entitle the seller to sue the customer.

Interest on Late Payment

• Certain statutes allow interest to be awarded for late payment, e.g., the Law Reform (Miscellaneous Provisions) Act 1934.
• It is sensible to include a specific contractual provision to allow the seller to claim interest in the event of late payment.

Satisfactory Quality

• In a sale in the course of a business, the goods are to be, objectively, of satisfactory quality (s14(2)).
• The price and description of the goods will be taken into account in deciding whether or not the goods are of satisfactory quality.
• Factors to be considered include fitness for the common purposes of the goods, appearance and finish, freedom from minor defects, safety, and durability.

Fitness for Purpose

• s14(3) implies a term that the goods are fit for any particular purpose which the buyer makes known to the seller, either expressly or by implication.
• In the absence of any information to the contrary, the seller is entitled to assume that the goods will be used for their normal purpose.
• Where a buyer requires goods for a particular (non-normal) purpose, it must inform the seller before the contract is made to benefit from this right.