Sales Law: Contract Essentials

• Sales law ensures fair transactions and legal protection by governing the transfer of ownership of goods from a seller to a buyer for a price.
• A sales contract is an agreement where the seller transfers ownership of goods or services to the buyer in exchange for a price.

Essential Elements of a Sale

• Consent of both parties is a formal understanding between two or more parties that establishes rights, obligations, and responsibilities, and is preferably written to ensure clarity and legal enforceability.

Key Features of an Agreement Between Parties

• Mutual consent requires all parties to voluntarily agree to the terms.
• Offer & Acceptance requires one party to make an offer, and the other party to accept it.
• Consideration involves the exchange of something of value, such as money, services, or goods.
• Legal Capacity ensures that all parties are legally able to enter into a contract.
• Legality requires that the agreement does not involve illegal activities.
• Examples of agreements are business contracts like service agreements or partnership agreements, employment agreements, lease agreements (renting a property), and non-disclosure agreements (NDA's) such as confidentiality contracts.
• Determining the subject matter involves specifying, identifying, and agreeing upon an object, service, or obligation.
• Doing this ensures both parties know exactly what is being exchanged or fulfilled preventing misunderstandings.

Characteristics of a Determinate Subject Matter

• The subject must be clearly defined, such as a specific car, or a particular piece of land.
• Once agreed upon, the subject must be unchangeable unless all parties consent,.
• The subject must be real and attainable.
• Price certain in money or its equivalent means the price of a transaction is clearly specified in monetary terms, or in something with a definite and agreed-upon value, which ensures clarity in agreements and avoids disputes about payment.

Key Features of Price

• Fixed and definite amount: The price is clearly stated (ex. $5,000 instead of a reasonable amount).
• Monetary Value: The price is expressed in money (ex. Dollars, euros) or an agreed-upon equivalent (ex. Gold, cryptocurrency, goods)
• Agreed by the parties - Both parties accept the price before the transaction occurs.

Types of Sales Contracts

• Absolute Sale: Ownership of goods or property is transferred to the buyer immediately and unconditionally.
• Once the price is paid in an absolute sale, the buyer receives full ownership and the seller has no further claims.
• Conditional Sale: Ownership is transferred only after certain conditions are met, such as full payment or a specific action by the buyer.
• Sales by description: The goods are sold based on their description in a contract, catalog, or advertisement.
• In a sale by description, the buyer relies solely on the given description without seeing the actual product, and the seller must deliver exactly what was described.
• Installment Sale: The buyer pays for the goods or property in multiple payments over time rather than in one lump sum. In an installment sale, ownership may or may not transfer immediately, depending on the agreement.

Obligations of the Seller

• Deliver the goods: The seller must hand over the goods to the buyer at the agreed time, place, and manner specified in the contract.
• Transfer Ownership: The seller must legally transfer ownership (title) of the goods to the buyer after repayment or as per the agreement.
• Provide Warranties: the seller must guarantee that the goods meet the agreed-upon standards and quality.
  • Express Warranty: warranties that are specifically stated.
  • Implied Warranty: warranties that are assumed by law.
• Ensure the goods are free from defects, which the seller must inform the buyer of if they exist.

Obligations of the Buyer

• Pay the agreed price: The buyer must pay the amount specified in the contract at the agreed time and manner.
• Accept Delivery of Goods: The buyer must receive the goods when the seller delivers them as per the agreement and can only refuse if the goods do not match the contract terms.
• Comply with contract terms: The buyer must follow all terms such as payment deadlines, inspection periods, and return policies.

Partnership and Corporations Law

• Governs the formation, operation, and dissolution of business entities.

Partnerships

• A partnership is a business arrangement where two or more persons agree to contribute money, property, or industry to a common fund with the intention of sharing profit

Essential elements of a partnership

• Mutual agreement between partners - A partnership is based on the mutual consent of two or more individuals who agree to form and run a business together.
• The mutual agreement must be written or verbal, but a written partnership agreement is preferred for legal clarity
• Contribution of money, property, or industry- Each partner must be something valuable to the partnership.
• Those things for a partnership can be money in cash investment, property like land, buildings, or equipment or industry like skills, expertise, or labor.
• Partnership must operate a business with shared funds or assets and is a structured business activity.
• Intention to share profits and losses- Agreement on how to divide profits and losses, usually based on contributions but can be customized in the partnership agreement Types of Partnerships

General Partnership

• All partners share equal rights and responsibilities in managing the business, they also have unlimited liability.

Limited Partnership

• General Partners manage the business and have unlimited liability
• Limited Partners invest money but have limited liability and are only responsible for the amount they invested

Partnership at Will

• Exists when there is no fixed duration mentioned in the agreement.
• It continues as long as the partners want and can be dissolved anytime

Universal and Particular Partnership

• Universal Partnership: Partners share all present and future profits, property, and liabilities.
• Particular Partnership: Form for a specific project or purpose dissolving after its completion.

Corporations

• A legal entity separate from its owners, created by law, and possessing rights, privileges, and liabilities distinct from those of its members

Characteristics of a Corporation

• Separate legal Personality: Treated as a separate legal entity from its owners (shareholders), which allows it to own property, enter contracts, and pursue legal action in its own name.
• Limited Liability of Shareholders: Shareholders are only liable for the amount they invested in the company.
• Perpetual Existence: A corporation continues to exist even if its owners change or pass away and dissolves through legal processes like liquidation or merger.
• Centralized Management: A corporation is managed by a board of directors elected by shareholders, with high-level decisions made by the board and daily operations handled by executives (CEO, CFO).
• Transferability of Shares: Shares of a corporation can be easily bought, sold, or transferred without affecting the company's existence.
• A partnership is based on mutual agreement while a corporation is created by law.
• Partners have unlimited liability while shareholders have limited liability.
• A corporation has perpetual existence while a partnership dissolves upon a partner's death.

Dissolution of Partnership and Corporations

• A partnership can be dissolved due to the death, withdrawal, or agreement of partners.
• A corporation dissolves voluntarily or involuntarily, often requiring legal proceedings.