Sale of Goods Agreements Explained
A Sale of Goods Agreement is one of the most common types of business-to-business transactions. These agreements are generally straightforward contracts in which a seller lists its terms and conditions, procedures and obligations for the sale of goods to a buyer. It is a legally enforceable contract (once signed) that works to support the sale against any interference, and can establish parameters for later business deals and make a business seem more trustworthy to customers.
These agreements typically cover issues such as the following:
Ongoing sale of goods: An agreement indicating a long-term intent to sell goods over a period of time
Quality assurance: An ongoing relationship in which you’ll be purchasing goods from a seller on the basis of sample approval and quality , and perhaps in larger quantities
Payment terms: A contract indicating that you must pay for goods within a certain timeframe upon receipt
Delivery: An overview indicating the delivery time or location that the seller must meet
Customization: The buyer can commission a seller to design custom goods to sell in their own store
All of these provisions are enforceable in Pennsylvania as a Pennsylvania Sale of Goods Agreement under either the Uniform Commercial Code (UCC) in Pennsylvania or common law. A well-worded Sale of Goods Agreement can mitigate the need for litigation later in the sales process, which saves time and creates a better relationship with customers.
Necessary Components of a Sale of Goods Agreement
Parties: Identifying the first part of the Sale of Goods Agreement, the Seller, and the second part of the goods sale, the Buyer.
Goods: The Seller must carefully describe what the goods being sold are. If you think that it may be expected that these goods are known and understood by the Buyer you should clearly set out what the goods are. Such as:
If the Buyer is purchasing a quantity of goods, it is very important to detail what specific type of goods are being sold. An additional clause should stipulate that the goods will be "at the Seller’s discretion but to Buyer’s specification", so as to avoid any confusion as to what the Seller’s discretion may be.
Price: A space must be provided for the price of the goods sold, and other details such as method of payment, installments, etc. If the product to be sold is particular then you ought to indicate in the agreement what the price for each item may be.
Delivery: The Seller shall be required to deliver the goods to the Buyer’s destination. This clause will need to include place of delivery and date of delivery.
Conditions: A Seller may discontinue the delivery of goods to the Buyer until full payment has been received, if it so desires.
The Advantages of Using Templates
An added benefit of a Sale of Goods Agreement template is that these agreements are easy to amend. The template will provide the general structure of your goods contract and the provisions governing the sale. All you have to do is enter your own business name and other specific details. Also, changing an item listed in the goods contract is easy when you use a sales of goods contract template. When you use a Sale of Goods Agreement template, you don’t have to go back and forth with drafts of a contract as you would if you were writing out the deal yourself. Your attorney is probably going to have a template already drawn up, so the two of you can work from the same document without sending it back and forth through email.
How to Personalize Your Template
To customize your Sale of Goods Agreement template to fit the specific circumstances of your business, follow these steps: First, examine the details of the transaction and the nature of the goods being sold. For instance, are they physical products, digital goods, services, or something else? Depending on the nature of the sale, you may need to define the goods more specifically, such as by including technical specs or referencing models or serial numbers. Second, make sure that the terms and conditions that you are replacing or editing properly reflect what you want them to say. For example, the amount of time you have to ship the goods may be different from what the template allows. Alternatively, it may be a holiday week, which leaves you with fewer business days to ship the goods before the buyer wants them. Third, consider any other issues or needs specific to the business or buyer. If there is going to be a large delivery, and storage capacity is an issue, make sure to look at the template’s section on deliveries to make it precise, stating exactly what will be delivered and who will be responsible for receiving/delivering. Follow these steps to customize your Sale of Goods Agreement template effectively, and keep a close eye out for any advice or suggestions given to you that may be relevant to your own situation.
Common Pitfalls to Avoid
Selling goods across borders comes with a series of unique challenges that you are likely to face at every turn. One area where this can be especially challenging is in the Deal you are going to strike between you and your Supplier or Buyer (as the case may be). The mistakes regularly seen in Sale of Goods Agreements can often make clear lines of demarcation when it comes to liability very difficult to identify. Here are some of the most common mistakes that we see that can complicate an otherwise less obstructed position:
Conflating the English Contracts Act and the Sale of Goods Act We have lost track of how many times we saw an agreement getting written up that made a passing reference to the English Contracts Act. The English Sales of Goods Act does to a certain extent overlap with the English Contracts Act, so much so that there are times when they can be confused as synonyms for one another. However, the Contracts Act has nothing to do with Sale of Goods Contracts so it is very important that you are cognizant of that fact before make a mere passing reference to a Contracts Act as opposed to a reference to the Sale of Goods Act.
Vagueness in defining the type of Agreement We understand that there are times when a Buyer will approach a Supplier with a request to sell Goods in a certain Country or Countries and one of the big questions you will be grappling with is how you would like those Goods sold and to where. Rather than trying to make things very complicated, it might be a good idea to make a simple distinction between your goods based on their nature. For example; if you were selling machinery , it is imperative that you define what type of machinery you are talking about. Is it agricultural? Is it manufacturing machinery? It is important to be as specific as possible in defining the Goods.
Vagueness in defining the parties This is quite common because Seller and Buyer are often used as legal terms and people that aren’t lawyers often fail to comprehend the implications that vague language can have. It is always better to formally name the Sellers and Buyers whether they are corporate parties or otherwise. A simple mistake such as this one can be the difference between being able to effectively provide further clarification in the event of a dispute and being unable to do so.
Obscuring the issue of warranties/quality standards This essentially comes down to describing the exact type of Goods being sold, but more importantly it should fully describe the condition in which the parties imagine the Goods would be in at the time of sale. Often times what parties need is a simple "in good condition" clause in the Agreement but on occasion it might require a more detailed description of the condition of equipment or the type of quality expected from the Goods.
Miscalculating the Goods to be sold This can be a fairly straightforward mistake that could be fairly easy to avoid in the drafting process. Because these agreements are often drafted in haste, and as a result miscalculated, they can weaken the position of a Seller or Buyer in an already dicey business dynamic. Where there are calculations involved the Seller or Buyer should sit down and independently verify those calculations with the best legal and business advisers available to them.
Legal Issues and Regulations
The creation of a Sale of Goods Agreement is not without legal compliance considerations. Chief among these is the Statute of Frauds, which is intended to prevent the unlawful use of informality in the sale of goods, particularly where the sale price exceeds $500. Simply put, the statutory law requires that certain contracts be in writing to be enforceable. A Sale of Goods Agreement is one of those contracts.
If enforcement of the contract is sought in court, the document should have: (A) the quantity of the goods, (B) signed by the party to be charged, (C) the signature must be that of the seller or an agent acting on behalf of the seller, (D) expressly state the terms of the sale, and, if applicable, (E) the quantity of the goods must be a quantity found in the cookie-cutter Sale of Goods Agreement Form.
When creating a Sale of Goods Agreement it would be advisable to clarify whether the sale is to be governed by the Uniform Commercial Code ("UCC"). The UCC governs commercial transactions from beginning to end. Under the UCC, the buyer may be required to pay sales tax. Make sure to get the sales tax certificate. Failure to do so may lead to penalties. The UCC also governs the enforceability of a Sale of Goods Agreement, in addition to the Statute of Frauds; the UCC provides guidance on establishing the "quantity" term of the sale.
Other legal compliance issues revolve around State and Federal laws, particularly disclosures and disclaimers. If the sale of goods involves disclosure and disclaimer requirements, make them conspicuous. Disclosures must be made by members of a trade organization if the sale gives rise to an implied warranty. Warranties surrounding the sale of goods are usually disclaimed because the purpose of the Sale of Goods Agreement is the transfer of title so that the risk of loss belongs to the buyer once of title passes to the buyer.
Finding the Ideal Template for Your Business
Whether you’re dabbling in e-commerce or a veteran retailer, crafting the perfect Sale of Goods Agreement isn’t as challenging as it may seem – provided you know where to look for your templates. There are a multitude of online resources available for you to tap. But don’t select just one template and run with it without first knowing your transaction types inside-out. The most popular types of Sale of Goods Agreements fall under three main categories: Each of these template types will have different sections not only to address the type of transaction but also the goods involved, whether they be physical or e-goods. For example, if you will be utilizing a Sale of Goods Agreement for a subscription service, you want to make sure that your template contains a clause on automatic renewals and the cancellation process. You don’t want to get caught with a disgruntled customer or lose a recurring sale because you didn’t have this clause! Many companies that keep up with trends in the industry curate or release their own templates for Sale of Goods Agreements that they’ve had created by their internal legal counsel or hired out to third-party firms. They will often feature different types of templates for various types of transactions , including those sold to consumers and those sold to businesses. This is why reputable companies like Legalzoom, Rocket Lawyer, and Legal Templates are a reliable place to obtain templates online, as they maintain their sites to stay up-to-date and relevant. Service companies and other professional service industries also create their own templates for Sale of Goods Agreements, again with the purpose of sharing theirs with general consumers. If you run an IT or legal consulting business, for example, you could create a Sale of Goods Agreement for your services and offer it through your site and download for free or for a nominal fee. You could also have your attorney continue drafting generic versions for you that you would then be able to share on your website to use as call-to-actions for quotes for a paid version.