When two parties wish to enter into a transaction to buy and sell goods, they will typically create a sale of goods contract. The terms of the sale of goods contract will govern their business relationship.
This document can also be used as a reference in the event that any disputes regarding the agreement arise between the two parties in the future.
The following elements are generally required in order to form a legally enforceable and valid contract:
- An offer must be made;
- That offer must then be accepted;
- There must be some form of consideration (e.g., something of value, which is usually money) present within the terms of the offer; and
- The buyer and the seller must both agree to the terms of the final contract.
Article 2 of the Uniform Commercial Code (“UCC”) is the law responsible for regulating transactions for the sale of goods. Under the UCC, the word “goods” only refers to items that are both tangible and moveable, such as a piece of fruit. Thus, Article 2 of the UCC will not apply to contracts for real estate transactions, leases, or service contracts.
What Should be Addressed in a Sale of Goods Contract?
A contract for the sale of goods can take on various forms. Parties are also permitted to negotiate what terms they want to include in the contract and how specific they want their contract to be.
There are some provisions, however, that should always be included in a sale of goods contract, such as:
- The names of the parties to a contract;
- Detailed descriptions of the goods being purchased;
- The quantity of those goods;
- The parties’ agreed upon price of the transaction;
- When, where, and how the goods will be delivered (e.g., at the buyer or seller’s place of business);
- When, where, and how payment will take place;
- Whether there are any warranties associated with the products;
- When the agreement will terminate; and
- A general explanation of how to resolve any future disputes (e.g., through arbitration, mediation, litigation, etc.).
If the parties’ contract is missing important terms, such as the price of goods or where the goods are supposed to be delivered, the UCC contains rules regarding “gap filler” provisions. Such provisions will address how courts should help the parties’ fill in these kinds of terms.
For example, if the place for delivery of the goods is not listed in the contract and there is no other evidence available that shows the parties had a prior understanding about where the goods were supposed to be delivered, the UCC provides this basic rule:
- When a contract is missing terms for where the goods should be delivered, the default place of delivery will be the seller’s place of business.
Do I Need to Put a Sale of Goods Contract in Writing?
While not every contract is required to be in writing, it is generally a good idea to put any agreement in writing in the event that a dispute arises. Having a written contract is beneficial for both parties.
There are some types of contracts, however, that must be in writing according to the rules set out by the statute of frauds. One of those kinds of contracts involves sale of goods contracts for certain dollar amounts.
In general, for a sale of goods contracts to be both legally enforceable and valid, it must meet the following statute of frauds requirements:
- The contract must be in writing if it involves the sale of goods worth $500 or more;
- The contract must be in writing if the transactions cannot be fully completed within one year (according to the terms laid out in the parties’ agreement);
- A sale of goods contract must be in writing when it pertains to a lease for personal property that is worth $1,000 or more; and
- It must be in writing when the agreement creates a security interest (e.g., loans).
The above list only specifies the major examples of when a sale of goods contract falls under the statute of frauds requirements. Individual states may have their own regulations that the parties will have to follow. This means that every state may have a different variation of the same law, so keep that in mind when forming a sale of goods contract.
Do I Need to Hire an Attorney for Help with Drafting My Sale of Goods Contract?
While retaining an attorney to draft a sale of goods contract is usually not required by the law, it may be helpful to do so anyway. The reason for this is because the UCC is a very complex and confusing set of laws that have many loopholes.
An experienced business lawyer will be able to help you navigate the UCC and can draft a contract that closes these loopholes, so that you can avoid having to defend against any arguments in the future.
Additionally, the UCC can impose other various requirements, which will depend on your particular situation. A local business lawyer will be able to inform you about the laws that your contract will be subject to and can help protect your rights by incorporating any important and relevant information in your agreement.
Lastly, if your contract is breached, a lawyer can provide representation on your behalf to help you recover the damages that you are legally entitled to, whether it be physical goods that were never delivered or money damages.