Sale of Goods Agreement

What is a Sale of Goods Agreement?

The Sale of Goods Agreement is a legal document used to specify the terms and conditions entered into between the Seller and the Buyer of the Goods. This Agreement can be used by either the Seller or Buyer to Buy or Sell any type of movable goods like furniture, electronics, building materials, etc.

The Sale of Goods Agreement cannot be used for selling immovable properties like buildings, lands, etc.

What is the difference between a Sale of Goods Agreement and a Supply Contract?

The main difference between a Supply Contract and a Sale of Goods Agreement lies in the nature of the agreement. In a Supply Contract, both the supplier and the buyer agree to purchase certain goods for a specific period for a fixed price. This can often involve an exclusive business relationship between the supplier and the seller. On the other hand, a Sale of Goods Agreement typically refers to a one-time transaction where goods are sold for a price, without the ongoing commitment like that of a Supply Contract.

Is it mandatory to have a Sale of Goods Agreement?

No, it is not mandatory. However, having a written Sale of Goods Agreement will help in setting clear terms of sales and avoid disputes in future.

Who can enter into a Sale of Goods Agreement?

In order for an agreement to be valid, the parties involved must be legally eligible individuals or entities. A minor (under 18 years of age), a person who is not of sound mind, or someone who is intoxicated cannot enter into a Sale of Goods Agreement.

What can be the duration of a Sale of Goods Agreement?

The Sale of Goods Agreement can be for a specific period or until the completion of the transaction. Typically, the duration is till the delivery of goods and settlement of the final payment.

What has to be done once the Sale of Goods Agreement is ready?

The Sale of Goods Agreement will be legally binding when it has been printed on non-judicial stamp paper or e-stamp paper, and signed by each party. The value of the stamp paper would depend on the state in which it is executed. Each state in India has provisions in respect of the amount of stamp duty payable on such agreements. Information regarding the stamp duty payable can be found on the State government websites.

Each Party should sign and return a copy of the Sale of Goods Agreement. Where a company is a party to this agreement, it should ensure that the Sale of Goods Agreement is signed by an authorized signatory, which is usually a director as authorized by a board resolution of the company.

Each Party should keep a signed copy of the Sale of Goods Agreement. To do this, two different copies can be signed, or if only one copy is signed, it can be photocopied and then distributed between the parties.

What must a Sale of Goods Agreement contain?

The Sale of Goods Agreement includes the following important clauses:

• Parties involved: the name and details of the seller and buyer.
• Consideration/Price: which includes the total price, advance amount, etc.
• Warranties: any guarantees or warranties provided by the seller.
• Risk and ownership: the details of how and when the risk of loss of goods will be transferred to the Buyer.
• Delivery: including the details about delivery such as the date of delivery, time of delivery, place of delivery and cost of delivery.
• Liability: the maximum liability of the Seller in case of non-performance under this Agreement.
• Termination: conditions under which the Sale of Goods Agreement can be terminated.

Which laws are applicable to a Sale of Goods Agreement?

The Sale of Goods Agreement is covered under the Sale of Goods Act, 1930 and the Indian Contract Act, 1872.

If the Goods are sold to an individual person for a non-commercial purpose (other than for self-employment) the Consumer Protection Act, 2019 will also be applicable.

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