Sale of Goods Agreement

What is a sale of goods agreement?

A sale of goods agreement is used to define a commercial arrangement for the sale and purchase of goods. Both parties to the sale of goods agreement should be established in England and Wales and be acting in the course of business.

What are the different types of sale of goods agreement?

A sale of goods agreement can be:

• a pro-seller agreement - this type of agreement will give the seller more control over the arrangements and may impose minimum purchase obligations on the purchaser
• a pro-purchaser agreement – this type of agreement will give the purchaser more freedom and will place more obligations on the seller to accept orders

What is the difference between a supply of goods agreement and a sale of goods agreement?

The supply of goods agreement can be used to supply goods to a party on a made-to-order basis. This means that the purchaser will request the manufacture of the goods and the seller will manufacture these for purchase.

A sale of goods agreement can be used for ready-made goods. The sale goods agreement will include a schedule of goods that will be available for purchase - similar to a catalogue.

What is the difference between a sale of goods agreement and a services agreement?

A sale of goods agreement deals with the sale of goods (physical objects) only. Examples of goods are:

• electronic items
• kitchenware
• vehicles
• building materials

A services agreement deals with the provision of services. A service refers to an action that will be completed under an agreement. For example, this might include:

• waste management
• cleaning
• transportation

Is it mandatory to have a written sales of goods agreement?

No. It is possible to reach a verbal agreement about the sale of goods. However, it is best practice to set the agreement out in writing so that each party has a clear understanding of their obligations.

What do the words 'title and risk' mean in a sale of goods agreement?

The word title refers to the ownership of the goods. The word risk refers to the responsibility for the goods (i.e. which party bears the risk if the goods are lost or damaged).

A sale of goods agreement will deal with the transfer of title and risk. Usually, this will transfer to the purchaser either:

• upon payment
• upon delivery/collection

What is not allowed in a sale of goods agreement?

The sale of goods agreement should also not be used to sell goods to consumers*. A different type of agreement should be used for consumer sales.

It is not possible to exclude certain types of liability* in a sale of goods agreement. In particular, it is not possible to exclude liability for the following:

• any breach of the relevant legal provisions about the title of the goods (the seller's right to sell the goods)
• defective products as defined by law
• death or personal injury caused by negligence
• fraud or fraudulent misrepresentation

Liability means the legal responsibility of a party for something. If a party's liability is successfully excluded in relation to a particular issue, this means that they will have no legal obligations concerning that matter, including no requirement to pay legal damages.

A consumer is an individual who purchases goods or services from a business for personal use. Consumers have certain rights and protections.

What are the prerequisites of a sale of goods agreement?

Discussions and negotiations will generally have taken place prior to the sale of goods agreement commencing. The seller may wish to make use of a letter of intent when making an offer or discussing the proposed terms.

Who can enter into a sale of goods agreement?

Both of the parties to the agreement must be acting in the course of business because this is a commercial (B2B) agreement. The parties will therefore be either:

• a company
• a Limited Liability Partnership
• a partnership
• a sole trader

What can the duration of a sale of goods agreement be?

A sale of goods agreement can be agreed for a fixed term that will either automatically terminate or a fixed term that will automatically renew.

The agreement will contain termination provisions to explain how the agreement may be terminated before the end of a fixed term.

What has to be done once the sale of goods agreement is ready?

Once the agreement has been completed, it must be signed. The agreement takes the form of a simple written contract and therefore should be signed as a contract in accordance with the business structure of each of the parties.

What documents should be attached to a sale of goods agreement?

The seller should ensure that a schedule is attached to the agreement to list and describe the relevant goods.

The seller may also wish to attach an order pro forma (a template which may be used to place an order).

What happens if a party breaches a sale of goods agreement?

If one party breaches the terms of an agreement the other party may wish to:

• send a formal warning to the other party
• terminate the agreement
• consider sending a letter before proceedings
• make a claim in the Civil Court

What must a sale of goods agreement contain?

A sale of goods agreement should include the following key information to confirm:

• the identify the parties
• the relevant definitions in relation to the goods
• the term (duration) of the agreement
• the sale and purchase obligations – including whether there will be any minimum purchase requirements
• the process for making and cancelling orders
• the process for delivery/collection of the goods
• any relevant conditions regarding the standard of the goods and the right to inspect and reject the goods
• how and when the risk and title (ownership) of the goods will transfer
• the details regarding prices and payment (including any price increases)
• how the agreement may be terminated
• any limitations on the liability of the parties
• any relevant confidentiality requirements
• any data protection requirements

Which laws apply to a sale of goods agreement?

The following key legal provisions will be relevant to a sale of goods agreement:

• The Sales of Goods Act 1979 (as amended)
• The Unfair Contract Terms Act 1977
• The Companies Act 2006
• The Partnership Act 1980
• The Bribery Act 2010
• The Modern Slavery Act 2015
• The Data Protection Act 2008
• The retained EU General Data Protection Regulation 2016/679 (UK GDPR)

Help from a lawyer

You can choose to consult a lawyer if you need help.

The lawyer can answer your questions or help you through the process. You will be offered this option when you complete the document.

How to modify the template?

You fill out a form. The document is created before your eyes as you respond to the questions.

At the end, you receive it in Word and PDF formats. You can modify it and reuse it.