How to draft an international sale of goods contract

15 Mar 2012 by in Contract Drafting
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A sale of goods is a "contract by which the seller transfers or agrees to transfer the property in goods to the buyer for money consideration called the price". Or we can say a sale of goods contract governs the business relationship between a buyer and a seller of goods.
In order to constitute a sale of goods under the legislation, the consideration must be money, the price is fixed during the course of negotiations between the parties and the contract of sale must be in relation to goods (or chattels) rather than land or buildings. The agreement need not be in writing, but is sound practice to do so to avoid uncertainty and the terms of the sale contract, such as the time of delivery, the price, standard of goods, whether they have been sold subject to a description, whether they may be returned, and whether a retention of title is intended to apply to the goods sold under the contract.
The ownership of goods passes at different times, depending upon the type of goods sold in the sale of goods contract, and are different for specific and named goods, unascertained goods and future goods. The time the ownership (i.e. title) passes in sales of goods is important as the owner of the goods bears the risk in the event that the goods are destroyed or they perish. In some instances the contract may be able to be avoided in its entirety.

Terms implied into sales of goods contracts by the Sale of Goods Act include:
1.the seller has the right to sell the goods;
2.the goods are free from any security interest;
3.the buyer will have quiet enjoyment of the goods;
4.where the goods sold by description, the goods will conform with the description;
5.where the goods sold by sample, the goods will conform with the sample;
6.the goods are of satisfactory quality unless defects are brought to the notice of the buyer prior to the contract or a reasonable inspection would reveal the defect; 
7.the goods are reasonably fit for the purpose stated by the intended buyer or implied by the buyer's statements and conduct;

Possible Exclusions
The parties may agree that the implied warranties relating to sale by description, satisfactory quality and sale by sample do not apply in commercial, rather than consumer sales. The warranty that the seller has the right to sell the goods may not be excluded by agreement.

Along with a general agreement about ownership and responsibilities, every business with multiple owners needs a buy-sell agreement. It covers how and when an owner can sell shares and at what price. The agreement should be signed before the business is started, but if you neglected to do so, do it now. Without a buy-sell, angry partners usually end up in court, and the business usually ends up wrecked. If you don't have one, says Zachary Shulman, a venture capitalist and professor at Cornell University's Johnson School, "it is incredibly difficult to negotiate when something goes wrong."
The buy-sell should specify triggers that will set the agreement in motion. If an owner retires, for example, you may not want to allow him to continue to hold his shares. If an owner gets divorced or declares bankruptcy, you want to protect the business from the spouse and the courts. If an owner dies, you may want his shares to be sold to existing owners rather than passed to his three-year-old. (The company often takes out life insurance on each partner, so it can purchase the shares of a deceased partner if necessary.)

Read 46738 times Last modified on Thursday, 15 March 2012 17:39
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