Contract for the sale of goods

When do I use this document?

A sale of goods contract template should be used if:

• you are a regular seller of goods to business customers
• both the seller and buyer are based in the UK
• you want a contract prepared more for the benefit of the seller than the buyer

What are the key features?

• cover sheet and Appendix to be completed with details of seller, buyer, goods, specification, delivery date and location, price and other additional terms
• schedule of contract terms, with 21 paragraphs over 9 pages
• provisions relating to goods specification, delivery, ownership and risk and price and payment
• warranties and remedies for breach of warranty
• exclusions and limitations on seller’s liability
• force majeure and termination clauses

What else do I need to know?

A business which sells goods to other businesses may wish to do so on the basis of a standalone contract of sale rather than on its own standard Terms and Conditions.

What terms are implied in contracts for the sale of goods?

The sale of goods on a B2B basis is governed principally by the Sale of Goods Act 1979 (“SOGA”), in conjunction with the Unfair Contract Terms Act 1977 (“UCTA”)?

Terms implied into a B2B contract for the sale of goods include:

• title to goods: an implied condition that the seller has the right to sell the goods
• encumbrances: an implied warranty that the goods are free from any charge or encumbrance not disclosed or known by the buyer
• quiet enjoyment: an implied warranty that the buyer will enjoy quiet possession of the goods
• sale by description: if the contract is for the sale of goods by description, an implied condition that the goods will correspond with the description
• satisfactory quality: an implied condition that the goods are of satisfactory quality. Goods will be of satisfactory quality if they meet the standard that a reasonable person would regard as satisfactory, taking into account any description of the goods, the price (if relevant) and other relevant circumstances
• fitness for purpose: if the buyer has made the seller aware of any particular purpose for which the goods are being bought, an implied condition that the goods are reasonably fit for that purpose (unless the circumstances show that the buyer did not rely, or that it is unreasonable for the buyer to rely, on the seller’s skill or judgment)
• sale by sample: if the contract is a sale by sample, an implied condition that the bulk will correspond with the sample and will be free from any defect making their quality unsatisfactory, which would not be apparent on reasonable examination of the sample
• delivery by instalments: unless otherwise agreed, the buyer is not obliged to accept delivery of goods by instalment

What makes goods of “satisfactory quality”?

Goods will be of satisfactory quality if they meet the standard that a reasonable person would regard as satisfactory, taking into account any description of the goods, the price (if relevant) and other relevant circumstances.  Quality of goods include their state and condition and the following are aspects of the quality of goods (in appropriate cases):

• fitness for all the purposes for which goods of the kind in question are commonly supplied
• appearance and finish
• freedom from minor defects
• safety
• durability

The implied term as to goods being of satisfactory quality does not extend to any matter which makes them unsatisfactory:

• which is specifically drawn to the buyer’s attention pre-contract
• which ought to have been revealed by a pre-contract examination carried out by the buyer
• which out ought to have been apparent on a reasonable examination of the sample, in the case of a contract for sale by sample

Can the SOGA implied terms be excluded or restricted?

Yes under UCTA, with certain exceptions and, for others, provided that the exclusion or restriction is reasonable.

For example:

• title to goods, encumbrances and quiet enjoyment: liability under these implied terms may not be excluded or restricted
• sale by description, satisfactory quality, fitness for purpose and sale by sample: liability for breach of these implied terms may be excluded or restricted by a term in the contract provided that the term satisfies the requirement of reasonableness under UCTA

The UCTA test of reasonableness, amongst other matters, requires regard to be given as to whether the non-breaching party knew or ought reasonably to have known of the existence and the extent of the term (having regard, among other things, to any custom of the trade and any previous course of dealing between the parties).