Question

Section 1(1) of the Sale of Goods Act, 1962 (Act 137) provides that, Sale of goods is a contract whereby the Seller transfers or agrees to transfer the property in goods to the Buyer for a Consideration called Price consisting wholly or partly of money. Discuss five elements of sale of goods agreements with reference to international sale contract.

Answer 1

The five critical elements of a sale of goods agreement include contract formation, property transfer, consideration, identification of goods, and legality. Warranties and service contracts can also be part of such agreements, offering additional buyer protection and services for a fee.

Step-by-step explanation:

Elements of Sale of Goods Agreements

The Sale of Goods Act, 1962 (Act 137) specifies the structure for sales agreements, establishing the necessity for clear terms which are essential in both domestic and international sale contracts. The five critical elements of a sale of goods agreement are:

1. Contract Formation - A sale agreement is a form of contract, which implies that there must be an offer by the seller and an acceptance by the buyer for it to be legally binding.
2. Property Transfer - The seller must transfer or agree to transfer the ownership (property) of the goods to the buyer.
3. Consideration - There must be a price, which can be wholly or partly monetary, that the buyer agrees to pay in exchange for the property in the goods.
4. Goods - The object of the sale must be goods; tangible items that are identifiable and agreed upon at the time of the contract.
5. Legality - The contract must adhere to legal requirements and international trade laws, where applicable, and the goods or the terms of the sale should not be illegal.

Beyond these elements, sellers may offer warranties and service contracts. A warranty is a seller's promise to fix or replace goods that fail within a certain period, enhancing buyer protection. Potential buyers may also be offered service contracts, especially for large items like cars or appliances, which cover maintenance for a set time in exchange for an additional charge.

Legal systems enforce contracts to encourage economic transactions and preserve property rights, providing security that agreements will be upheld. This is crucial for international sales, where legal enforcement might involve different jurisdictions.

Activities like exclusive dealing agreements must be carefully structured to ensure compliance with competition laws, safeguarding against anti-competitive practices that could inhibit market diversity.