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Agreement For Sale Of Goods

Sales bring in the much needed economic activity in the country. It encourages citizens to pump in currency to the market and create the driving force behind the industrial development and higher standards of living; It is sales that take the form of exports and imports which bring in foreign exchange. Sales thus help in enhancing employment opportunities and thereby aids economic development on a macro level. Therefore, it is an activity of utmost significance and a harbinger of development. There is a need to give protection to the interests of the participants to a sale, viz the buyers and sellers; so that they may benefit themselves and the economy indirectly. This is the reason why there are legal recognition and protection given to sales under contract and commercial laws. 

In India, sales are regulated under the Sale of Goods Act, 1930 read with the Indian Contract Act, 1872, which provide enhanced protection to contracts in the form of sales.

There is also a systematic way of taxing various commodities sold based on the importance of those products. This differential taxing can be used to encourage the sale of important commodities and discourage hazardous products.

What Is A Sale?

A sale is an act where a product is given in exchange for a monetary consideration at a worth decided by the seller and accepted by the buyer. The nature of the goods should be tangible and the quality verifiable. The quantity of the goods should be measurable in units: either as numbers or according to weight/displacement. The goods may be complete or ready to be used for building another complete product. It may require packaging of specified standards in order to prevent it from disintegrating in transit.

What Is An Agreement For Sale?

An Agreement for Sale of Goods is a legal document where a seller agrees to sell and a buyer acknowledges his willingness to purchase any commodity or commodities to be used for the purpose of commercial or non-commercial activities. The agreement for sale of goods specifies all details regarding the products to be sold along with the methods of transportation/delivery and all the terms and conditions to be complied by both parties, consideration being the prime one among them. For business houses that continuously sell products, it is ideal to have sale agreements in place so that the understanding it has with its buyers, including the credit cycles. This increases convenience and prevents disputes in the long run.

What To Include In An Agreement For Sale?

An Agreement for Sale ideally begins with the purpose of the agreement, that is to say the description of both the parties and the act of buyer approaching the seller to procure the goods described at a particular rate, which is accepted by the seller. Then, the terms and conditions of the sale are described which can include the following points:

  1. Any further description of the goods including grade to be supplied by the seller.
    It is of utmost importance to describe what exactly is sold in order to avoid disputes in future. This prevents the seller from supplying lower grade products and the buyer from demanding higher value products than what was agreed and paid for.
  2. Seller’s responsibility to dispatch the goods in designated carriers: which may be through land, sea, or air.
    If the sale consideration includes the cost of transportation, the mode described in the agreement has to be complied with. For example, perishable goods are usually dispatched by air. If the agreed terms are not met with, it can result in losses to the buyer. So, this part is significant.
  3. Whether the delivery will be made together or in parts by the seller.
    It is up to the buyer requirements whether he/she will be needing the products in bulk or in parts. This depends upon the manufacturing /sale capacity of the buyer at a time and also depends upon the perishability.
  4. Buyer’s duty to insure the goods at the market value against untoward incidents in transit.
    Once the goods move out of the warehouse of the seller, it is usually the responsibility of the buyer to insure the same. The payment for insurance shall also be specified in detail.
  5. Buyer’s duty to forward the letter of credit through its banker in favour of the seller’s banker as a guarantee to cover the prices of the goods and transportation, especially if they are located in different countries.
    A letter of Credit is usually encashed for payment by the seller before handing over the consignment in most international trade. This may not be significant in intra-national/state trade.
  6. Seller’s duty to send important documents like a contract of freightment, insurance policy,bills of lading, as applicable. In international transportation especially through ships, the related documents need to be handed over by the seller through mediums agreeable to the buyer.
  7. Method of delivery – The delivery may be deemed to happen once they are handed over to the seller or his/her authorised agent. This can happen either at the seller’s warehouse, in transit, or by delivery at the buyer’s warehouse. This needs to be mentioned unambiguously.
  8. The mode of payment: for instance at the production and encashment of letter of credit from the buyer’s bank.
    The way in which payment shall be made needs to be agreeable to the buyer. It may be through cash or credit. International buyers find letter of credit as a convenient instrument for making payment from bank to bank.
  9. The currency in which payment shall be made, especially if it is an international sale. It may be a mutually agreed currency like US Dollars or Euro.
  10. The description of other formalities in shipping and whether the buyer or the seller would complete them. It may be obtaining of various clearances like customs, tax requirements and various licenses required for such transaction.
  11. The right of the buyer to reject the goods if they do not conform with the agreed grade or quality.
    The buyer needs to be empowered to reject the goods if they are not meeting the agreed standards. Penalties may be imposed on the seller in such a case. The method of return and the costs towards the same shall also be described as payable by the seller.
  12. The right of the seller to reject the delivery if the payment is not made by the buyer.
    The rejection may be at any stage. For cash transactions, it may be immediate and for credit transactions, it may be refusal for further delivery. Again, penalties may be imposed on the buyer for non payment as mentioned in the agreement.
  13. Dispute resolution clause: whether or not arbitration would be involved. If yes, which arbitrator shall decide and if not, which courts shall be referred to in case of dispute.

Looking For A Sale Agreement?

Whether you are a buyer or a seller, we have something to suit your individual need. You can use our tailor-made agreements to create your sale agreements. For us, quality is a habit. Small or big, your business is important to us. If you are not yet incorporated, you can choose our incorporation package  and establish your presence. If you wish to create a detailed agreement for sale of goods, click the button below and submit a request.