A sale of goods
contract sets out the terms and conditions of a transaction between the buyer
and seller for the products, services, or works; the contract should clearly
define the following:
For a contract to be
classified as valid, there must be the elements of Offer and Acceptance. An
offer occurs when one party presents a consideration of value they wish to
exchange for products, services, or works that also have value.
The offer is set out in
the contract terms, which another party must accept for the contract to become
valid or enforceable after an offer is presented. It can be accepted or
declined, and an acceptance means that the proposed offer was accepted.
Acceptance within a
contract is an essential element that ensures contracts are only formed by
being acknowledged, agreed upon, and accepted. However, an acceptance does not
need to be said or written to be conveyed, as it can be determined through
conduct.
For example, an offer
to cut someone’s grass for £25.00 that is cut without a verbal acceptance of
the agreement means that the action has signified acceptance of the agreement,
making the charge of £25.00 payable upon the completion of the grass cutting.
Consideration can be
money but may also be a service, an object or anything of value, such as a
right, interest, or benefit. It should be remembered that past consideration or
value is typically invalid when two parties are forming a contract.
During the formation of
a contract, there must at some point be mutuality or the intention to form a
contract, which means the parties involved in the contract must intend to
create a valid, enforceable contract. Within business transactions, it is often
understood that the relevant parties expect to be bound to the contract, giving
rise to the paradigm known as the “battle of the forms”.
A battle of the forms
occurs when two parties negotiate the terms of a contract, where each party
wants the contract to be formed based on their terms and conditions taking
precedence.
For example, when the
buyer offers to buy goods from the seller on the buyer’s standard contract
terms, and the seller purports to accept the offer based on the seller’s standard
terms.
Within this situation,
the battle of the forms is often won by the party whose terms and conditions
were accepted, the last party to put forward terms and conditions that the
other party did not explicitly reject.
The parties intending
to enter into a binding contract can avoid uncertainty surrounding the
intention to form a valid contract by putting their contract in writing; in the
above example, the buyer could have created a written contract of sale with the
seller, which would have demonstrated the buyer’s intention regarding the
contract.
Not all parties are
eligible to form a contract, as there must be the capacity to form a contract,
meaning that the parties have the legal ability to sign the contract. The
capacity may involve the mental capacity of a party, indicating the ability to
understand the contents of the contract.
This precludes
individuals with cognitive impairments or who are incapacitated through other
means from being able to agree to a contract. Capacity can also refer to
someone’s ineligibility through age, bankruptcy, or past or current criminal
activities.
International sales
contracts are the riskiest form of contract, as little is often known about the
buyer. The currency, tariff, insurance, and title risks must be considered,
especially concerning bills of lading upon which monies are usually borrowed.
The buyer invariably requires possession to release the goods from the port.
Globalising the world’s
economy has made it easier for domestic and international organisations to
trade products and services across the globe. With the advent of worldwide
logistics, e-commerce, and more accessible language translation, global
marketplaces have been opened to businesses of all sizes. The disadvantages and
commercial risks of conducting trade on a worldwide basis are:
Governments must ensure
their country’s wealth by promoting the use of local resources in which they
can be the most competitive by utilising training, local market development and
research to increase the financial stability of the trading environment to
negate any harmful effects caused to the environment through global warming and
decreasing their carbon footprint. Free Trade Agreements
must be encouraged to harmonise the legal standards of international trade to
minimise its inherent risks and harm to the environment.
- The buyer.
- The seller.
- A description of the products, services, or works.
- Any terms specific to the contract.
- Payment terms.
- Delivery of the products, services, or works.
- Guarantees and warranties.
- Shipping Customs and Duties.
- Exchange Rates.
- Language Barriers.
- Cultural Differences.
- Servicing Customers.
- Returning Products.
- Intellectual Property Theft.
- Transactional: time-related in terms of exchange rate volatility between ordering and payment for goods and services.
- Translational: in terms of financial resources held in foreign subsidiaries.
- Economic or Operating: in terms of future exchange rates affecting the valuation of cash flows and capital.
- Fixed: Exchange rates are fixed or allowed to fluctuate within narrow margins against a nation’s currency value, either in terms of gold, another currency, or a basket of currencies.
- Freely Floating: A freely or flexible floating exchange rate is freely determined by market forces without intervention.
- Pegged: Exchange rates are “pegged” against a nation’s currency value, either in terms of gold, another currency, or a basket of currencies.
- Managed Float: The nation’s fiscal policy influences the exchange rate, which is loosely controlled by the nation’s central bank intervention.
- Quota: A system imposes restrictions on the specific number of goods imported into a country, allowing governments to control the number of imports to help protect domestic industries.
- Tariffs: That increase the price that consumers pay for imported goods and services in line with the fees charged by domestic producers.
- Subsidies: given to assist domestic industries in competing with foreign markets to increase their competitiveness by influencing the pricing of domestic markets.
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