Contracts for the Sale of Goods

Chapter 13

Chapter Overview

The law of sales governs contracts for the sale and lease of goods. These laws are now part of the Uniform Commercial Code (UCC). Every time you buy goods and take ownership of them, a sale occurs. Many sales contracts are oral rather than written. Whether you purchase a hamburger at a fast food restaurant or a television set at the local electronics store, the law of sales covers you. In this chapter, you will learn how to better protect yourself when buying or selling a product. You will also study about the passage of title and the risk of loss for the goods you might purchase.


  • A sale is a contract in which ownership for goods is transferred from seller to buyer for consideration

  • Contract to sell occurs if you will be taking ownership at a later date.

  • Price: the money that’s paid for goods

  • Goods are all things that are movable (clothes, books, cars)

  • A merchant is a business or person who deals regularly in the sale of goods or who has specialized knowledge of the goods. (Example: car salesperson)

Uniform Commercial Code (UCC)

The Uniform Commercial Code (UCC) is a collection of laws that govern various types of business transactions.

The 3 purposes of the UCC:

  1. combines laws relating to commerce into a single uniform code
  2. simplify, clarify, and modernize the law governing commercial transactions
  3. encourage expansion of commercial practices thru customs, usage and agreement of parties

The Sales Contract

  • A sales contract may be oral or written. It needs to show that the parties have reached an agreement.

  • A contract comes into existence when acceptance is sent using any reasonable method (fax, phone, email, mail, in the store)

  • When a contract includes both goods and services, the dominant element is what determines the type of contract.
    Example: If your parents buy a new dishwasher and pay for it to be installed, the dominant element is the sale of goods (purchase of the dishwasher).

  • A firm offer is a merchant's written promise to hold an offer open (not longer than 3 months)

  • A sales contract must be in writing when the price is $500+.

Ownership and Risk of Loss in Sales of Goods


  • The right of ownership to goods is known as title. People who own goods have title to them.

  • A bill of sale shows formal evidence of ownership. It proves that you once had title, not that you still own the goods.

    Voidable title
    means the title may be voided if the injured party elects to do so. Anyone with voidable title to goods is able to transfer good title to others.

  • Five reasons a person would hold only voidable title to goods they’ve purchased:
    1 - fraud
    2 - mistake
    3 - undue influence
    4 - duress
    5 - when goods are bought from or sold to a minor or mentally impaired person

The UCC ensures that consumers receive good title when buying goods from a merchant.


  • Risk of Loss is the responsibility for loss or damage to goods.

  • It is necessary to determine who must bear the risk of loss because goods may be stolen, damaged, or destroyed after sales contract has been entered but before transaction is completed.

  • Identified Goods are goods that presently exist and have been set aside for a contract. The title passes to buyer when seller does what’s required under contract to deliver the goods.

  • Future Goods are goods that are not both existing and selected (EX: crops not yet grown)

*No one can have title to future goods. They can be the subject matter of a contract to sell at a later date.

Title and risk of loss pass to the buyer when the document of title (paper stating you have the right to receive the goods) is delivered to the buyer.

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Remedies for Breach of Sales Contracts

There are three seller’s remedies:

  • cancel the contract
  • withhold delivery of goods
  • stop delivery of any goods still in possession of the carrier

There are three buyer’s remedies:

  • cancel the contract
  • bring claim against the seller for the return of any money that has been paid
  • refuse to accept goods if they don’t conform to the contract

E- Commerce and the Law

E-Commerce or Electronic commerce is the buying and selling of goods and services, or the transfer of money, over the Internet.

How can you shop safely on the Internet?

  • Shop with companies you know
  • keep passwords private
  • pay with credit card
  • keep records of your order/confirmation #’s

The Federal Trade Commission (FTC) protects consumers by stopping unfair, deceptive, or fraudulent acts or practices in the marketplace. Also regulates e-commerce privacy.

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