Introduction
A contract for the sale of goods is one of the most common types of commercial agreement in England and Wales. The legal framework governing these contracts is primarily found in the Sale of Goods Act 1979 (SGA 1979). While these agreements are a specific category of contract, they must also satisfy the general principles of English contract law to be valid. This essay will explain the essential elements required for a valid contract for the sale of goods by first outlining the specific requirements set out in the SGA 1979, before briefly considering the general common law principles that also apply.
The Statutory Elements of a Sale of Goods Contract
The core definition of a contract for the sale of goods is provided by section 2(1) of the SGA 1979, which states: "A contract of sale of goods is a contract by which the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration, called the price." This statutory definition contains three key elements that distinguish a sale of goods contract from other agreements: the goods, the transfer of property, and the price.
Goods
The first essential element is that the subject matter of the contract must be 'goods'. The SGA 1979 defines 'goods' in section 61(1) as including "all personal chattels other than things in action and money". This broad definition covers most tangible, movable items, such as a car, a book, or machinery. The definition also extends to "emblements, industrial growing crops, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale". However, the definition excludes non-tangible items such as company shares ('things in action') and land itself. The position of computer software has been a source of some difficulty, but the courts have generally held that software supplied on a physical disk can be considered goods, whereas a pure download may not be (see St Albans City and District Council v International Computers Ltd [1996] 4 All ER 481).
Transfer of Property
The second key element is the transfer of 'property'. In this context, 'property' refers to the ownership of the goods, not simply their physical possession (SGA 1979, s 61(1)). The fundamental purpose of a sale of goods contract is to pass title in the goods from the seller to the buyer. This distinguishes a contract of sale from other transactions involving goods, such as a contract of hire, where only possession is transferred, or a bailment, where goods are held by one person for another. The SGA 1979 distinguishes between a 'sale', where property transfers immediately, and an 'agreement to sell', where property will transfer at a future time or upon the fulfilment of a condition (s 2(4) and s 2(5)).
The Price
The third statutory element is that the transfer must be for a "money consideration, called the price" (SGA 1979, s 2(1)). This requirement for payment in money distinguishes a contract of sale from a contract of barter or exchange, where goods are swapped for other goods. While the price is usually a specific sum fixed in the contract, section 8(1) of the SGA 1979 allows for it to be determined by the course of dealing between the parties or to be fixed in a manner agreed in the contract. If the price is not determined by any of these methods, section 8(2) provides that the buyer must pay a 'reasonable price'.
General Common Law Requirements
In addition to the specific elements under the SGA 1979, a sale of goods contract, like any other contract, must be formed in accordance with the general principles of common law. These essential elements are:
- Offer and Acceptance: One party must make a clear offer which is unequivocally accepted by the other.
- Intention to Create Legal Relations: The parties must intend their agreement to be legally binding. In commercial transactions, this intention is generally presumed to exist.
- Consideration: Each party must provide something of value. In a sale of goods context, the seller's consideration is the promise to transfer the property in the goods, and the buyer's consideration is the promise to pay the price.
- Capacity: The parties must have the legal capacity to enter into a contract.
It is also worth noting that, under section 4 of the SGA 1979, a contract for the sale of goods does not generally need to be in writing. It can be made orally, in writing, or implied by the conduct of the parties, making such contracts highly flexible and suitable for everyday commerce.
Conclusion
In summary, for a valid contract for the sale of goods to exist, it must satisfy a dual set of requirements. Firstly, it must meet the specific statutory definition provided in the Sale of Goods Act 1979, which requires a transfer of property in goods for a money consideration. Secondly, it must adhere to the fundamental common law principles necessary for the formation of any valid contract, namely offer and acceptance, consideration, and an intention to create legal relations. The combination of these statutory and common law elements provides a clear and comprehensive framework for the vast number of sale of goods transactions that take place daily.
References
Cases
- St Albans City and District Council v International Computers Ltd [1996] 4 All ER 481
Legislation
- Sale of Goods Act 1979
