Contracts of sale
The purchase of anything from a loaf of bread to a lounge suite or a car is a "contract of sale". It is a legal agreement between you and your customer, where you agree to sell certain goods at a certain price
Knowing when there's a contract
Knowing that a contract exists will help you should a customer wants to withdraw from a deal.
Usually, customers are entitled to withdraw from a purchase only if the goods were defective or misrepresented. Otherwise, the contract of sale entitles you to claim "fair damages" if the customer withdraws. This covers things like loss of profit, storage costs, etc.
On the other hand, if a contract exists and you want to withdraw, the customer is entitled to damages. This would cover, for example, the extra money the customer may have to pay to buy the item elsewhere.
To be legally enforceable, a contract has to have all of the following features:
Intention to create a legally enforceable relationship
It must by clear that both you and the customer intend to make a legally binding agreement.
Offer and acceptance
An offer must be made by one party and accepted by the other. Usually, this is by a customer selecting goods with a marked price and presenting them to your sales staff with the clear intention of wanting to buy them.
Such an offer is frequently unspoken and, in most cases, you simply accept the offer and sell the goods at the marked price.
However, if a customer “makes an offer” on goods that are clearly priced wrongly, you don't have to sell the goods at that price, i.e. you don't have to accept “the offer”.
Consideration
Each party must exchange or give something for what they get. Generally, the customer exchanges an agreed price for the goods you supply. However, money doesn't have to change hands when the contract is made. If it is agreed that the money will be paid later, then a contract of sale still exists.
Legal capacity
People under the age of 18 can be held to a contract only if it involves a 'necessity of life'. Food and shelter are generally regarded as necessities – surfboards and stereos aren’t.
Also, people without the capacity to understand what they are doing are usually unable to enter into an enforceable contract.
Legality of the purpose
Contracts involving the sale and purchase of illegal goods or services, or for illegal purposes, are not enforceable. For example, if a customer bought (or agreed to buy) a product that had been banned for safety reasons, or services which involved committing an offence, the contract could not be enforced.
Types of contracts
By displaying goods, you are inviting customers to make an offer to buy them – but you are not offering to sell them. If you accept the customer’s offer, you agree to sell the goods at that price and a contract has been made.
The three most common ways you can accept the offer are: in writing, verbally or by your actions (for example, handing over the goods). All three types of contracts are legally binding.
Written contracts
A written contract is made when you and your customer sign a document which you intend to be a complete record of your agreement. It should contain a description of the goods or services being sold, the price of the goods or services and any other conditions of sale.
This type of contract is completed when both parties sign it. Its terms are proved easily, so it's very useful if a dispute arises.
Verbal contracts
This type of contract is made when you verbally accept a verbal offer to buy. While it is binding in law, it is sometimes very difficult to prove in the event of a dispute.
If the price of the goods is more than $20, a verbal contract becomes enforceable only when the customer pays a deposit, pays the total price, accepts the goods or signs some note or memorandum of the contract.
Contracts by actions
Contracts by actions are very common and apply when customers select goods themselves and their only contact with staff is at the counter or checkout. When customers take goods to the checkout and offer you money, they are “making an offer” to buy those goods at a particular price. When the transaction has been rung up and payment has been made, you have accepted the offer and the contract is in place.
Contracts of sale are for everyone's protection
Once a contract has been made by any of these methods, customers can't simply change their minds and withdraw from the purchase. On the other hand, if the goods were defective or misrepresented, or some important condition wasn't met, the law may give the customer a way out.
To protect you in the event that a dispute arises, it's a good idea to have a written contract for all large transactions. This should include the following details:
- customer's name, address and phone number;
- your business name, address and phone number;
- the price of the goods;
- a description of the goods (colour, size, etc);
- when the goods will arrive;
- delivery details;
- deposits paid and any other terms of payment;
- any special conditions that apply;
- the signatures of both you and your customer.