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How Understanding the Sale of Goods Act Can Aid your Business

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The information contained in this article is for information purposes only and is not intended to constitute legal advice. If you require further information our commercial team would be more than happy to assist you. Please contact us at [email protected] or call us on 02920 095500 to speak to one of our team. 

Many businesses which sell and buy goods routinely will be familiar with the Sale of Goods Act 1979 (SOGA) and its benefits.

The Act governs legal contracts between parties, and not only ensures that their legal rights are protected when exchanging property, but also that the quality and price of the items are as stated.

However, its function is wider ranging than this. It also provides vital information to the buyer and seller detailing what to do in the event of certain unforeseen, but common, issues.

These could include: 

  • Informing you in how to approach negotiations into the contract;
  • Informing you in the event of a breach by your own business, what your exposure to risk may be;
  • Informing you what rights of action you can take, in the event of a breach by the other party to the contract.

Payment dates  

When entering into a contract, your business and the other business will most likely negotiate a date when payment will take place in return for the goods sold by the seller.

However, what may be less commonly known, is that according to the Act time is not of the essence when it comes to the agreed payment date. This means that should the buyer fail to pay on the agreed date, the seller does not have the right to treat the contract as terminated, but only to sue for damages.

This is detrimental for the seller, as there is less onus placed upon the buyer to pay on time, as the seller suing for damages involves time and cost. The potentially increased risk of the buyer not paying on time is also undesirable as it could cause cash flow issues for the seller.

However, if in the contract the seller stated that they required payment of the essence, the default SOGA position would no longer apply, and the seller would be able to treat any late payment as the termination of contract.

Delivery dates 

Where a date has been agreed for delivery of goods, it is likely that time is of the essence. This means that should the seller fail to deliver on the agreed date, the buyer is free to treat the contract as terminated and go elsewhere to buy the goods. This position is problematic for the seller as they could lose out on a potentially lucrative contract due to a late delivery.

However, if in the contract the seller negotiated that for the delivery dates time is not of the essence, their exposure to risk in losing out on valuable contracts would be reduced.

Knowledge of sale of goods legislation can help your business achieve the best result possible in contractual negotiations, in maximising business certainty, and reducing financial risk.