Sale (economics)

I INTRODUCTION

Sale (economics), agreement or contract by which real or personal property is transferred by a seller to a buyer for a price, in the form of money. A sale differs from a barter transaction in that the barter transaction does not involve the transference of money.

II TYPES OF SALES

A sale of real estate must in all cases be in writing. A sale on trial, on satisfaction, or on approval is one in which the goods are delivered to the buyer for examination and use; the buyer is a bailee of the goods, and the title in the goods remains with the seller until the buyer accepts the goods. Such a sale differs from one in which goods are sold with permission to be returned by the purchaser if they are unsatisfactory; in the latter situation, the title in the goods to be purchased is immediately transferred. A conditional sale is one in which the title to the goods is not transferred to the purchaser until some particular condition has been satisfied, such as the sale of a car in which payment is made in instalments, with the title not being transferred until the final instalment has been paid.

III LEGAL SUITS

A seller who is unpaid may sue the purchaser for the price of the goods. A buyer who fails to receive the goods that were purchased or contracted for may sue the seller for damages for breach of contract.

IV WARRANTIES

In every sale, certain implied warranties are imposed by law on the seller. A seller of goods warrants by implication that he or she has a title or a right to sell the goods, that the goods are free of cumbrances or liens, and that the goods are fit to be used for their intended purpose. Goods are sold by description or by the sample with an implied warranty that they are of merchantable quality, that is, not defective, and conforming to the sample or description. A seller may also make express warranties as to the goods sold; for example, in the case of a sale of textiles, a warranty may be expressed that the goods be of a specified construction.

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A breach of warranty, express or implied, gives the purchaser the right to bring an action for breach of contract against the seller to recover damages resulting from the breach; or the purchaser may in certain circumstances rescind the contract to sell, or the sale, and refuse to receive the goods. If the purchaser knew, however, of the breach of warranty when accepting the goods, the contract may not be rescinded nor the purchase price recovered. For personal injuries suffered as a result of defects in the manufacture of a product, the purchaser may bring an action against the manufacturer for negligence, or for a breach of warranty if the injuries resulted directly from such breach.

V SHIPMENT AND CONTRACTS

Goods sold may be shipped to a purchaser on a COD (cash on delivery) basis, and can in addition to this be shipped FOB (free on board), or CIF (cost, insurance, and freight). In a COD contract, the goods are shipped to the purchaser; if the goods are shipped by a carrier, title passes to the buyer when the goods are received by the carrier. In a FOB contract, the purchaser pays transport charges from the point at which the goods are delivered to the carrier, and title passes to the purchaser when the goods are delivered to the carrier. In a CIF contract, in which the purchase price includes the cost of the goods, insurance on them, and delivery charges to their place of destination, title passes to the purchaser at the point to which the goods are shipped. In each of these contracts the place where and the time when title passes to the purchaser are of importance because, as a general rule, the risk of loss resulting from destruction of the goods must be borne by the one who has title to the goods.

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