What is the Sale of Goods Act and Does It Affect Me?

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Table of Contents

• When the Sale of Goods Act Applies
• Contract of Sale
• Transfer of Goods
• What is a ‘Good’?
• An Exchange of Money
• Implications for Buyers
• Key Takeaways

The Sale of Goods Act (the ‘Act’) governs sale transactions between businesses. You should be aware of the Act if you are a supplier or a manufacturer of goods for businesses. Each state has its version of the Sale of Goods Act. This article will focus discuss when and where the Sale of Goods Act applies, focusing on the New South Wales (NSW) Act. 

When the Sale of Goods Act Applies

The Sale of Goods Act applies when the seller agrees to transfer, or actually transfers, the ownership of specific goods to the buyer in exchange for money. So, for the Sale of Goods Act to apply, the following elements must be present:

1. a sales contract;
2. transfer of property;
3. goods; and
4. an exchange of money.

We explore each element in detail.

Contract of Sale

The contract of sale can either be an outright sale or an agreement to sell. Both types of contracts fall under the definition of ‘contract of sale’ under the Act. An outright sale occurs when ownership of the item passes immediately from the buyer to the seller. For example, when you buy ice cream from a shop, you pay, and it immediately becomes yours.

An agreement to sell occurs when ownership of the item is going to be transferred at a future time or is subject to a certain condition. For example, you might agree to buy a car, but the sale depends on you securing a loan for it. Since ownership has not been transferred until the condition is met, this is an ‘agreement to sell’.

Transfer of Goods

For the Act to apply, there must be a transfer of goods between the seller and buyer. This must mean that the buyer becomes the new owner of the goods. The Act only applies when the buyer receives the goods. That buyer must receive unrestricted ownership of whatever goods they purchase. Therefore, contracts for leases or conditional good ownership do not fall under the Act.

In most cases, ownership of the goods will transfer when the parties mutually intend for it to transfer. If you end up in a legal proceeding or dispute, the court will determine what you and the other party intended by considering the: 

• terms of the contract;
• conduct of the parties; and
• circumstances of the case.

What is a ‘Good’?

The contract must be for the purchase of ‘goods’, which are tangible objects. Under the Act, ‘goods’ are not:

• attached to the ground; 
• part of the land;
• money;
• intangible property, such as intellectual property; or
• contracts for services, such as a contract between an accountant and a business.

In some cases, it can be difficult to differentiate between service contracts and contracts for goods. To decide whether a contract is for goods or services, consider the primary substance of the contract.

An Exchange of Money

In exchange for the goods, the buyer must pay a monetary price. You may decide this price with the buyer or set it out in a contract. Where the parties do not set a price, the buyer must pay a reasonable price. 

Implications for Buyers

The Act implies certain important terms in contracts for the sale of goods unless the parties decide to exclude this legislation from the contract expressly. Some of these implied terms mean the buyer will have assumed possession of the goods. For this to occur, the goods must: 

• not belong to a third party;
• match their description;
• be fit for purpose and of merchantable quality; and
• match any sample provided.

Many of these implied terms are similar to the consumer guarantees provided by law, such as in the Australian Consumer Law (ACL). 

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Key Takeaways

The Sale of Goods Act regulates contracts for the sale of goods in commercial transactions. It works alongside other laws and applies when goods are transferred in exchange for money. You must know when the Sale of Goods Act applies, as it may give rise to implied rights or obligations in your commercial transactions.

If you need help with your contract, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.