The Sale of Goods Act is legislation that governs transactions for the sale of goods. Although the Australian Consumer Law (ACL) is now primarily used in business to consumer transactions, the Sale of Goods Act continues to apply in business to business transactions and in some business to consumer transactions. Therefore, it is important to be aware of this Act if you are a supplier or a manufacturer for businessesThis article will discuss when and where the Sale of Goods Act applies. Each state has its version of a Sale of Goods Act. While they are all very similar, this article will focus on the the New South Wales (NSW) Sale of Goods Act.

When the Sale of Goods Act Applies

The Sale of Goods Act applies in transactions where the seller agrees to transfer, or transfers, property in goods to the buyer for a money consideration. So, for the Sale of Goods Act to apply, the following elements must be present:

  1. a contract of sale;
  2. transfer of property;
  3. goods; and
  4. money consideration.

Contract of Sale

The contract of sale can either be a sale or an agreement to sell. Both types of contracts fall under the definition of ‘contract of sale’ under the Sale of Goods Act.

A 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 for the ice cream 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 some condition. For example, if you agree you are going to buy a car but the sale is conditional on you obtaining a loan for the vehicle. Because ownership of the vehicle has not transferred, this is an ‘agreement to sell’.

Transfer of Goods

For the Sale of Goods Act to apply, the consequence of the contract must be a transfer of goods. This means that ownership of the goods must pass from the seller to the buyer. The Sale of Goods Act only applies when the buyer gets the goods. That buyer must receive unrestricted ownership of whatever they purchase.

Therefore, contracts for leases or conditional ownership of goods do not fall under the Sale of Goods Act. In most cases, ownership of the goods will transfer when the parties intend for it to transfer. The court looks at the terms of the contract, the conduct of the parties and the circumstances of the case when deciding what the parties intended.

What is a ‘Good’?

The contract must be for the purchase of ‘goods’. ‘Goods’ 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 service, such as a contract between an accountant and a business.

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

For example, you pay a builder to build a table. Are you paying for the table (which is a good) or are you paying for the builder to build the table (which is a service)? If the table is prefabricated and the builder is simply assembling it, the primary substance of the contract is the table. However, if the table is a custom piece and the builder is exercising a special skill in building it, it may be classified as a contract for service.

Money Consideration

In exchange for the goods, the buyer must pay a monetary price. The price is set by the contract or determined by the parties. Where the parties do not set a price, the buyer must pay a reasonable price. 

Key Takeaways

The Sale of Goods Act regulates contracts for the sale of goods in commercial transactions. It works alongside other law, and is relevant when goods are transferred in exchange for money.

It is important to know when the Sale of Goods Act applies, as it may give rise to implied rights or obligations in your commercial transactions. If you have any questions, contact LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.

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