Chapter 8 Types of business contract
Learning objectives
After studying this chapter you should understand the following main points:
■the distinction between different types of business contract;
■the nature of agency contracts, their formation and termination, and the
main duties of principal and agent;
■the benefits and drawbacks of using standard form contracts in
business.266
In this chapter we move away from studying basic
principles of general application to all contracts to look
at specific kinds of contracts in common use in the
business world. The fundamentals of the law of contract
are still largely governed by the common law. Over the
past 100 years, however, business transactions have
increasingly become subject to statutory provisions.
Parliament’s original aim was to translate established
common law rules into a format which would be more
accessible and understandable to businessmen. As the
years passed, so the legislators’ motives changed. Par-
liamentary interest in commercial law over the last cen-
tury has been prompted mainly by the need to regulate
and control unfair business practices.
It is important that you can distinguish between
different kinds of business transactions because different
legal principles apply to each. The rights and duties of
the parties will be determined by the nature of their
contract and the legal rules which govern that particular
kind of agreement. For example, contracts for the sale
of goods are covered by the Sale of Goods Act 1979, as
amended by the Sale and Supply of Goods Act 1994, the
Sale of Goods (Amendment) Acts 1994 and 1995 and
the Sale and Supply of Goods to Consumers Regula-
tions 2002 (SI 2002/3045), while contracts for the sale
of land are governed by the Law of Property Act 1925,
as amended by the Law of Property (Miscellaneous
Provisions) Act 1989. This chapter is designed to pro-
vide you with a brief guide to the different kinds of busi-
ness contracts and the source of any legal rules which
regulate them. The most important contracts will be
considered in more detail in later chapters.Contracts for the supply of goods
Sale of goods
The most common form of transaction in the business
world is a contract for the sale of goods. Whenever you
buy goods, whether from a supermarket, market stall,
doorstep salesman, by mail order or using the Internet,
you have entered into a contract for the sale of goods.
As we have already mentioned, the rights and duties of
the parties to this type of contract are set out in the Sale
of Goods Act 1979 (as amended). The Act applies to all
contracts for the sale of goods, from buying a sandwich
at lunchtime to a multi-million pound deal to supply
new aircraft to an airline company. A contract for the
sale of goods is defined in s 2(1) of the Sale of Goods
Act 1979 as:A contract by which the seller transfers or agrees to
transfer the property in goods to the buyer for a money
consideration called the price.This definition is extremely important because only
those contracts which fall within it will be covered by
the provisions of the 1979 Act. A closer look at the
definition will help you distinguish a contract for the