8 Types of business contract
sale of goods from other similar kinds of contracts in
which goods change hands.
Section 2(1) covers two possibilities: an actual sale and
an agreement to sell at some future time. The essence of
the transaction is the transfer of property in goods from
the seller to the buyer. (‘Property’ in this context means
ownership of the goods.) Goods include all tangible
items of personal property such as food, clothes and
furniture: land and money are excluded from the defini-
tion. The consideration for the goods must be money,
although a part-exchange deal in which goods are
exchanged for other goods plus money will be covered
by the Act because some money has changed hands.
The law relating to sale of goods contracts will be
examined in more detail in Chapter 10.
Exchange or barter
No money changes hands in this type of contract.
Instead there is a straight exchange of goods between the
parties. The absence of money from the consideration
means that the Sale of Goods Act 1979 does not apply to
these contracts. Previously the obligations of the parties
were governed by the common law, but now the Supply
of Goods and Services Act 1982 (as amended by the
Sale and Supply of Goods Act 1994) imposes certain
statutory duties on the supplier of goods under a con-
tract of exchange.
Work and materials
Another way in which you can acquire goods is in
consequence of a contract whose main purpose is the
provision of services. If you take your car to be serviced
by a garage, the main substance of the contract is the
skill and labour of the mechanic in checking the car. The
supply of such items as brake fluid and the renewal of
spark plugs is an ancillary part of the contract.
The distinction between a contract of sale and a con-
tract of work and materials is often a fine one.
However, a contract to buy a painting from an art
gallery would be a sale of goods contract. Contracts for
work and materials are now subject to the Supply of
Goods and Services Act 1982 (as amended by the Sale
and Supply of Goods Act 1994 and the Sale and Supply
of Goods to Consumers Regulations 2002). The provi-
sions of this Act will be discussed in Chapter 10.Supply of goods on credit
There is a bewildering number of ways in which goods
can be acquired and then paid for over a period of time.
Hire-purchase, ‘interest-free’ credit, credit cards and
bank loans were all readily available before the ‘credit
crunch’, enticing us to buy more than we could probably
afford. Consumer credit – credit granted to an indivi-
dual, sole trader or a small partnership of two or three
partners – is strictly regulated by the Consumer Credit
Act 1974 as amended by the Consumer Credit Act 2006.
This Act is examined in detail in Chapter 13.
The more important forms of consumer credit agree-
ment are described below.
1 Hire-purchase (HP).This is one of the best-known
ways of buying goods on credit. HP is essentially an
agreement for the hire of goods, at the end of which the
hirer may exercise an option to purchase them from the
owner. The hirer obtains the immediate use and enjoy-
ment of the goods, but he does not become the owner
unless and until all the instalments are paid. There is a
subtle distinction between HP and a contract for the sale
of goods. You will remember that the definition of a sale
of goods includes agreements to transfer the ownership
in goods at some time in the future. An HP agreement,
however, does not bind the hirer to buy. He or she may
choose to pay for the hire of the goods and then decline
to purchase them.
2 Conditional sale.A conditional sale is very similar to
HP. The customer obtains immediate possession of the
goods in return for the payment of regular instalments.
The transfer of ownership is delayed until some specified
condition is fulfilled. The difference between the two
agreements is that the buyer under a conditional sale
agreement is committed to buy from the outset. Thus, a
conditional sale is really a type of sale of goods contract.
3 Credit sale.This is another way of buying goods and
paying for them later. Unlike HP and conditional sale
agreements, ownership of goods passes to the buyer at
the start of the agreement.267Robinsonv Graves(1935)Robinson, an artist, was commissioned to paint a portrait
for 250 guineas. The Court of Appeal held that this was
a contract for Robinson’s skill as an artist and not a con-
tract for the sale of goods, i.e. the finished portrait.