Legal Information for Entrepreneurs

The Legal Aspects of Sales Contracts

Written by Samuel Muriithi for Gaebler Ventures

The level of business success that an entrepreneur enjoys is fundamentally tied to the manner in which he/she handles the aspects of buying and selling. More than ever before there is an inherent need for entrepreneurs to understand the legal aspects that control the day to day use of sales contracts.

A sale is defined as the situation where the ownership of goods is immediately transferred upon the payment of an agreed upon price.

The Legal Aspects of Sales Contracts

The laws that govern the sale of goods are detailed in Article 2 of the Uniform Commercial Code i.e. UCC. Here, the buyer is termed as the purchaser or vendee and the seller is identified as the vendor. According to the UCC, sales contracts ought to have elements of legality. These contracts are dependent on the types of sellers involved. In a sales contract an offer must be made and accepted and the sale ought to include a consideration.

The UCC provides that there are two types of sellers i.e. a merchant and a casual seller. A merchant deals in the sale of a particular good or goods on a regular basis and claims to have special knowledge on this. The casual seller only makes occasional sales and doesn't claim special knowledge. According to the UCC the two types of sellers are quite distinct; the merchant, who is taken to have better knowledge of whatever he/she sells, is gauged by a higher standard. As such merchandisers are often subjected to licensing or may be required to comply with other special regulations.

There are two types of consideration that are required in a sales contract. The first of these is price i.e. the amount of money agreed upon by both parties for the sale to occur. The second is barter i.e. where no money is changes hands but rather goods are exchanged for goods. The UCC considers both parties as vendors in this case. Price and barter only become considerations once they have been agreed upon.

The offer of sales contracts comes with some exceptions and it is these that entrepreneurs should be knowledgeable on.

In conventional contracts offers can be revoked. This is also true for sales contracts as long as they are not firm offers. A firm offer is written and signed by a merchant and it expressly signifies that the sales offer cannot be revoked. No consideration is required and the offer remains open for the indicated duration. The potential vendee may or may not accept the offer and he/she should make a decision within the timeframe indicated.

Acceptance is the second sales contract exception and it has to do with the counteroffer. In conventional contracts a counteroffer for an offer that is not accepted as is becomes a rejection of the original. In sales contracts however, such a counteroffer may be enjoined with the original as long as a stipulation forbidding this was indicated in the original offer.

Samuel Muriithi is a business owner in Nairobi, Kenya. He has extensive international business experience in the United States and India.

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