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Sales Law

Contract Formation

A contract for the sale of goods can be made in any manner that shows agreement between the buyer and seller. A contract may be made orally or in writing or through any other conduct by both parties that acknowledges the existence of a contract.

To form a contract, one of the parties must make an offer, the other party must accept the offer, and consideration, or something of value, must be exchanged. An offer may be revoked without any loss to the offeror if the revocation is made before the other party accepts the offer and gives consideration. However, an offer may not be revoked for up to 90 days if it is (1) accompanied by an assurance that the offer will be kept open; (2) made by a merchant; and (3) in writing signed by the offering merchant (U.C.C. § 2-205).

If a party accepts an offer but in the process of accepting changes material terms of the offer, the acceptance may be considered a counteroffer. A counteroffer eliminates the first offer, and no contract is formed until the original offeror accepts the counteroffer and consideration is exchanged. In contracts between merchants, additional or different terms by the offeree become part of the contract unless (1) the offer expressly limits acceptance to the terms of the offer; (2) the new terms materially alter the contract; or (3) the offeror objects within a reasonable time.

Many basic principles of contract law also apply to the sale of goods. The STATUTE OF FRAUDS requires that an agreement to sell goods at $500 or more must be in writing or it cannot be enforced in court. The writing must be signed by the party to be charged, it must contain language indicating that a contract has been made, and it must identify the parties to the contract and the quantity of goods sold. There are a few exceptions to the Statute of Frauds.

A sales contract that is UNCONSCIONABLE may be struck down in whole or in part by a court. A sale is unconscionable if a person in a superior bargaining position dictates terms that are grossly unfair to the other party. A court will determine whether a sale is unconscionable by examining the circumstances at the time the contract was made. Courts rarely find unconscionability in sales between merchants because merchants generally are more sophisticated in sales negotiations than are non-merchants.

Parties to a sale sometimes do not include all the terms of the sale at the time the agreement is made. Such omissions will not destroy the agreement if the parties intend to add terms at a later date. If the parties wish to modify an existing sales contract, the modifications should be in writing if they increase the value of the sale to $500 or more.

Additional topics

Law Library - American Law and Legal InformationFree Legal Encyclopedia: Roberts v. United States Jaycees to Secretary of StateSales Law - Contract Formation, Issues Arising Prior To Performance, Seller's Obligations, Warranties, Buyer's Obligations