Reading time: 4 minutes

Wherever you purchase a good or service, you are inadvertently entering into a contract. Many consumers do not realise this as there are usually no disputes that occur during these sales. These contracts are implied, and their legal standing comes from the Sale of Goods Act. This article will explain the Sale of Goods Act and how it might affect your contract in New Zealand. 

Sale of Goods Act

The Sale of Goods Act (the Act) is legislation that governs how goods and services are bought and sold. It covers everything from contract formation to the performance of the contract. Accordingly, it is crucial to understand as it underpins commercial dealings and clarifies when a seller must hand over goods to the buyer.

Consumer Guarantees vs Sale of Goods Act

Another critical piece of legislation that deals with the sale of goods is the Consumer Guarantees Act. This differs from the Sale of Goods Act as the former deals with the quality of products being sold and whether it is as advertised. Conversely, the Sale of Goods Act deals with how contracts are formed when a good or service is being provided. Likewise, the Act will affect certain parts of your contract in New Zealand. We explore these elements below.

Contract Formation

The Sale of Goods Act affects the formation of your contract. It applies where you sell a good or have an agreement to sell a good. The Act says that contract formation occurs when one party agrees to transfer property to another party in exchange for consideration. 

Consideration is something of value (usually monetary) and is an element of a legally binding contract

Performance of the Contract

The Sale of Goods Act also underpins the performance of contracts for the sale of goods. The performance of a contract is the actual carrying out of what was agreed. For example, suppose you had agreed to buy goods. The performance of the contract is when the seller transfers the good into your possession.

There can also be ambiguity in consumer contracts as to when a seller passes goods to the buyer. The Act ascertains that the seller must transfer goods to the buyer when both parties intended. This intention will either be:

  • specified in the contract; 
  • implied from the conduct of the parties; or 
  • implied from the circumstances surrounding the transaction. 

Lien

A lien is a form of security that is granted over a good that secures payment of an obligation. For example, you might be a producer who sells goods to a distributor. If your distributor cannot pay the full price of your supplied goods, you can grant a lien over them. This means that you have security in the goods until they can pay whatever they owe. Then, if the distributor cannot pay the rest, you can take back the goods. 

Remedies

If a consumer contract is not honoured or has not been fully performed, the Sale of Goods Act provides certain remedies, namely:

  • damages; or
  • specific performance.
Remedy Description
Damages

A buyer can appeal for damages if the seller refuses or fails to deliver the good. The damages will usually be set at the loss that the buyer incurs from not receiving the goods. 

A seller is also able to claim damages if they do not receive payment for their goods. They can also claim damages if the buyer refuses to accept the goods after parties enter an agreement.

Specific Performance Both buyers and sellers can also employ specific performance if either party does not receive what was promised under the contract. Specific performance is where the courts enforce the terms in the contract. Another name is ‘action for price’, where the seller enforces the contract on the buyer.

Key Takeaways

Contractual relationships are the hallmark of any commercial dealing. They underpin transactions and agreements and are legally enforceable. One type of contract is a consumer contract and the Sale of Goods Act governs this. This Act determines how contracts are formed and performed and remedies available to both the buyer and the seller. The Act also allows sellers to apply liens over their products to guarantee payment of their goods.

For legal assistance with how the Sale of Goods Act affects your contracts, contact LegalVision’s contract lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

Do sellers have to use liens?

No, if a seller has already paid for the goods, there is no need to use a lien. However, it is an option available to sellers if need be.

Will either party always receive a remedy during a breach of contract?

The courts will not always give a remedy, but they are likely to if one party breaches the contract.

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

The majority of our clients are LVConnect members. By becoming a member, you can stay ahead of legal issues while staying on top of costs. From just $119 per week, get all your contracts sorted, trade marks registered and questions answered by experienced business lawyers.

Learn more about LVConnect

Need Legal Help? Get a Free Fixed-Fee Quote

If you would like to receive a free fixed-fee quote or get in touch with our team, fill out the form below.

Our Awards

  • 2019 Top 25 Startups - LinkedIn
  • 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Winner – Australasian Lawyer
  • 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2021 Law Firm of the Year - Australasian Law Awards
  • 2020 Law Firm of the Year Finalist - Australasian Law Awards