Contract of Sale

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Contract of Sale


in civil law, one of the most widely used types of agreement.

According to the contract of sale, the seller is obligated to transfer property to the ownership of the buyer, and the buyer must accept the property and pay an agreed sum of money in exchange. A contract of sale belongs to the category of bilateral compensatory agreements in which, as a rule, goods and property are involved.

In socialist society, a contract of sale is intended primarily to satisfy various consumer demands mainly through retail trade. It plays a definite role in relations between socialist organizations. For example, in the USSR, equipment is sold to kolkhozes and sovkhozes by agencies of the All-Union Board for the Supply of Farm Machinery, Fuel, and Fertilizers (Soiuzsel’khoz-tekhnika), and surplus equipment, raw materials, and other materials are sold by enterprises and institutions under conditions and procedures established by law. The transactions between manufacturing enterprises, consuming enterprises, and trade organizations are based on contracts of delivery. Operations related to a contract of sale are regulated by civil codes. For example, the Civil Code of the RSFSR contains a separate chapter (ch. 21, arts. 237–54) on this form of contract. In relations between organizations, a contract of sale may involve capital or consumer goods. A contract of sale between individual citizens usually involves goods serving personal needs, such as household articles. Contracts of sale concerning certain types of property, such as apartment buildings, have set limitations that forbid exploitation of that property for unearned income. The form of a contract of sale is determined by general rules for transacting business.

The buyer has ownership rights over sold property from the moment of delivery unless otherwise stated by law or in the contract. Delivery of property to the buyer is recognized from the moment of its transfer to the buyer himself or to a shipping company or to a post office for dispatch to the buyer. Transfer of a bill of lading or other trade documents is equivalent to a transfer of property. As a rule, the risk of accidental loss or damage is transferred to the buyer concomitantly with ownership rights.

The seller must hand over an article of appropriate quality, that is, of a quality consistent with the conditions of the contract. In the absence of quality provisions in the contract, the article must meet normal quality standards. An article sold by a trade organization must correspond to the All-Union State Standards, to technical stipulations, and to the models. Failure to comply or inappropriate fulfillment by the contracting parties of the obligations previously set forth by law and in the agreement are punishable by appropriate sanctions, such as fines, penalties, replacement of articles in question, elimination of defects free of charge, and compensation for losses. As a general rule, claims arising from defects must be submitted to the seller immediately after their discovery and in no case later than six months from the delivery date of the article; claims arising from defects in construction must be submitted no later than one year from the date of the transfer of ownership to the buyer.

The contract of sale is widely used in Soviet foreign trade. It should be noted that deals between socialist countries are carried on in accordance with the General Conditions of Sale of the Council for Mutual Economic Assistance of 1968.

According to the law of capitalist states, the contract of sale is the basic form for the sale of goods, as well as real estate, securities (stocks, bonds), patent rights, and so forth. Model agreements, which are drawn up by monopolies and permit them to dictate conditions to the consumers, play a large role in regulating relations under contracts of sale. In the capitalist states of Europe, contracts of sale are regulated by civil codes. Some countries, such as France and the Federal Republic of Germany, have special trade codes. In Great Britain, where there is no single trade code, the contract of sale is regulated by a special law established in 1893 that applies to the sale of commercial goods. In the USA, individual points of the contract of sale are normally handled through legislation by the states; by 1968 all the states except Louisiana had adopted a uniform sales act. There are also federal laws that apply to special areas of civil law such as international trade and trade with foreigners.

International trade uses contracts of sale based on policies defined through many years of commercial practices, such as FOB, CIF, and FAS.


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