Difference Between Sales and Services

English law started just after the Norman conquest of 1066, like thousand years ago before that law was administrated by local lords in local courts that is feudal courts.

A contract is an agreement between two or more parties who wish to create a legal relationship, which is enforceable by law. (Smith and Keenan ENGLISH LAW) but there must be a reason and intention to enter into a legal relationship, there must be an offer and acceptance because this is the agreement. There are cases in which there is a requirement of written formalities in short a contract involves an offer acceptance and consideration. There are many types and kind of contracts depending on what for the contract is.

Management of contracts is a fast track procurement process and all about documentation, deadlines, budgets, commitments, workflow, secure access and analysis tools to analyze certain things. It can be summarized as the process of systematically and efficiently managing contract creating, execution, and analysis for the purpose of maximizing financial and operational performance and minimizing risk. Common commercial contracts include employment letters, sales invoices, purchase orders, and utility contracts. Complex contracts are often necessary for construction projects, goods or services that are highly regulated, goods or services with detailed technical specifications, intellectual property (IP) agreements, and international trade.

Implementation and following the contract rules is quiet useful in any field because by having a contract people are bound to perform their duties and functions according to the decisions taken before starting any activity and commitments pre-allocated otherwise there will be lot of problems and deflects among the parties.

Contract management in United Kingdom can be broadly divided into three groups

Relationship management

It is a management of a contract between two parties in order to resolves issues and tensions in a constructive and efficient manner also it is regarding identifying and solving problems earlier.

Contract administration

It deals with the written formalities which include the formal governance of the contract and changes to be made to the contract documentation.

Service delivery management

It makes sure that the service delivered should be according to the contract as agreed between the parties.

Acceptance, offer and settlement of contract

Contract depends upon an offer and acceptance. One party makes an offer offeror and the other one if accepts offeree gives a binding shape of contract. It is worth mentioning here that invitation to treat is not an offer for example advertisements etc. Contract requires an offer, acceptance and consideration. Consideration is something paid usually money. Acceptance can be oral or written but silence is not an acceptance. Invitation to tender is invitation to treat where as other party’s priced tender is an offer. If the first party accepts this priced tender we have a contract.

Analysis of management of contracts and applicable laws

English law has a body of rules known as ‘the law of contract’ which is applicable to all contracts of any kind according to the principle. It is quiet difficult to draw a line between contracts specifically for goods and genera rules.

Parliament passed the law of goods act in 1893 but as it was not clear and there were many problems so it was amended in 1979. There are many provisions which are not only for sale of goods but also for general contracts like provisions for damages are same in all the cases. Section 2 of the sale of Goods Act 1979 defines a contract of sale of goods as ‘a contract by which the seller transfers or agrees to transfer the property in goods to the buyer for money consideration called the price’. It means that seller is agreed on transferring the ownership of goods to the buyer and buyer will pay money for that and there are many things to be agreed upon when entering into a contract like quality of goods etc.

Section 1 of the Sale and Supply of Goods Act 1994 substantially updated section 14 of the 1979 Act. ‘Satisfactory quality’ is now defined by section 14(2A) – ‘goods are of satisfactory quality if they meet the standard that a reasonable person would regard as satisfactory, taking account of any description of the goods, the price (if relevant) and all the other relevant circumstances’

‘Satisfactory quality’ is further defined by section 14(2B) of the 1979 Act, so that the quality of goods ‘includes their state and condition and the following (among others) are in appropriate cases aspects of the quality of goods –

(a)  Fitness for all purposes for which goods of the kind in question are commonly supplied,

(b) Appearance and finish,

(c)   Freedom from minor defects,

(d)  Safety, and

(e) Durability’.

Now there are two types of sales domestic and international sales. Domestic sales mean with in England and Wales. There are many international sales which are not under the English law but many of them are governed by English law because of the reason that English law is more closely connected with the transaction or it depends on the wish and will of parties. It is worth mentioning here that sales of goods are quite different from sale of land. Under s. 61(1) of the sale of goods Act 1979 a contract for crops or minerals is a contract for sale of goods but still if anyone is going to sell farm it will be treated as contract for sale of land though there were growing crops as well. In some cases court took it as two separate contracts that is one contract for the sale of farm and the other for the sale of crops as in English Hop Growers v. Dering (1928) the owner (defendant) of the farm agreed to sell hops only to the plaintiff. Owner sold the farm when the crop was enough mature and court took it as two separate contracts one for selling farm and the other for selling crops and practically defendant was in breach of contract with the plaintiff. So that’s why it is quiet necessary to think before going in to any contract. Also an exchange for goods (barter) is not a sale as stated in s. 2 of 1979. But still it is possible to do it by analyzing the value of goods and than going in to a contract for sale like in Aldridge v. Johnson (1857) where 32 bullocks valued at £192 transferred by one party and 100 quarters of barley worth £215 to be transferred by the other party.

Section 2 of the sale of goods Act 1979 draws a distinction between sales and agreements to sell. Section 2(4) provides: ‘where under a contract of sale the property in the goods is transferred from the seller to the buyer the contract is called a sale.’ Section 2(5) states: ‘where under a contract of sale the transfer of the property in the goods is to take place at a future time or subject to some condition later to be fulfilled, the contract is called an agreement to sell.’ In English law it is possible that ownership can be passed without transferring of goods by simple agreement.

Liability is concerned with problems in dealing between the parties. It is about to what extent a party is faulty. The consumer protection act 1987 is aimed to impose liability for defective products on producers of products. A seller may be a producer or may be they are not manufacturing goods they sell them as if they are their own. A seller may also come under the criminal liability if seller is dishonest in dealing. For example a second hand car dealer who turns back the odometer to show the car has covered lesser miles than actually it had done this is a criminal offense under the trade descriptions Act 1968. In this case with criminal law civil law can also be enforced by buyer claiming that seller was dishonest in showing the mileage but this remedy is problematic and expensive for the buyer where as by enforcing criminal law the advantage is that all the expenses will be on local criminal law enforcing bodies but the disadvantage here is that criminal law is about punishing the guilty and not about compensating the victim.

Sometimes sellers misrepresent the facts for example in case of Oscar Chess v Williams (1957) the seller was exchanging his car with the new one with a dealer. The buyer asked him how old the car is and he said it is a 1948 Morris. Though car was 1939 Morris but there was a great difference between the market price of both the models. Actually the log book was altered by the previous owner so as to prove it to be a 1948 model. Later when the buyer checked the cylinder block he found it to be a 1939 model and there was no doubt about the evidence that the seller stated it to be a 1948 model but majority of court of appeal held that he had not contracted that it was a 1948 model. This is a fact that it was not in contract but the statement was a clear misrepresentation though seller did not know which model exactly it was as previous owner sold the car fraudulently. It should be noted that not all of the terms of contract are concerned with making statements of fact. Many terms contain promises as to future conduct and they are not misrepresentation. For example promising of delivering goods next week is not in the category of misrepresentation. The statement of opinion is considered to be a statement of fact as in case of Oscar v Williams the seller was of the opinion that the car is 1948 Morris and he was not misrepresenting his state of mind as he himself was unaware of the fact. During 1950s it was felt that rules about misrepresentation were unsatisfactory and change in law was recommended. Now according to section 2(1) misrepresentation Act 1967: where a person entered in to a contract after a misrepresentation has been made to him by the other person and he suffered loss than the other person who misrepresented the facts will be liable to damages until and unless he had reasonable grounds to prove that misrepresentation was not made fraudulently. So a plaintiff who entered in to a contract by misrepresentation can recover damages by showing that the defendant was fraudulent.

Buyer may have claims against manufacturers sometimes seller and manufacturer are the same person in such a case there is no problem but where they are not same than manufacturer may have entered in to a separate contract with a buyer like in the form of guarantee. Of course the manufacturer often be liable in the contract to the person whom it has supplied the goods and buyer therefore be able to start off a chain of actions in which the buyer sues the retailer, the retailer sues the wholesaler and the wholesaler sues the manufacturer. Consumer protection Act increases the possibility of an effective remedy to someone who suffered from defective goods. Liability is on manufacturer and if the goods are imported than first person who is liable will be the one who imported those goods.

By offering a false trade description one will be liable to criminal offense. The trade description Act 1968 covers such kind of offense.

Under section 12(1) the buyer is generally entitled to reject the goods where he see the breach of contract or he can claim damages he suffered from. Under section of the sale of goods Act a seller can exclude his/her liability only in case of different intentions a contract is showing. Late performance or delay in job may results in termination of the contract as it falls in the category of contract breach if time factor is important and included in the contract.

The 1979 Act contains three sections which deal with the damages. In Section 50 if a buyer refuses to accept and pay for goods without any reason or wrongfully than a seller can sue a buyer and similar is the case with seller if he refuses to sell goods wrongfully a buyer can sue in such condition according to the section 51. In section 53 if there is a breach of warranty by seller than a buyer can not reject goods but claim price reduction or damages for warranty. The Act gives a right to unpaid seller to sue a buyer for the price or damages. The provision s39 says: if goods have been passed to the buyer and he didn’t pay than a seller has a right to lien on goods or retain them for the price, right to stop the gods in transit, right of resale. If goods are still in possession of seller than he has a right of withholding them including other remedies.

Difference between sales and services

A service should be intangible, instantly perishable  and should not be storable or transferable.

It is clear that there are many contracts in which there goods are supplied as part of package which also includes the provision of services. Some of them are treated as contract of sales but some are considered as contracts for works and materials so it is clear here that a contract of sales does not apply to contracts of work and materials.

According to supply and sale of goods Act 1982 some rights are statuary and need not to be mentioned in contract

That the supplier will carry out the service with reasonable care and skill

That the work will be carried out in reasonable time (unless timeframe has been specifically agreed)

That the work will be carried out at reasonable cost (unless cost has been specifically agreed)

Let’s take an example of a person taking his car to a garage for service after fitting some new parts does not lie in the category of sale. In this case both the parties could enter in to two contracts if they wish one can be contract for sale and the other one for contract of service but normally it does not happen. There are some situations where effect of sales seems dominant and in some cases work element is large in such cases it is possible to identify the type of contract but in some cases there is a situation of confusion where there is a substantial element of both that is property transfer and work. Courts adopted different tests in order to overcome such confusions as in Lee v. Griffin (1861) a contract by a dentist to make and fit dentures for a patient is considered to be a contract of sale on the grounds that at the end of the day there was a discernible article which was to be transferred from the dentist to the patient while in Robinson v. Graves (1935) a contract to paint a portrait was one for work and materials as ‘the substance of the contract is the skill and experience of the artist in producing a picture’. There are differences of opinion and situations are impossible and confusing to deal with. The way in which the parties set up the transaction may sometimes solve the problem of classification. For example if I select length of a cloth for myself, pay for it and then ask tailor to make a suit from it then it is likely to be two contracts one for the sale of cloth and other to make a suit. But in this case quality of work and material will be the responsibility of tailor. During a service of a car if a garage supplies and fits a new tire to the car as far as service is concerned it is the responsibility of garage to ensure that the tire is fitted with care and if a tire fitted carefully may be having a defect of manufacturer and blows out when the car is driven the garage will be liable for that because the tire was not merchantable. Now there are cases in which there is a free issue of materials like sometimes customer himself provides material, for example a customer may collect supplies of steel from a stockholder and deliver them to a fabricator to make it according to the specification. Suck kind of transactions does not involves change of ownership as it belongs to the customer such a contract would be for the services of fabricator. The confusing stage in such cases will be when a finished product is made of materials partially supplied by the maker and partly supplied by the customer. Here the decision lies in who supplied the main material.

Introduction of service tax on software created many problems and confusions that where and in which category they lay either to treat them as goods or as service.

In Tata Consultancy Services v. State of Andhra Pradesh (2005), it has been held that canned software (i.e. computer software packages sold off the shelf) like Oracle, Lotus, Master-Key etc. are ‘goods’

In Bharat Sanchar Nigam Ltd. v. UOI (2006), following extract from decision in case of Tata Consultancy Services v. State of Andhra Pradesh was quoted with approval and adopted, ‘A ‘goods’ may be a tangible property or an intangible one. It would become goods provided it has the attributes thereof having regard to (a) its utility; (b) capable of being bought and sold and (c) capable of being transferred, delivered, stored and possessed. If a software, whether customised or non-customised satisfies these attributes, the same would be goods. It was observed that whether goods are in corporal or corporal, tangible or intangible, they must be deliverable’.

Advantages of CISG membership

Growing from an original group of 11 countries in 1988, the Convention is now the law in more than 70 nations. It is deemed important to follow the CISG laws for international trade specially when you are trading on a large scale and enter in to big markets. Being member of CISG that is convention on international sales of goods is very useful and has many advantages being uniform international law.

As each and every country is having his own laws and regulations and when it comes to international trade chances of facing legal problems are more with an unfamiliar system of law so CISG is a better option to minimize the risks of legal difficulties as it is same for all. It facilitates the international trade and reduces the uncertainty because there is a uniform rules set for commercial transactions. The great merit of the CISG is that it removes a substantial barrier to international trade by providing a unified and simplified legal framework within which international sales can operate.

Recommendations

As some times the situations or taking decisions are very confusing in law for sales of goods Act. It is necessary to be careful while going in to a contract and we need to understand the laws for sales so that we may know our responsibilities if we are buyer or seller and as far as CISG is concerned it is really important for international trade as it makes ways easier to understand laws and makes standard for all the countries so it should be followed and implemented for any international trade. Rules and concepts should be more simplified for making decisions so that it is easier to know who is faulty and who is liable for damages. Rules should be simplified and specific to avoid unnecessary claims for damages from different parties to the contract. Customers should know their rights when they are buying goods they should know what are laws and rules for their benefits and concern it will help in improving quality of products and a buyer will get what he wants that serves his satisfaction.

Conclusions

Laws for sales of goods needs to be understandable as otherwise one can face legal problems. Supply of services is different from sale of goods as stated in many cases though sometimes it is confusing to know whether it comes in sale of goods or services as in case of software. Before signing a contract everything should be clear to avoid claims and unnecessary actions. One should understand terms of the contract so that they must be followed. CISG is really important for international trade as it is a set of laws for all members which avoids legal implications. As these laws are internationally known so all the member countries can understand them and follow them otherwise following laws which are new like if someone is trading in two or more different countries he has to understand the rules and regulations for trade in that country which is problematic so to avoid such confusions implementing CISG and following it is very fruitful in international trade depending upon the parties if they both are agree to follow CISG.