And, although there are many different kinds of contracts out there, you’re most likely to encounter contracts for either goods or services. While both provide a framework for a transaction, there are some differences between contracts for goods vs. services.
Contract for Sale of Goods
A Contract for Sale of Goods (also known as a Contract for Products) is a contract between two or more parties agreeing on the sale of goods. The quantities of goods, price per unit, total price, as well as terms of payment (generally upon delivery) are specified within the contract. Contracts for the sale of goods also have terms regarding failure or default by either party, including a provision for unforeseen circumstances that prevent the completion of the contract (“act of God” or “Force Majeure”).
Two quick but important notes about Contracts for Goods:
1- The buyer can include terms within the contract that premise their acceptance on an inspection of quality. This is known as a Destination Contract and means the seller has not completed his obligation under the contract until the goods arrived to the buyer.
2- A shipment contract is associated when a third party - common carrier - transports the goods to the seller. The seller need only safely transfer the goods to the common carrier, make reasonable arrangements for the delivery, and notify the buyer that the goods are en route. After that, any damage to the goods whilst under control of the common carrier shall not be the seller's fault, and he bears no responsibility for loss.
Contract for Services
A Contract for Services is a contract between two or more parties agreeing to the performance of an express task or service. Much like a contract for the sale of goods, a contract for services specifies the service to be performed and sets an agreeable standard of completion for these services. Service contracts also provide terms for failure to deliver the service (or meet the specified standard), as well as allowances for acts of God.
Contracts for goods and service contracts are similar in that they both place legal obligations on contracting parties and require consideration. However, the laws governing both types (Statute of Frauds and the Uniform Commercial Code, namely), the rules governing partial and complete performance and the remedial measures required when the contractual obligations are not met are dramatically different. It is important to consult with a knowledgeable attorney prior to entering into any contract.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.