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The Finnish Sale of Goods Act (355/1987)1 isapplicable when both of the parties to a contract of sale areFinnish, or when in the contract it is expressly stated that thecontract is to be governed by Finnish law. This being the case, theprovisions of the United Nations Convention on Contracts for theInternational Sale of Goods (1980) (hereafter CISG) shall alsoapply, unless excluded in the contract. In this article, however,we shall only deal with contracts of sale which are not subject tothe CISG.
In general, the parties to a contract are free to choose the lawapplicable to the whole or parts of the content of their contract.It has to be kept in mind that the form of the contract must besuch that it satisfies the requirements set for the formation ofthe contract as required by the applicable law.
Delivery and the transfer of risk
According to the Finnish Sale of Goods Act, the delivery ofgoods from the seller to the buyer should occur at the place ofbusiness of the seller, unless the parties agree upon a differentarrangement. The delivery is considered complete when the goodspass into the possession of the buyer. The contract of sale canalso involve carriage of goods, in which case the seller or a thirdparty carrier should deliver the goods to the buyer.
Determining the time of delivery is important because it definesthe moment of passing of risk from the seller to the buyer. Savefor the provisions of the warrantees and the guarantees, if aproduct becomes defective after the delivery to the buyer, thedefects are no longer the responsibility of the seller.
The specific terms of delivery and the time of delivery arecritical points to be agreed upon when drawing up a purchaseagreement. It is advisable to agree both on the time and the exactlocation of the delivery. A timetable or schedule can also beannexed to the contract if the delivery of goods occurs in morethan one instance.
If the delivery does not take place due to a cause attributableto the buyer, the liability for risk of the goods passes to thebuyer in any case as soon as the seller has fulfilled itsobligations of delivery towards the buyer. A clause providing forthe option to return goods does not affect the passing of risk fromthe seller to the buyer.2
The delay in delivery on the part of the seller may give rise toa right of the buyer to terminate the contract if the breach ofcontract is of substantial importance to the buyer and the partiesknew or should have known about it. In such case the buyer hasvarious options provided by law besides the termination. The buyermay demand immediate delivery of goods, assign a new time ofdelivery or withhold payment of the contract price in an amountcorresponding to his claim. The buyer is entitled to damages forlosses suffered due to the seller's delay in delivery unlessthe delay has been caused by an event of force majeure. Indirectdamages, however, are not compensated.
Conformity with the contract
The goods delivered should be in conformity with what has beenagreed and described in the contract. The conformity of goods ismeasured in regard to description, quantity, quality and otherproperties, but it includes also packaging. If the latter has notbeen agreed upon in the contract between the parties, the Sale ofGoods Act requires that it should be appropriate and as expectedfor the proper preservation of the goods. If the goods do notconform with the provisions set forth in the law or what has beenagreed between the parties, the goods are regarded as defective.Furthermore, according to the law, the goods are also defective iftheir properties or use do not conform with the information theseller has provided when marketing the goods or otherwise beforethe conclusion of the contract, and which can be presumed to havehad an effect on the contract.
However, if the buyer fails to notice any defect or shortcomingof the product that was present before the conclusion of thepurchase agreement, not out of bad faith of the seller but out ofnegligence of inspection and evaluation of the buyer, there shallnot be any inconformity attributable to the seller.
According to the Finnish Sale of Goods Act as well as theprovisions of CISG, a notification of defect on delivered goodsthat is not in conformity with the contract is to be made within areasonable time after the buyer has discovered or should havediscovered such defect. In the CISG the possibility to give noticeof defect of goods is in principle limited for the period of twoyears from the coming into possession of such goods. No such exacttime limit has been stipulated in the Finnish Sale of Goods Act.Since the term â€Üreasonable time' is rathervague, it is advisable to state in the contract that the reasonabletime should not exceed, for example, two months after the goodshave come into the possession of the buyer. Relatively shortperiods of notification are one effective way of limiting theseller's liabilities.
Another significant difference between the Finnish law and theCISG lies in the fact that, under Finnish law, unless otherwiseexpressly agreed in the contract, the seller is, in principle,obliged to indemnify the buyer only for direct damages arising fromthe supplied goods. Indirect losses are compensated, however, ifthe delay or loss is due to negligence of the seller. According tothe Finnish law, indirect loss consists of the following: 1) lossdue to reduction or interruption in production or turnover; 2)other loss arising because the goods cannot be used as intended; 3)loss of profit arising because a contract with a third party hasbeen lost or breached; 4) loss due to damage to property other thanthe goods sold; and 5) other similar loss that is difficult toforesee. Under CISG the seller would be liable to indemnify againstboth direct and indirect damage.
How to further limit the seller's liability ofrisk?
Although the Finnish Sale of Goods Act is in some measure morefavourable compared to the terms of CISG as regards theseller's liabilities, it is still advisable to include a fewspecific provisions further limiting the liability in thecontract.
First of all, short notice periods mentioned above are a goodexample of such provisions. For the sake of clarity, all indirector consequential damages including for instance loss of business,contracts, good will or revenue of profits should also be expresslyruled out in the contract. Another useful contractual term to beused is a provision limiting the maximum and aggregate liability ofthe seller. The liability could be limited to e.g. a certain fixedamount or a percentage calculated from the contract price.
All these aforementioned clauses are just a few useful examplesof the possibilities the seller may use when trying to limit itsliabilities towards the other party. Nevertheless, none of theclauses should be used carelessly without actually understandingthe purpose and meaning of each clause -a leading principle fordrafting each contract.
1. In Finnish, Kauppalaki 27.3.1987/355
2. Section 16 Sale of Gods Act.
The content of this article is intended to provide a generalguide to the subject matter. Specialist advice should be soughtabout your specific circumstances.
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The characteristics of an international sale of goods contract consists of the obligation of the seller delivering the goods and transfer the property in the goods to the buyer, which for its part agrees to pay the price for the goods and take delivery of them.
The CISG requires the seller to “deliver the goods, hand over any documents relating to them and transfer the property in the goods, as required by the contract.” The CISG specifies the seller's obligations with respect to the place for delivery, arranging for the carriage of goods and their insurance, the time of ...What is the basic obligation of a seller in a sales of goods contract? ›
In the case of contracts for the sale of goods, the basic obligation is that the seller deliver the goods and the buyer pay for the goods. Article 2, however, goes further, and provides specific rules relating to shipments and deliveries of goods, as well as to payment.What are the general obligations of the seller and the buyer in a sales contract? ›
The obligation of the seller is to transfer and deliver and that of the buyer is to accept and pay in accordance with the contract.What are the responsibilities of the seller? ›
It is the duty of sellers to deliver the goods to the buyer. Then the buyers accept or reject it. If the buyers accept it then he must pay for goods. It is the law of contract of sale.What are the rights and obligations of the buyer and seller of the options? ›
The buyer of a futures or forward contract is taking on the obligation to buy and receive the underlying asset when the futures contract expires. The seller of the contract is taking on the obligation to provide and deliver the underlying asset at the expiration date.Which of the following articles in the CISG that stipulates the main responsibility of the buyer to pay for the price for the goods and take the products delivered? ›
The buyer's obligation to pay the price includes taking such steps and complying with such formalities as may be required under the contract or any laws and regulations to enable payment to be made.
Right of vendor to withhold delivery in sale on credit. In a contract of sale, the obligation to paythe price is correlative to the obligation to deliver the thing sold. Accordingly, the vendor is not bound tomake delivery if the vendee has not paid him the price.What are the rights of seller? ›
RIGHTS OF THE SELLER:
a)Right to reserve the right of disposal of the goods until certain conditions are fulfilled as per section 25 of the Act. b)Right to deliver the goods only when applied for by the buyer as per section 24 of the Act.
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Sale Obligation means an obligation to sell Full Requirements Service incurred by Client pursuant to a Sale Contract. Such obligations may be expressed in MWhs or in dollars.