Contracts and Sales Multistate Bar Practice Exam

What type of contract allows the buyer to return goods if they cannot resell them?

1. Sale or return contract

2. Sale on approval contract

3. Standard sales contract

4. Contract for services

The correct answer is: Sale or return contract

A sale or return contract is specifically designed to give buyers the ability to return goods if they are unable to sell them. This type of contract is beneficial for buyers, particularly in retail contexts, where they may want to take inventory on a trial basis. If the buyer does not sell the goods, they can return them to the seller within an agreed timeframe. This arrangement provides flexibility and minimizes risk for the buyer, as they do not have to commit to permanently purchasing inventory that may not sell. The conditions for returning the goods, including timelines and procedures, are outlined in the terms of the sale or return contract. In contrast, a sale on approval contract allows the buyer to take goods for a specific time period to evaluate their suitability without the obligation to purchase unless they approve of the goods. A standard sales contract usually does not provide the buyer with the option to return goods post-purchase, and a contract for services typically deals with the provision of services rather than the sale of goods. Thus, the sale or return contract is the appropriate choice for situations where the buyer wants the option to return unsold goods.