What is the common law definition or key elements of "selling" something

Question

Is there a common law definition of "sell" or some key elements?

What is required for a transaction to constitute a "sale"?

I have a situation where a license is required by statute to "sell" some specific type of equipment, and our company (a transport & logistics company) essentially operates as a middle-man on behalf of clients to purchase this equipment for them and transport it to them.

So the clients contact us and request us to purchase it from the manufacturer for them, in the following way:

1. We take an order from the client
2. We confirm with the manufacturer that the equipment is available
3. We take payment from the client which is made up of 2 parts (the exact price of the equipment that we will pay to the manufacturer + our delivery fee). The manufacturer's cost of the equipment is available to the client, and we do not charge any commission on top of that. We charge an additional fee which is for the transport of the equipment to the client.
4. We then pay the equipment cost to the manufacturer and arrange to transport it to the client.

Our business is set up as offering purchase and logistics services to clients, so it is clear to the clients that we are not the manufacturer.

So we don't stock the equipment and don't charge any commission or profit on each transaction. As we saw it, our work was to act as an agent for the client, who themselves can legally purchase the product from the manufacturer, and we think of ourselves as the purchaser and transporter, not the seller.

Recently it has been suggested that we are in fact selling the equipment and would need to apply for the relevant license.

It doesn't make sense for us to purchase a license to do something that we either are not doing, or are not profiting from, so if we need to purchase such a license to continue operating this way we would need to change our business model to cover those costs.

Are we selling it? And if so, why? Which specific thing that we are doing is the selling part, that if we eliminated it, would no longer constitute "selling" the equipment?

What is an accurate definition of selling or sale that will allow me to understand for myself whether or not we are selling the equipment?

Answer 1

Are we selling it? And if so, why? Which specific thing that we are doing is the selling part, that if we eliminated it, would no longer constitute "selling" the equipment?

What is an accurate definition of selling or sale that will allow me to understand for myself whether or not we are selling the equipment?

Sale as defined in the Black's Law Dictionary does not seem to apply to the situation you describe. But first, I'll mention some caveats that depend on the statute and the merchandise at issue.

Knowing the specific statutory language might help ascertaining the meaning and intent of the legislature to which you refer. Although you ask for the common law definition of "sale", that definition can be superseded and replaced by its statutory counterpart if the latter is specific enough (Hoerstman General contracting, Inc. v. Hahn, 474 Mich. 66; 711 N.W.2d 340, 345-346 (2006)).

Some statutes define "sale" (or a derivative word) in a way that encompasses more than the definition given in the legal dictionary. For instance, Black's Law Dictionary distinguishes between sale and barter, whereas MCL 290.753(s) states that "Sell" means to sell, trade, or barter, or to offer to sell, trade, or barter. . Even in a same jurisdiction, the statutory definition of sale/sell may vary depending on the matter being legislated. Thus, the statute/license might contain language that either equates or distinguishes "sale" and "distribution".

Other statutes mention both sales and distribution, which signals the legislator's recognition that these two words are not synonymous.

In the case of regulated goods (such as pharmaceutical products or for that industry), requiring a license might be justified from the need to deter criminal activity (such as traffic of narcotics or abuse of equipment), or to ensure that the distributor is competent to handle those goods/equipment safely. The license or statutory context could indicate the intent of requiring a license, thereby helping to determine whether you actually ought to obtain/maintain that license.

Now I'll focus on the relevant excerpts from the definitions in Black's Law Dictionary.

Sale is the transfer of the title and the possession of property. A sale consists of two separate and distinct elements: (1) contract of sale which is completed when offer is made and accepted, and (2) delivery of property.

Based on step 4 of your description, the manufacturer at no point transfers to you the ownership of the equipment. That is, you never have the title of the property being sold, whence your activity cannot meet element (1) of a sale. The mere fact that you facilitate element (2) does not suffice to situate you in a position of seller of equipment.

Moreover, delivery is defined as "The transfer from one person to another of the res or a right or interest therein, which means more than physical transfer of possession". You only perform the physical transfer of goods from the manufacturer to the customer.

Another relevant item is that you don't work for the manufacturer and you are not its agent.

Therefore, my conclusion is that your company does not sell equipment. Only the statutory language and legislative context might subject you to a licensing requirement insofar as a distributor, but that issue is beyond the situation you describe.

Answer 2

Am just a law student and don't claim any special knowledge of the field The definition of 'Sell' essentially involves exchange of a good or service for money. The nature of the transaction infers that the purchase is directly by the client given that no profit is earned therefrom. However you contradict this position when you say "we think of ourselves as the 'purchaser' and transporter". While grammatically it is correct, its legally misleading, and such a confession might be a fatal claw back at some future time. Am of the opinion that you treat yourselves as "purchasing agent and transporter" since in the latter, there's an assumption of a principal (the client) and your primary role - transporter is made clear. Given this state of things, I find that what you sell is the transport service and the purchase from the manufacturer would be a secondary service to this transaction or contract of which the law should not be concerned. Therefore its a contract of sell of services and I don't find the need to get the licence. It's however better to ascertain the law prevalent in your area for better guidance especially as regards such middleman transactions.

Answer 3

This is a close call between an agency relationship and a wholesale transaction, and if the goods are not subject to a certificate of title, determining who the buyer is at the manufacturer's stage is even more difficult.

One rule of thumb is that the person who pays for something is the buyer, so unless you are using a check written by the ultimate buyer, that looks like you are the buyer. Normally, an agent would use the ultimate buyer's check rather than their own.

Another rule of thumb is that an agency is not effective for all purposes (e.g. limiting liability) unless the ultimate buyer is disclosed. If the ultimate buyer isn't disclosed to the manufacturer, it looks like a straw man purchase, possibly to evade licensing requirements. This is particularly true if the buyer never places an order with the manufacturer personally.

For example, the arrangement you describe would not be legal for a sale of prescription drugs or firearms if the ultimately buyer was not disclosed to the manufacturer and verified.

Another issue would be credit risk and risk of loss. Suppose you are paid by the ultimate buyer with a check. If you bear the risk that the check is dishonored rather than the manufacturer, this also looks like a sale.

Ultimately, no legal issues are ever decided on general principles alone. The factual context matters.

For example, the type of licensing involved would matter. If it had a regulatory purpose, features like disclosure of the buyer would be important, but it might have a sales or VAT tax purpose instead, in which case a relevant point would be whether or not taxes were evaded relative to alternative characterizations of the transaction.