KEY TAKEAWAYS

  • Goods are items that are movable at the time of identification to the contract
  • The Uniform Commercial Code governs the sale of goods
  • Goods have both expressed and implied warranties

In commerce, every business transaction revolves around goods. Goods are things that can be identified when the contract is formed. This very broad definition includes a host of things, from cattle to trade secrets. For merchants, vendors, and consumers, understanding the type of a good that is involved in the transaction is essential to contract creation, performance and pursuing a remedy in the event of a breach.

Tangible vs. Intangible Goods

Goods usually fall into two categories: tangible goods and intangible goods. You can see, feel, or touch tangible goods. Tangible goods include machinery, business equipment, textiles, and livestock. They also include computer hardware, medical equipment, and more.

Intangible goods lack a physical form or shape. This class of property is also known as intellectual property. It includes mobile apps, software, patents, trademarks and goodwill.

Knowing a good's classification helps determine the law that governs the product.  Intellectual property rights typically cover intangible goods. The law usually involves licensing and agreements. Property rights usually govern tangible property. These rights extend to the ownership, possession, and transfer of the good.

Fungible vs. Non-Fungible Goods

Goods may also be classified as fungible or non-fungible. Fungible goods are assets of the same kind. They are interchangeable because they have the same quality and value. This includes gold, grain, oil, cash, stocks, and bonds. 

In contrast, non-fungible assets are unique and cannot be swapped for another good. Some examples of non-fungible goods include real estate, art, antiques, and gemstones. 

Understanding the difference between these two categories is essential. The legal enforcement and solutions may vary depending on whether a good is fungible or non-fungible. For instance, contracts involving fungible goods would need specific identification to be considered valid. In contrast, contracts for goods wouldn't require detailed specifications; they would only need to specify the quantity to be considered legally binding.

Consumer Goods vs. Commercial Goods

Goods can be classified based on tangibility and fungibility and can also be categorized as consumer or commercial products. Consumer goods are products intended for sale and use by the public, such as household items, personal care products, and electronics.

On the other hand, businesses and organizations utilize commercial goods. When dealing with consumer and commercial products, it's important to remember that they are subject to consumer protection laws.

These regulations safeguard consumers from business practices when purchasing goods and services. Various organizations, such as the Consumer Financial Protection Bureau, the Food and Drug Administration, and the Consumer Product Safety Commission, along with state and federal agencies, oversee the enforcement of these regulations.

Commercial goods are also heavily regulated; one of the most prominent regulators of commercial goods is the Federal Trade Commission (FTC). The FTC works to prevent fraud, deception, and unfair business practices. It also enforces federal antitrust laws that could cause higher prices, fewer market options, or less innovation.

Durable vs. Perishable Goods

Goods may also fall into the subcategory of durable or perishable products. Durable goods do not wear and tear easily, so consumers are expected to own them for a longer period of time. Some common durable goods are furniture, electronics, appliances, and jewelry. 

Perishable goods have an expiration date. Think of products like bread, eggs, and milk. Also, think of items like hair products and flowers. These goods cannot be used for a long period of time, and at some point, they will expire.

The Perishable Agricultural Commodities Act of 1930 regulates many perishable goods. This Act governs the sale of perishable agricultural goods in interstate and foreign commerce. It was made to protect growers, shippers, and sellers of perishable goods.

One of the main regulators of durable goods is the Consumer Product Safety Improvement Act (CPSIA). Below are some of the provisions that are outlined in CPSIA:

  • Durable Infant or Toddler Product Safety Standards:
  • Testing and Certification, including initial testing, periodic testing & material change testing requirements
  • Lead limits in paint and substrates
  • Phthalate limits in toys and certain childcare articles 

Existing vs. Future Goods

Existing goods are goods that the seller either owns or possesses at the time of contract. These could be equipment, machinery, textiles, or any other tangible product. 

In contrast, future goods are goods that have yet to be produced by the seller. When it comes to future goods, the seller typically promises the buyer that the goods will be tender at some specified time in the future.

Goods Under the Uniform Commercial Code (UCC)

The Uniform Commercial Code (UCC) outlines a comprehensive set of laws and regulations that govern the sale of goods and leases of personal property. Section 2-105  of the UCC defines goods as items that are movable at the time of identification to the contract. According to Article 2, goods also include the unborn young of animals growing crops and other identified fixtures that are attached to reality. 

Another notable section of the UCC is § 2-204. This section provides guidance on contract formation which is the foundational element of any business arrangement. Section 204 states that a contract for the sale of goods can be formed in any way that shows agreement, including conduct by both parties that acknowledges the contract's existence. The contract can be valid even if the exact moment it was formed is unclear. This is important to know when entering into a contract.

Another key provision is Article 2A which governs the leasing of personal property. This section also provides guidance on contract formation, the effect of a lease contract, performance, and default. It also serves as a gap filler to clear up ambiguities in Article 2.

Legal Implications of Goods Classification

Understanding the nature of the good is key for all parties to grasp the law and associated warranties attached to the good. Products typically have both expressed and implied warranties. Unless the warranty is disclaimed, a warranty is typically honored. Any disclaimer must be fair; otherwise, there are grounds to sue for breach of contract. In the landmark case,  Henningsen v. Bloomfield Motors, Inc. (1960), the Court expanded consumer protection by reinforcing the implied warranty of merchantability. This decision was pivotal not only to Henningsen’s breach of a warranty claim but also to consumer protections

Conclusion

There are many types of goods in commerce. Understanding the nature and characteristics of the goods ensures that the rights, duties, and legal protections are upheld throughout the contract.

Frequently Asked Questions

What are the 4 types of goods in economics?

In economics, there are 4 types of goods: private goods, public goods, shared resources, and club goods.

What can be classified as goods?

Goods are items that are produced to meet human needs and provide utility.