Modes of Purchase Part 2

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Goods may be purchased either by inspecting them personally or on the basis of sample or pattern examined or on the basis of description or brand name of a product.

Modes of Purchase

Modes of Purchase

Modes of Purchase

Purchase by Inspection

This is the most common method of buying known as purchasing by inspection where the buyer goes to the seller and inspects the goods or a whole lot of goods planned to be purchased. It is mostly used in case of retail buying.

Purchase by Sample/ Pattern

A sample is a specimen of goods, particularly of raw materials, foodstuffs, etc. It is a representative of the bulk. Its quality largely reflects the quality of the whole lot. Similarly, pattern is a specimen of standard manufactured goods such as cloth, coir mattresses, etc. It reveals the shade, texture etc. and sometimes bears a code number. The code number can be quoted while placing orders for purchase. It is agreed upon by both the parties that the bulk supply shall be of the same quality as the sample/ pattern shown.

Purchase by Description or Brand

In certain cases, it is not possible for a seller to even show a sample to the prospective buyer. Seller carries a catalogue and price list that contains the description of goods offered for sale. Sometimes goods are standard products having specific quality and price etc. They are often given a number or a name. Sometimes the names become quite popular as brands, like Godrej Store well, Surf, Lifebuoy, Fevicol, Pepsodent, etc.

Methods of Sale

Before buying anything, we are not always sure about how they can be actually obtained and paid for. If the item is somewhat expensive, the buyer may not be able to afford the price immediately. The seller may allow that a small amount be paid initially and the balance be paid in monthly instalments. Again, you may come across banners on the road side that furniture will be sold by auction on a particular Sunday. You may attend the auction to bid for the chosen item. Sometimes you may have read notices of the State Government inviting tenders/quotations from businessmen for supply of certain items. These are all methods of sale. We shall now discuss these methods in detail.

Methods of Sale

Methods of Sale

Methods of Sale

Hire Purchase Basis

Sale on hire-purchase basis provides for payment of purchase price in instalments. The goods are regarded as being on hire until all instalments are paid. In other words, even though the goods are delivered to the buyer, the ownership right remains with the seller, and the amount that the customer pays is treated as payment for hiring the goods. If the customer fails to pay any instalment, the seller can ask for the goods to be returned and also sue the defaulting buyer for damages. It may be noted that the customer has the right to purchase the goods by paying the total remaining amount at any stage of the instalment period. This type of sale is used in case of durable and expensive items like car, motorcycle, TV, Machinery etc.

Sale through Instalment Payment System

When goods are sold and payment is agreed to be made in instalments, it is known as deferred instalment plan of sale. In this case, if there is default in the payment of any instalment by the buyer, the seller cannot ask for the goods to be returned as the ownership rights pass to the buyer when goods are sold and initial payment is made. The seller can only sue the buyer in a court of law for payment of the balance due.

Sale on Approval Basis

A sale on approval is basically a conditional sale. In this type of sale, goods are delivered to the buyer on payment with the understanding that the buyer can return the goods (the whole lot or even a part of it) to the seller and claim refund within a specified period, if the goods do not meet his requirements. If the buyer does not communicate within the given time then it is assumed that the goods are sold. Sometimes this method of sale is practised with a variation. Goods are delivered to the buyer ‘on approval’ with the understanding that he may remit the price signifying approval or return the goods without any obligation.

Sale through Tender

This method of sale is normally found in the case of purchases made by big organisations or government agencies where the quantity of goods required and the amount involved are very large. A tender is an undertaking to supply materials/goods indicating the terms and conditions of sale therein. This method of sale involves responses to tenders invited by intending purchasers with a view to selecting the supplier who offers the most competitive and favourable terms. The advertisement or notice inviting tenders are usually published in one or more newspapers and contains details regarding the goods to be purchased.

Auction Sale

An auction sale refers to the sale of certain goods openly on a specific date and time so that people may bid for the goods. The goods are sold to the highest bidder. In auction sale, the goods are displayed and there is a reserve price below which goods are not to be sold. This reserve price is fixed by the seller, which may be made known to the public or kept secret. This may be regarded as the minimum price below which goods are not to be sold. A bid by an intending purchaser is considered an offer and if it is the highest bid, it is accepted. Once accepted, the bidder cannot go back and must pay the price and purchase it. However, the seller has the liberty not to sell even at the highest bid. Now a days, auction sales are done more commonly through the internet.

Wash Sales

These sales are generally conducted to clear surplus or old stocks. Some sellers periodically arrange such sales to dispose off stock. Mostly these sellers offer heavy discount.