Commentary on the Articles of Paragraph 2, “Retail Sale and Purchase,” Chapter 25 of the Civil Code of the Republic of Kazakhstan

A retail sale and purchase agreement is one of the most common types of sale and purchase agreements encountered in everyday life. The principal characteristics that distinguish a retail sale and purchase agreement as a separate type of sale and purchase agreement are the seller’s status as an entrepreneur (conducting the sale of goods as a business activity), the retail nature of the sale (that is, the direct sale of goods to consumers, generally in quantities required by individual consumers), and its public nature, which derives from the retail and commercial character of the transaction and requires the seller to enter into an agreement with anyone who applies to purchase the goods (Article 445 of the Civil Code).

In conducting commercial activities, a seller-entrepreneur may engage not only in retail sales but also in wholesale trade. In practice, many trading organizations sell goods both wholesale and retail. Similarly, manufacturing enterprises may supply their products to retail organizations while also selling their manufactured goods through their own retail store networks.

However, the provisions of the paragraph under consideration apply only to the retail sale of goods. Wholesale sales are governed, depending on the nature of the obligation, either by the general provisions on sale and purchase or by the rules governing the supply of goods.

At the same time, the activities of a seller-entrepreneur involving the retail sale of goods fall within the scope of the legal regulation established by this paragraph of Chapter 25 of the Civil Code.

The legal regulation of retail sale and purchase agreements is undoubtedly intended to protect the interests of buyers in retail trade and to establish the principle that such agreements are public contracts.

A distinctive feature of the subject matter of a retail sale and purchase agreement is that it generally consists of goods intended for use unrelated to entrepreneurial activity. In this regard, it should be noted that the intended use of the goods is an ancillary consideration and is not the decisive factor in classifying an agreement as a retail sale and purchase agreement.

The decisive factor is the retail sale of goods by a seller-entrepreneur under the conditions applicable to public contracts. In such circumstances, the intended use of the goods is irrelevant to the classification of the agreement.

At the same time, the range of goods sold at retail is extremely diverse. The same goods may or may not be used for entrepreneurial purposes. A particular product that is ordinarily used in business activities may also be sold at retail as a result of changes in consumer demand or socioeconomic conditions.

As a general rule, the buyer under a retail sale and purchase agreement is an individual who is not an entrepreneur or a nonprofit organization. However, the identity of the buyer, like the intended use of the goods, is generally an ancillary consideration.

It should nevertheless be noted that goods are frequently purchased at retail by individual entrepreneurs, including those providing services in the food service industry.

The law permits nonprofit organizations to engage in entrepreneurial activities, provided that such activities are consistent with their statutory purposes. In such cases, a nonprofit organization may purchase goods at retail for business purposes.

Although there is a presumption that transactions entered into by commercial organizations are entrepreneurial in nature, commercial organizations may also participate in retail transactions as buyers. As a rule, commercial organizations purchase goods at retail for purposes unrelated to their business activities.

However, determining the intended use of goods is a relative matter and may not be interpreted uniformly in every situation. If the legislation does not expressly prohibit commercial organizations from purchasing particular types of goods at retail or using such goods for entrepreneurial purposes, there are no legal obstacles to their purchasing goods at retail for business use.

In practice, this issue is largely determined by economic considerations. Commercial organizations generally find it more advantageous to purchase goods intended for business use directly from manufacturers or from wholesale suppliers. This, in turn, explains why other types of sale and purchase agreements, including supply agreements and wholesale sale and purchase agreements, are commonly used in such circumstances.

A retail sale and purchase agreement has several distinctive features concerning its form, the procedure for its conclusion, its essential terms, the seller’s obligations, and the seller’s liability.

A retail sale and purchase agreement may be concluded in any legally permissible form. However, the nature of retail trade means that such agreements are generally concluded orally. This is because retail transactions are usually performed immediately upon their conclusion.

Furthermore, the public nature of retail trade and the classification of retail sale and purchase agreements as public contracts require the procedure for concluding such agreements to be standardized within each retail organization.

Accordingly, the procedure for concluding a retail sale and purchase agreement and its form are determined in each particular case by taking into account the rules governing trade within the relevant retail organization. In this context, the general provisions of the Civil Code governing contracts of adhesion apply to the relationship between the seller and the buyer (Article 446 of the Civil Code).

Special rules may be established by legislation for the sale of certain types of goods. For example, the sale of motor vehicles may require the preparation of certificates of sale in a prescribed form, while age restrictions apply to the purchase of alcoholic beverages and tobacco products.

At the same time, the Civil Code establishes a rule for determining when a retail sale and purchase agreement is concluded in cases where the retail organization has no specific rules or the legislation does not prescribe special procedures for selling particular types of goods.

Unless otherwise provided by the agreement, including through the seller’s standard forms or other contractual documents, or by legislation, a retail sale and purchase agreement is deemed concluded when the seller issues the buyer a document confirming payment for the goods, such as a cash receipt or sales receipt (Article 446 of the Civil Code).

Nevertheless, special rules governing the conclusion of certain types of retail sale and purchase agreements, including rules determining the moment of conclusion, may be established by legislation.

For example, when goods are sold through vending machines, the seller may not issue any document confirming payment. In such cases, the agreement is deemed concluded when the buyer performs the actions necessary to obtain the goods (Paragraph 2 of Article 451 of the Civil Code).

If the seller does not issue any document confirming payment and the legislation does not establish a special procedure for concluding the agreement, the moment of conclusion must be determined in accordance with the general provisions on sale and purchase contained in Paragraph 1 of Chapter 25.

This is because the provisions of Paragraph 1 apply to all types of sale and purchase agreements to the extent that the relevant matters are not specifically regulated by Paragraphs 2–6 of that chapter.

Since a written form is not mandatory for a retail sale and purchase agreement and the agreement may be concluded orally, the parties may use witness testimony to establish that the transaction took place, as well as to prove its contents and performance.

The absence of documents confirming payment does not deprive the buyer of the right to rely on witness testimony to prove the conclusion of the agreement and its terms (Article 446 of the Civil Code).

The public nature of a retail sale and purchase agreement determines the public nature of the seller’s offer.

The display of goods in shop windows or on counters, the demonstration of product samples, or the provision of information about goods offered for sale at the place of sale constitutes a public offer, regardless of whether the price and other essential terms of the sale and purchase agreement are specified (Paragraph 1 of Article 447 of the Civil Code).

The only exception is where the seller has clearly indicated that the relevant goods are not intended for sale. For example, a notice may state that an item displayed in a shop is not for sale.

Naturally, objects used for the artistic decoration of a retail space, shop windows, counters, and commercial equipment do not constitute goods offered for sale. Accordingly, the rules governing public offers do not apply to such objects.

The display of goods, their demonstration, and the provision of information about goods offered for sale also include descriptions, catalogues, photographs, and other means of familiarizing buyers with the goods, provided that such information is directed at an indefinite group of persons and is made available at the place where the goods are sold.

At the same time, offers of goods contained in advertisements, catalogues, or other descriptions directed at an indefinite group of persons outside the place of sale do not constitute public offers, even if they contain all the information necessary to conclude the retail sale and purchase agreement and determine its essential terms (Paragraph 2 of Article 447 of the Civil Code).

This rule is one of the distinctive features of Kazakhstan’s legislation governing retail sale and purchase agreements and differs from the corresponding provisions of Russian law.

Under Russian law, an offer of goods contained in advertisements, catalogues, or other information addressed to an indefinite group of persons outside the place of sale may constitute a public offer if it contains all the essential terms of the sale and purchase agreement.

Another distinctive feature of a retail sale and purchase agreement is that the price constitutes one of its essential terms. This follows from the provisions of Paragraph 1 of Article 447 and Paragraph 1 of Article 453 of the Civil Code.

Specifically, Paragraph 1 of Article 447 identifies the price as an essential term of the agreement. Paragraph 1 of Article 453 provides that the buyer must pay the purchase price announced by the seller at the time the agreement is concluded, unless otherwise established by legislative acts or arising from the nature of the relevant obligation.

Although the price is an essential term of a retail sale and purchase agreement, it is determined by the seller due to the public nature of the agreement. The buyer may either accept the stated price or refuse to enter into the agreement if the price is unacceptable.

This also demonstrates the public nature of retail sale and purchase agreements and explains why such agreements generally take the form of contracts of adhesion, regardless of whether they are concluded orally or in writing.

Retail sale and purchase agreements have several distinctive features compared with the general provisions on sale and purchase, particularly with regard to payment for goods when the agreement provides for advance payment or the sale of goods on credit, including payment by instalments.

Under a retail sale and purchase agreement providing for advance payment, the buyer has the right to unilaterally withdraw from the agreement before making the payment.

If the buyer fails to make the advance payment within the period established by the agreement, such failure is presumed to constitute the buyer’s refusal to perform the agreement, unless otherwise agreed by the parties.

Accordingly, the provisions of Article 440 of the Civil Code apply to retail sale and purchase agreements providing for advance payment, subject to the special rule allowing the buyer to withdraw unilaterally before making the advance payment.

Another distinctive feature of retail sale and purchase agreements involving sales on credit, including payment by instalments, is established in Paragraph 3 of Article 453 of the Civil Code.

Under the terms of a sale on credit, interest may be charged on the amount payable for the goods as consideration for the deferral of payment and the buyer’s use of the funds.

The interest rate applicable to a sale on credit is determined when the agreement is concluded, and the interest payable is included in the price of the goods.

At the same time, Paragraph 3 of Article 453 establishes a mandatory rule prohibiting the imposition of penalties for overdue payments under retail sale and purchase agreements involving sales on credit.

This prohibition applies both to statutory penalties, calculated in accordance with Article 353 of the Civil Code by reference to the refinancing rate of the National Bank of the Republic of Kazakhstan, and to contractual penalties.

Under this rule, any provision of a retail sale and purchase agreement involving a sale on credit that provides for the imposition of a penalty, late-payment interest, or a fine on overdue payments is invalid. The prohibition applies both to overdue principal amounts and to interest charged for the deferral of payment (Paragraph 3 of Article 453 of the Civil Code).

Under a retail sale and purchase agreement providing for payment by instalments, the buyer may pay for the goods at any time during the period established by the agreement, at the buyer’s discretion.

The buyer may make the payment early or on the final day of the instalment period.

Taking into account the buyer’s right to pay at any time during the instalment period and the prohibition on imposing penalties for overdue payments, instalment-payment terms in retail sale and purchase agreements allow the buyer to pay for the goods at any time during the agreed period, at the buyer’s discretion (Paragraph 4 of Article 453 of the Civil Code).

In most cases, the moment when a retail sale and purchase agreement is concluded coincides with the moment of its performance. However, there are certain types of sale and purchase agreements in which the conclusion and performance occur at different times.

Such types of retail sale and purchase agreements include agreements requiring the buyer to accept the goods within a specified period, agreements providing for delivery of goods to the buyer, and agreements for the sale of goods by sample.

Under a retail sale and purchase agreement requiring the buyer to accept the goods within a specified period, the seller may not sell the goods to another buyer after the agreement has been concluded and before the period established for the original buyer to accept the goods has expired.

This rule applies regardless of the payment terms because the agreement may provide for advance payment, payment upon acceptance of the goods, a sale on credit, or other payment arrangements (Paragraph 1 of Article 449 of the Civil Code).

If the buyer fails to accept the goods within the period specified in the agreement, the seller is entitled to sell them to any other person. In such circumstances, the buyer is presumed to have refused to perform the agreement (Paragraph 2 of Article 449 of the Civil Code).

Expenses incurred by the seller to ensure that the goods are available for delivery to the buyer at the specified time, such as warehouse storage costs, are included in the price of the goods.

Unless otherwise provided by the agreement or legislative acts, the seller may not demand separate reimbursement of such expenses from the buyer (Paragraph 3 of Article 449 of the Civil Code).

Under a retail sale and purchase agreement providing for delivery of goods to the buyer, the seller is obliged to deliver the goods to the location specified by the buyer within the period established by the agreement.

Consequently, the essential terms of this type of agreement include the parties’ agreement on the place of delivery and the period within which delivery must take place (Paragraph 1 of Article 452 of the Civil Code).

A retail sale and purchase agreement providing for delivery of goods to the buyer is deemed concluded when the goods are handed over to the buyer.

The agreement may specify the place of delivery as the buyer’s place of residence, where the buyer is an individual, or the buyer’s place of business or location, where the buyer is a legal entity. Alternatively, the buyer may specify any other location.

The seller’s obligation to hand over the goods is also deemed fulfilled when the goods are handed over to a person who presents a receipt or another document confirming the conclusion of the agreement or the arrangement for delivery (Article 452 of the Civil Code).

However, a receipt or other document confirming the right to receive the goods is not a security. Therefore, if the seller performs the obligation in favour of an unauthorized person—for example, a thief who presents a stolen receipt—this does not release the seller from the obligation to perform the agreement properly in relation to the buyer.

An exception may apply if the seller proves that all necessary measures arising from the requirements of Article 275 of the Civil Code were taken.

The rule determining the moment of performance of a retail sale and purchase agreement providing for delivery is discretionary under the Civil Code. Accordingly, a different procedure for determining the moment of performance may be established by legislative acts or the agreement, or may arise from the nature of the obligation (Paragraph 2 of Article 452 of the Civil Code).

A retail sale and purchase agreement for goods sold by sample is characterized by the buyer’s purchase of goods corresponding to samples presented by the seller.

The buyer may examine product samples in the seller’s demonstration areas or retail premises, where samples are displayed for inspection. The buyer may also become familiar with the goods through catalogues, product descriptions, technical documentation, and other information provided by the seller (Paragraph 1 of Article 450 of the Civil Code).

As a general rule, an agreement for the sale of goods by sample, like an agreement providing for delivery of goods to the buyer, includes a term requiring the goods to be delivered to the buyer (Paragraph 2 of Article 450 of the Civil Code).

The requirement to deliver goods to the buyer under an agreement for the sale of goods by sample is discretionary under the legislation and applies unless otherwise provided by the agreement or legislative acts.

However, unlike an agreement specifically providing for delivery of goods to the buyer, an agreement for the sale of goods by sample does not require the place of delivery to be specified as an essential term.

This is because Paragraph 2 of Article 450 establishes supplementary rules that apply when the agreement does not specify the place of delivery.

Specifically, if the agreement does not specify the place of delivery, the seller’s delivery of the selected goods to the individual buyer’s place of residence or to the location of the buyer that is a legal entity constitutes proper performance of the agreement (Paragraph 2 of Article 450 of the Civil Code).

Under an agreement for the sale of goods by sample, the buyer is entitled to withdraw unilaterally from the agreement before the goods are transferred to the buyer.

However, withdrawal from the agreement does not release the buyer from the obligation to reimburse the seller for the actual and reasonable expenses incurred in performing actions necessary to fulfil the agreement.

The reasonableness of such expenses must be assessed in each individual case, taking into account all the circumstances (Paragraph 3 of Article 450 of the Civil Code).

One of the distinctive features of retail sale and purchase agreements involving non-food products is the buyer’s right to exchange goods that meet the applicable quality requirements but are unsuitable for the buyer in terms of size, shape, dimensions, style, completeness, or other similar characteristics (Paragraph 1 of Article 454 of the Civil Code).

The buyer may exchange such goods for equivalent goods that are suitable in terms of size, shape, dimensions, style, colour, or other characteristics.

If the seller does not have the goods required for the exchange, the buyer is entitled to return the purchased goods and receive a refund of the amount paid (Paragraph 2 of Article 454 of the Civil Code).

The buyer may exercise the right to exchange the goods—or, if the required goods are unavailable, the right to a refund—within fourteen days from the date on which the goods were transferred to the buyer, unless the seller has established a longer period.

The consumer properties of the goods presented for exchange must remain intact, and the buyer must provide evidence that the goods were purchased from the relevant seller (Paragraph 3 of Article 454 of the Civil Code).

Only goods that have been included, in accordance with the procedure established by law, in the list of goods of proper quality that are not subject to exchange for equivalent goods or return are excluded from the exchange and return rules.

In particular, legislation excludes precious-metal articles, personal hygiene products, and certain other goods from exchange or return.

This list is exhaustive and may not be expanded at the seller’s discretion (see Paragraph 4 of Article 454 of the Civil Code).

Where goods of inadequate quality are sold, the legal consequences provided for in Article 428 of the Civil Code apply.

In particular, the seller may be required to replace the goods, proportionately reduce the purchase price, remedy the defects free of charge within a reasonable period, reimburse the buyer’s expenses incurred in remedying the defects, or accept the buyer’s refusal to perform the agreement and refund the amount paid for the goods.

Other legal consequences provided for in that article may also arise (Article 455 of the Civil Code).

In addition to the consequences established by Article 428, when goods of inadequate quality are sold under a retail sale and purchase agreement, the seller bears all expenses associated with returning the defective goods (the second part of Paragraph 1 of Article 455 of the Civil Code).

Any reduction in the value of the goods resulting from their full or partial use by the buyer before the defects were discovered, or from the loss of their marketable appearance, is also borne by the seller (Paragraph 2 of Article 455 of the Civil Code).

The Civil Code establishes special rules governing the seller’s liability and performance in kind under a retail sale and purchase agreement.

Under Article 457 of the Civil Code, compensation for losses and payment of a contractual penalty in the event that the seller fails to fulfil an obligation under a retail sale and purchase agreement do not release the seller from the obligation to perform in kind.

In other words, an exception is established for sellers under retail sale and purchase agreements to the general rule on liability and performance in kind set out in Paragraph 2 of Article 354 of the Civil Code.

Accordingly, even after compensating the buyer for losses and paying the applicable penalty, the seller remains obliged to perform the contractual obligation in kind (Article 457 of the Civil Code).

This commentary was prepared as part of the scientific and practical research programme of the Private Law Research Centre of the Kazakh State Law University.

Head of the Working Group responsible for drafting the Civil Code of the Republic of Kazakhstan, Corresponding Member of the Academy of Sciences of the Republic of Kazakhstan, Professor M. K. Suleimenov.

Deputy Head of the Working Group, Professor Y. G. Basin.

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