California Master Sale of Goods Agreement

CALIFORNIA MASTER SALE OF GOODS AGREEMENT

Governed by Division 2 of the California Commercial Code (UCC Article 2)

CALIFORNIA LAW NOTICE

This Agreement is governed exclusively by California law and incorporates the following California-specific requirements:

• California Commercial Code Division 2 is California's enactment of UCC Article 2 and governs all aspects of this sale of goods
• California sales and use tax (Cal. Rev. & Tax. Code § 6051 et seq.) applies to retail sales of tangible personal property; the seller must hold a valid CDTFA seller's permit
• Proposition 65 (Cal. Health & Safety Code § 25249.5 et seq.) requires warnings for products containing chemicals known to the State of California to cause cancer or reproductive harm
• California's battle-of-forms rule (Cal. Com. Code § 2207) governs conflicting terms in purchase orders and acknowledgments
• No modification consideration required — under Cal. Com. Code § 2209, agreement to modify a sale of goods contract needs no additional consideration
• California usury cap — interest on overdue payments must not exceed the maximum under Cal. Const. Art. XV
• 4-year statute of limitations for breach of a sale of goods contract (Cal. Com. Code § 2725)

AGREEMENT

This California Master Sale of Goods Agreement ("Agreement") is entered into as of [__/__/____] ("Effective Date") by and between:

SELLER:
Name: [________________________________]
Entity Type: [________________________________]
State of Formation: [________________________________]
Principal Address: [________________________________]
CDTFA Seller's Permit No.: [________________________________]
Federal Tax ID (EIN): [________________________________]

BUYER:
Name: [________________________________]
Entity Type: [________________________________]
State of Formation: [________________________________]
Principal Address: [________________________________]
CA Resale Certificate No. (if applicable): [________________________________]

(each a "Party" and together, the "Parties")

RECITALS

A. Seller manufactures, distributes, or supplies the tangible goods identified in this Agreement.

B. Buyer desires to purchase such Goods on a recurring or one-time basis under the terms herein.

C. This Agreement constitutes a "contract for the sale of goods" within the meaning of Division 2 of the California Commercial Code (Cal. Com. Code § 2102).

D. The Goods are tangible personal property subject to California sales and use tax, unless an applicable exemption is documented.

ARTICLE 1 — DEFINITIONS

"Applicable Law" means all California and federal laws, including the California Commercial Code, California Revenue and Taxation Code, California Health and Safety Code (including Proposition 65), CDTFA regulations, and applicable local ordinances.

"Business Day" means any day California Superior Courts are open for business.

"CDTFA" means the California Department of Tax and Fee Administration.

"Goods" means the tangible, movable personal property described in Schedule 1 and in any Purchase Order issued under this Agreement.

"Incoterms" means the rules published by the International Chamber of Commerce, most recently as Incoterms 2020.

"Inspection Period" means [____] calendar days after delivery of Goods to the Delivery Point.

"Purchase Order" or "PO" means Buyer's ordering document referencing this Agreement and specifying quantity, price, delivery date, and Delivery Point.

"Proposition 65" means the Safe Drinking Water and Toxic Enforcement Act of 1986, Cal. Health & Safety Code § 25249.5 et seq., requiring warnings for products containing listed chemicals.

"Specifications" means the technical and functional specifications for the Goods in Schedule 1.

"Warranty Period" means the period specified in Schedule 4, commencing upon Buyer's acceptance of the Goods.

ARTICLE 2 — SALE AND PURCHASE

2.1 Master Agreement. This Agreement establishes the framework for the purchase and sale of Goods. Individual transactions are effected through Purchase Orders.

2.2 Purchase Orders. Buyer shall issue POs referencing this Agreement. Each PO is subject to Seller's written acceptance within [____] Business Days. Silence constitutes acceptance after the acceptance period expires.

2.3 Battle of Forms — Cal. Com. Code § 2207. Any additional or different terms proposed by either Party in a PO, acknowledgment, invoice, or other communication are objected to and rejected unless expressly agreed in a writing signed by both Parties. The Parties expressly exclude the operation of Cal. Com. Code § 2207(2) with respect to material alterations.

2.4 Modification Without Consideration. Consistent with Cal. Com. Code § 2209(1), the Parties acknowledge that an agreement modifying this contract needs no consideration to be binding, but any modification must comply with any "no oral modification" clause to the extent permitted by § 2209(2).

2.5 Minimum Purchase Commitments.

☐ Minimum commitment applies. Buyer commits to purchase a minimum of [________________________________] units (or $[________________________________]) during each 12-month period.

☐ No minimum commitment. Buyer has no obligation to purchase any minimum quantity.

2.6 Forecasts. Buyer shall provide [☐ monthly / ☐ quarterly] non-binding rolling demand forecasts. Seller shall maintain sufficient inventory and production capacity to fill forecasted demand plus [____]% safety stock.

ARTICLE 3 — DELIVERY, TITLE, AND RISK OF LOSS

3.1 Delivery Terms. Goods shall be delivered:

Delivery Point: [________________________________], California [____]
Shipping Terms (select one):
☐ FOB Destination (Cal. Com. Code § 2319) — Seller bears risk until Goods reach Delivery Point
☐ FOB Shipping Point (Cal. Com. Code § 2319) — Risk passes when Goods are placed with carrier
☐ [________________________________] (Incoterms 2020) [________________________________]

3.2 Passage of Title. Title passes to Buyer upon delivery to the Delivery Point and payment in accordance with this Agreement (Cal. Com. Code § 2401).

3.3 Packaging and Labeling.

(a) Seller shall package Goods in accordance with industry standards and any requirements in Schedule 2 to prevent damage during transit.

(b) Proposition 65 Labeling. If any Goods contain chemicals listed under Proposition 65, Seller shall provide "clear and reasonable" warnings in compliance with Cal. Health & Safety Code § 25249.6 and 27 CCR § 25600 et seq. Seller shall notify Buyer in writing prior to shipment if any Goods require Proposition 65 warnings.

(c) Country of Origin. Seller shall label Goods with country of origin as required by California and federal law.

3.4 Delivery Schedule. Seller shall deliver Goods by the date specified in each PO. Time is of the essence for delivery obligations.

ARTICLE 4 — INSPECTION AND ACCEPTANCE

4.1 Inspection Right (Cal. Com. Code § 2513). Buyer has the right to inspect Goods before payment or acceptance. Buyer shall conduct inspection during the Inspection Period.

4.2 Acceptance. Goods are deemed accepted upon the earlier of:
(a) Buyer's written notice of acceptance;
(b) Buyer's use of the Goods in the ordinary course of business beyond the Inspection Period; or
(c) Expiration of the Inspection Period without a written Rejection Notice.

4.3 Rejection (Cal. Com. Code § 2601). If Goods fail to conform to the contract in any respect, Buyer may:
(a) Reject the whole;
(b) Accept the whole; or
(c) Accept any commercial units and reject the rest.

Buyer shall provide written notice specifying nonconformities. Buyer shall hold rejected Goods with reasonable care at Seller's risk and expense (Cal. Com. Code § 2602(b)).

4.4 Seller's Right to Cure (Cal. Com. Code § 2508). Seller may cure nonconforming tender within the delivery deadline or, if Seller had reasonable grounds to believe the tender was acceptable, within a further reasonable time after notification of rejection.

4.5 Revocation of Acceptance (Cal. Com. Code § 2608). Buyer may revoke acceptance if a nonconformity substantially impairs the value of the Goods and:
(a) Acceptance was on the reasonable assumption the nonconformity would be cured; or
(b) The nonconformity was not discovered due to difficulty of discovery or Seller's assurances.

ARTICLE 5 — PRICE AND PAYMENT

5.1 Prices. Prices are set forth in Schedule 3. Prices are:

☐ Firm for the Initial Term
☐ Subject to annual adjustment based on [________________________________] index, not to exceed [____]% per year

5.2 California Sales and Use Tax.

(a) Seller's Obligation. Seller shall collect and remit California sales tax on all taxable sales at the rate applicable to the Delivery Point. The current statewide base rate is 7.25%; local district taxes may increase the combined rate.

(b) Resale Exemption. If Buyer is purchasing Goods for resale, Buyer shall provide Seller with a valid California resale certificate (CDTFA Form BOE-230) prior to the first shipment.

(c) Manufacturing Exemption. If Goods qualify as manufacturing or R&D equipment, Buyer may claim the partial exemption under Cal. Rev. & Tax. Code § 6377.1 (reduced rate of 3.3125%) by providing CDTFA Form CDTFA-230.

(d) Use Tax. If Goods are purchased from an out-of-state seller without California sales tax collection, Buyer is responsible for remitting California use tax (Cal. Rev. & Tax. Code § 6201).

5.3 Invoicing and Payment. Seller shall invoice upon shipment. Buyer shall pay undisputed amounts within [____] days of invoice date by wire transfer or ACH in U.S. dollars.

5.4 Late Payment Interest. Overdue amounts accrue interest at [____]% per month, not to exceed the maximum rate permitted under California Constitution Article XV, Section 1. For obligations primarily for business purposes between non-exempt parties, the maximum is the greater of 10% per annum or the Federal Reserve Bank of San Francisco discount rate plus 5%.

5.5 No Setoff Without Consent. Buyer may not set off amounts owed under this Agreement without Seller's prior written consent, except for undisputed credits or warranty claims.

5.6 Disputed Invoices. Buyer shall notify Seller of any invoice dispute within [____] days of receipt. Undisputed portions must be paid when due. The Parties shall negotiate disputed amounts in good faith.

ARTICLE 6 — REPRESENTATIONS AND WARRANTIES

6.1 Mutual Representations. Each Party represents that:
(a) It is duly organized and in good standing under the laws of its state of formation and, where applicable, qualified to do business in California;
(b) It has full authority to enter into and perform this Agreement; and
(c) Its performance does not violate any agreement, order, or Applicable Law.

6.2 Seller's Warranties.

(a) Title (Cal. Com. Code § 2312). Seller warrants good and marketable title free of liens and encumbrances.

(b) Merchantability (Cal. Com. Code § 2314). Seller warrants the Goods are merchantable: they pass without objection in the trade, are fit for ordinary purposes, are adequately contained and packaged, and conform to any affirmations on the container or label.

(c) Fitness for Particular Purpose (Cal. Com. Code § 2315). Where Seller has reason to know Buyer's particular purpose and Buyer relies on Seller's skill or judgment, Seller warrants the Goods are fit for that purpose.

(d) Conformity to Specifications. Goods shall conform to the Specifications and be free from defects in design, materials, and workmanship for the Warranty Period.

(e) Proposition 65 Compliance. Seller warrants that Goods requiring Proposition 65 warnings have been properly labeled and that Seller has provided Buyer with all information necessary for Buyer to comply with Proposition 65.

(f) Regulatory Compliance. Goods comply with all applicable California regulations, including those administered by the California Department of Public Health, CARB, and Cal/OSHA.

6.3 Warranty Disclaimer (If Applicable).

☐ If checked, the following disclaimer applies:

EXCEPT FOR THE EXPRESS WARRANTIES IN SECTIONS 6.2(a), (d), AND (e), SELLER DISCLAIMS ALL IMPLIED WARRANTIES INCLUDING MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. THIS DISCLAIMER IS CONSPICUOUS AND COMPLIES WITH CALIFORNIA COMMERCIAL CODE § 2316(b). DISCLAIMER OF THE WARRANTY OF MERCHANTABILITY SPECIFICALLY MENTIONS "MERCHANTABILITY" AS REQUIRED BY § 2316(b).

NOTE: Under California law, limitation of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable (Cal. Com. Code § 2719(c)).

6.4 Warranty Remedies (Cal. Com. Code § 2719). During the Warranty Period, Seller shall at its option and sole cost: (a) repair defective Goods; (b) replace defective Goods with conforming Goods; or (c) refund the purchase price. If this exclusive remedy fails of its essential purpose, Buyer may pursue all remedies available under the California Commercial Code (Cal. Com. Code § 2719(b)).

6.5 Statute of Limitations. Actions for breach must be commenced within 4 years under Cal. Com. Code § 2725. The Parties:

☐ Agree to the statutory 4-year period.
☐ Agree to reduce the period to [____] year(s) (minimum 1 year under § 2725(a)).

ARTICLE 7 — CALIFORNIA-SPECIFIC COVENANTS

7.1 UCL Compliance. Neither Party shall engage in any "unlawful, unfair, or fraudulent business act or practice" within the meaning of Cal. Bus. & Prof. Code § 17200 et seq. in connection with this Agreement.

7.2 CLRA Compliance. To the extent any Goods are "consumer goods" purchased for personal, family, or household use, Seller acknowledges that the Consumer Legal Remedies Act (Cal. Civ. Code § 1750 et seq.) may apply. CLRA rights cannot be waived (Cal. Civ. Code § 1751).

7.3 No Non-Compete. Per Cal. Bus. & Prof. Code § 16600, this Agreement imposes no restriction on either Party's right to engage in any lawful profession, trade, or business. Neither Party is prohibited from selling to any customer or purchasing from any supplier.

7.4 Proposition 65 Cooperation. Seller shall cooperate with Buyer in responding to any Proposition 65 enforcement action related to the Goods, including providing chemical composition data, test results, and safe harbor warning language.

7.5 CDTFA Audit Cooperation. Each Party shall cooperate with the other in the event of a CDTFA sales or use tax audit relating to transactions under this Agreement, including providing transaction records, exemption certificates, and supporting documentation.

7.6 California Supply Chain Transparency Act. If applicable, Seller certifies compliance with the California Transparency in Supply Chains Act of 2010 (Cal. Civ. Code § 1714.43), including efforts to eradicate slavery and human trafficking from its direct supply chain.

ARTICLE 8 — CONFIDENTIALITY

8.1 Scope. "Confidential Information" means non-public information designated as confidential or reasonably understood to be confidential, including pricing, customer lists, specifications, and business strategies.

8.2 Obligations. The Receiving Party shall protect Confidential Information with at least reasonable care and use it solely for performing under this Agreement.

8.3 California Trade Secrets. Information qualifying as a "trade secret" under the California Uniform Trade Secrets Act (Cal. Civ. Code § 3426 et seq.) is protected indefinitely.

8.4 Duration. Non-trade-secret confidentiality obligations survive for [____] years after termination.

8.5 Permitted Disclosures. Disclosures required by California law, court order, or regulatory proceeding are permitted, provided the Receiving Party gives prompt notice and cooperates in seeking protective treatment.

ARTICLE 9 — DEFAULT AND REMEDIES

9.1 Buyer Default. Failure to pay any amount when due and not cured within [____] Business Days after written notice; insolvency or bankruptcy event.

9.2 Seller Default. Failure to deliver conforming Goods by the PO delivery date and not cured within [____] days after written notice; insolvency or bankruptcy event.

9.3 Seller's Remedies Under California Law. Upon Buyer's default:
(a) Withhold delivery (Cal. Com. Code § 2703);
(b) Stop goods in transit (Cal. Com. Code § 2705);
(c) Resell and recover difference (Cal. Com. Code § 2706);
(d) Recover price for accepted goods (Cal. Com. Code § 2709);
(e) Demand adequate assurance (Cal. Com. Code § 2609);
(f) Cancel the contract (Cal. Com. Code § 2703).

9.4 Buyer's Remedies Under California Law. Upon Seller's default:
(a) Cover by purchasing substitute goods (Cal. Com. Code § 2712);
(b) Recover damages for non-delivery (Cal. Com. Code § 2713);
(c) Recover identified goods (Cal. Com. Code § 2502);
(d) Specific performance for unique goods (Cal. Com. Code § 2716);
(e) Rescission (Cal. Civ. Code § 1689);
(f) Deduct damages from price (Cal. Com. Code § 2717).

9.5 Liquidated Damages. [If applicable:] $[________________________________] per [________________________________] constitutes a reasonable pre-estimate of damages. Valid under Cal. Civ. Code § 1671(b) (commercial contracts — presumed valid; challenger bears burden of proof) and Cal. Com. Code § 2718.

9.6 Prevailing Party Attorney Fees. Per Cal. Civ. Code § 1717, the prevailing party in any action on this Agreement is entitled to reasonable attorney fees, costs, and expenses.

ARTICLE 10 — INDEMNIFICATION AND RISK ALLOCATION

10.1 Seller Indemnification. Seller shall indemnify and hold harmless Buyer from Losses arising from:
(a) Breach of Seller's warranties;
(b) Product liability attributable to defects in the Goods;
(c) IP infringement by the Goods;
(d) Seller's failure to comply with Proposition 65 warning requirements;
(e) Seller's violation of Applicable Law.

10.2 Buyer Indemnification. Buyer shall indemnify Seller from Losses arising from:
(a) Buyer's misuse of the Goods;
(b) Buyer's failure to provide proper resale certificates resulting in tax liability; and
(c) Buyer's modification of the Goods after delivery.

10.3 Limitation of Liability.

(a) Cap. EXCEPT FOR INDEMNIFICATION OBLIGATIONS, GROSS NEGLIGENCE, WILLFUL MISCONDUCT, AND LIABILITY THAT CANNOT BE LIMITED BY CALIFORNIA LAW, NEITHER PARTY'S AGGREGATE LIABILITY SHALL EXCEED THE TOTAL AMOUNTS PAID OR PAYABLE UNDER THE PO(s) GIVING RISE TO THE CLAIM.

(b) No Consequential Damages. NEITHER PARTY SHALL BE LIABLE FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, OR PUNITIVE DAMAGES, INCLUDING LOST PROFITS OR GOODWILL. NOTE: Limitation of consequential damages for personal injury from consumer goods is prima facie unconscionable under Cal. Com. Code § 2719(c).

10.4 Insurance. Seller shall maintain during the Term:
(a) Commercial General Liability: $[________________________________] per occurrence;
(b) Product Liability: $[________________________________] per occurrence;
(c) Workers' Compensation as required by California Labor Code § 3700;
with California-admitted carriers, naming Buyer as additional insured upon request.

10.5 Force Majeure. Neither Party is liable for delays caused by events beyond reasonable control. If a force majeure event continues for more than [____] days, either Party may cancel the affected PO(s) without liability.

ARTICLE 11 — TERM AND TERMINATION

11.1 Initial Term. This Agreement commences on the Effective Date and continues for [________________________________] ("Initial Term").

11.2 Renewal. After the Initial Term, this Agreement automatically renews for successive [________________________________] periods unless either Party provides [____] days' written notice of non-renewal.

11.3 Termination for Cause. Either Party may terminate for uncured material breach pursuant to Article 9.

11.4 Termination for Convenience. Either Party may terminate on [____] days' written notice. Buyer shall pay for conforming Goods shipped and in transit.

11.5 Survival. Articles 6, 7, 8, 9, 10, and 12 survive termination or expiration.

ARTICLE 12 — DISPUTE RESOLUTION

12.1 Governing Law. This Agreement is governed by the laws of the State of California, including Division 2 of the California Commercial Code, the California Civil Code, and the California Code of Civil Procedure, without regard to conflict-of-laws principles.

12.2 Good-Faith Negotiation. The Parties shall first attempt to resolve disputes through negotiation between executives with settlement authority for a period of [____] days.

12.3 Exclusive Forum. Subject to Section 12.4, the Parties submit to the exclusive jurisdiction of the California Superior Court for the County of [________________________________] and the United States District Court for the [________________________________] District of California.

12.4 Arbitration (Optional).

☐ Elected. Disputes unresolved after [____] days of negotiation shall be resolved by binding arbitration in [________________________________], California, administered by [________________________________] under its commercial rules. California substantive law applies.

☐ Not Elected. Section 12.3 governs.

12.5 Injunctive Relief. Either Party may seek temporary or permanent injunctive relief in California Superior Court to prevent unauthorized disclosure of Confidential Information or infringement of intellectual property.

ARTICLE 13 — GENERAL PROVISIONS

13.1 Statute of Frauds. This Agreement satisfies the California statute of frauds for sale of goods (Cal. Com. Code § 2201) and for contracts generally (Cal. Civ. Code § 1624).

13.2 Entire Agreement. This Agreement, including all Schedules and POs, is the entire agreement and supersedes all prior understandings.

13.3 No Oral Modification. Amendments require a writing signed by both Parties. Under Cal. Com. Code § 2209(2), a signed agreement that excludes modification except by a signed writing cannot be modified otherwise, but an attempt at modification may operate as a waiver under § 2209(4).

13.4 Assignment. Neither Party may assign without the other's written consent, except to a successor by merger or acquisition, provided the assignee assumes all obligations.

13.5 Severability. Invalid provisions shall be reformed to the minimum extent necessary.

13.6 Notices. Written notices delivered by personal delivery, certified U.S. mail (return receipt requested), or overnight courier. Effective upon receipt or refusal.

13.7 Electronic Signatures. Valid under Cal. Civ. Code § 1633.1 et seq. (CUETA) and the federal ESIGN Act.

13.8 Counterparts. This Agreement may be executed in counterparts, each an original.

EXECUTION

IN WITNESS WHEREOF, the Parties have executed this California Master Sale of Goods Agreement as of the Effective Date.

SELLER:

Signature: [________________________________]
Printed Name: [________________________________]
Title: [________________________________]
Date: [__/__/____]

BUYER:

Signature: [________________________________]
Printed Name: [________________________________]
Title: [________________________________]
Date: [__/__/____]

SCHEDULE 1 — GOODS DESCRIPTION AND SPECIFICATIONS

Proposition 65 Warning Required: ☐ Yes ☐ No
If Yes, identify chemicals: [________________________________]

SCHEDULE 2 — PACKAGING, LABELING, AND DELIVERY REQUIREMENTS

Packaging Standards: [________________________________]
Labeling Requirements: [________________________________]
Proposition 65 Warning Format: [________________________________]
Carrier Requirements: [________________________________]
Special Handling Instructions: [________________________________]

SCHEDULE 3 — PRICING

Price Adjustment Mechanism: [________________________________]
Currency: U.S. Dollars

SCHEDULE 4 — WARRANTY TERMS

Warranty Period: [________________________________] from acceptance
Warranty Start Date: Date of Buyer's acceptance (per Article 4)
RMA Procedure: [________________________________]
Turnaround Time: [____] Business Days
Advance Replacement: ☐ Available ☐ Not Available

Sources and References

• California Commercial Code, Division 2 (Sales): https://leginfo.legislature.ca.gov/faces/codesTOCSelected.xhtml?tocCode=COM
• CDTFA Sales and Use Tax: https://cdtfa.ca.gov/taxes-and-fees/sutprograms.htm
• CDTFA Tax Application FAQ: https://cdtfa.ca.gov/taxes-and-fees/applying-tax-sales-purchases-faq.htm
• Proposition 65 (Safe Drinking Water and Toxic Enforcement Act): https://oehha.ca.gov/proposition-65
• California Consumer Legal Remedies Act (Civ. Code § 1750 et seq.): https://leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?lawCode=CIV&division=3.&title=1.5.&part=4.&chapter=&article=
• California Unfair Competition Law (Bus. & Prof. Code § 17200): https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?sectionNum=17200.&lawCode=BPC
• California Non-Compete Ban (Bus. & Prof. Code § 16600): https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC&sectionNum=16600.
• California Usury Law (Const. Art. XV): https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=CONS&sectionNum=SECTION+1.&article=XV
• California Supply Chain Transparency Act (Civ. Code § 1714.43): https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=CIV&sectionNum=1714.43.