In this video, I discuss risk in sale on approval or sale or return contact.
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In business, "Sale on Approval" and "Sale or Return" are two distinct types of sales contracts that come with their own set of risks.

Sale on Approval: This type of contract is often used when a buyer is not sure if they want to purchase the item. The goods are delivered to the buyer, but the sale is considered complete only if the buyer approves or keeps the goods after a certain period. If the buyer does not approve, they can return the goods without any obligation to pay.

Risks in Sale on Approval:

For the Seller: The major risk is that the goods may not be sold. This uncertainty can impact inventory management and cash flow. There's also the risk of goods being damaged or depreciated while in the buyer's possession.
For the Buyer: There's usually minimal risk for the buyer, except for the responsibility to return the goods in their original condition if they choose not to approve the purchase.
Sale or Return: In this contract, the buyer purchases the goods but has the option to return them within a specified period for a full or partial refund. This is common in industries like book publishing or clothing.

Risks in Sale or Return:

For the Seller: There's a risk of goods being returned, which can affect revenue projections and inventory management. Also, returned goods may no longer be saleable or may have to be sold at a discounted price.
For the Buyer: The buyer may face restocking fees or other return-related costs. There's also the risk of missing the return window, in which case they would be stuck with the purchase.
Both types of contracts aim to reduce the buyer's purchasing risk but increase the seller's risk. These contracts are often used as marketing strategies to attract customers who are hesitant to make immediate purchases.




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