Recently I’ve come upon an item wherein the sales contract stipulates that the buyer may not resell the item for a price higher than the purchase price. Is this legally enforceable? Generally I’d expect that if I’ve bought something, I’ve also bought the right to resell it at the price of my choosing.
I asked a similar question recently about buying or adopting a pet, and if it’s in the contract, you agreed to it and it’s enforceable (IANAL).
OK. What if I sold it at the same price, but only if accompanied by a pricey warranty and technical support contract?
Is there a provision that purports to bind any subsequent sale beyond your sale to the second purchaser (counting your purchase as the first)?
Sometimes, there are ways in which restrictive covenants don’t survive sale to a third party bona fide purchaser for value without notice.
Some centuries ago, a court decided that a contract ought to come to an end… The contract occurs for commercial reasons, to do with money, and exchange of goods and services, and that once all that is complete, and settled, its had its day.
I can’t imagine how it would be enforced.
Say I buy a (previously unknown) Picasso at a garage sale for $5. If the seller had such a caveat upon sale, it would HAVE to be meaningless at the end of the day.
Once you have paid for an item, it’s yours to do with as you see fit. If you want to hang the Picasso in your shed with a galvenised nail…go nuts.
Conversely, if you choose to sell it for $600k, that too is your choice to make.
One would imagine that about the only mechanism for enforcement is breach of contract. Maybe, just maybe, you could craft a contract that says the sale becomes void if an attempt is made to sell the item for more than was paid for it. (With ownership reverting to the first seller.) But no matter what - it seems very unlikely that the contract could be transitive. The next buyer is hardly likely to be so bound, and so the entire idea fails. One would also suspect that the courts might view such a contract dimly.
About the only things where sales of items is odd I can think of are software/works of art etc, and tickets. Software has a different constraint. In the US, the first seller doctrine says the vendor can’t constrain onward selling of the physical item, but they do retain ownership of the right to reproduce.
Tickets are an interesting one. Attempts to control scalping are exactly an attempt to prevent sales at higher than first sale price. But a physical ticket isn’t what is being sold. It is the right to enter a venue/travel. The vendor may reserve the right to refuse entry/carriage (and usually does.) If you have a scalped ticket, you still have the physical ticket even if you are refused entry/travel. And of course, once the performance/trip has ended, the ticket is worthless whether you were admitted or not. So one might argue that in terms of ticketing, breach of contract (by on-selling a a higher price) does result in termination of the contract and a refusal to honour the ticket. Thus enforcing the terms.
Be sure, IANAL, and am mostly just blowing smoke.
In most jurisdictions, it would be held to be enforceable in pesonam, but not in rem. That means that the reseller who resold it against a prohibition to that effect in the contract with the first seller would be liable to the first seller for breach of contract, i.e., damages. Nonetheless, the third party to whom it was resold would acquire good title, i.e., become the rightful owner of the property. Exceptions might occur if the third party acted in bad faith, i.e., had knowledge of the resale prohibition.
As with all legal questions the result would vary depending on the jurisdiction you’re in, but this is an outcome that a lot of jurisdiction would have found, and it appears very reasonable.
What would the damages be?
Assuming that we are discussing a physical good, rather than software or intellectual property, I have trouble imagining a situation where this would occur.
I sell you a widget and you sign a document agreeing not to sell it on. This raises a lot of questions: How long does the prohibition last? Does it only apply in the immediate locality, the State, the Country or worldwide? Does it prevent me from giving it away or donating it to charity? I am sure that a lawyer could come up with a dozen more, not least; - does the restriction have any legal standing.
In fact - if I sell a widget for a consideration, then title passes to the new owner and I lose all control. If I wanted to prevent onward sales, I would lease or hire it to the new keeper without passing title in the same way that software companies *sell *programs and music companies *sell *digital music…
Depends on the case, but it’s not inconceivable that there are damages. Suppose you’re a producer of luxury goods and you don’t want a second hand resale market of your goods to come into existence, because that would destroy the cachet of exclusivity of these goods. In such a case I don’t find it implausible that the manufacturer’s lawyers can argue that there are damages arising from the unauthorised resale. Then, of course, there’s the possibility that the contract that includes the resale prohibition also includes a contractual penalty clause, in which case no actual damages would have to be demonstrated.
The real problems from such cases do not arise from contract law; under the law of contracts, it is perfectly clear that if you are party to a contract that prohibits you from doing something (such as, resell a good), and you do it anyway, then you commit a breach of contract. The real problem lies in competition and antitrust law, because such clauses are anticompetitive in nature. A court could therefore hold that the clauses are unenforceable from that perspective. But once the clause withstands that test and is not found to be overly restrictive as to competition, then from a contract law point of view everything else follows quite easily.
Which, again, does not necessarily mean that the prohibiton extends in rem and actually prevents the third party purchase from acquiring good title.
Depends on jurisdiction but around here penalty clauses are unenforceable. And proving damages of the type you propose would be very difficult. You are likely to get a peppercorn, I think.
Some items are sold to certain people/businesses at a loss. The intention of doing this is to gain publicity or for other people to see you or your business using the product - a form of advertising.
Or they want a specific person/business to evaluate the product, so they sell it at a reduced price (loss).
If you go and sell it, then they are not getting what they intended. Is this the case?
Similar agreements are made between the suppliers and distributors of products. The only recourse I’ve heard of for suppliers in the case of violation of the agreement is to stop selling the products to the distributor. Perhaps because of the issue of damages it’s not worth going to court over.
Aside from ticket scalping described above, here is one case that actually happened. It was considered scandalous, but I don’t know that it was actually illegal.
At the end of WWII, no cars had been manufactured for several years. The first cars manufactured in 1945 or 1946 were price controlled and there were long waiting lists for buying one. But there were no price controls on used cars. So some people put their names on the list, waited till their turn came (maybe it was by lottery, I was only about 9 at the time), they bought their car, drove it around the block and then resold it as a used car for a considerable premium. But whether this violated any law or contract, I have no idea.
I imagine the same issue could arise whenever anything is rationed.
I declare this purely hypothetical as it’s highly unlikely I’ll ever pony up the cash for one of these, but just for public interest, here is some background on the thing. It’s called a Hang, and it’s a type of handpan drum, best explained by watching one on Youtube. But if anyone’s got an extra $4000 to burn, call me before you spend it on something else 
A relevant quote:
That’s not necessarily true, especially if the “item” is real estate where you can, for example, buy a piece of land but not own the mineral or water rights. “Ownership” of an object is really just a bundle of rights with respect to that object which can be bought and sold piecemeal as well (but usually aren’t when the object is a common chattel, such as a Picasso).
“first sale doctrine” is the legal principle behind your thinking. However, that doesn’t negate every contract that’s involved in a permanent purchase.
If you agreed to those terms (either by signing a contract, or completing a purchase after the terms had been communicated to you) you’re bound by them. Now, if that contract were not equitable you might be able to get out of it that way.
Okay.
Who CARES if people resell these things at a higher price? What imbalance to what universe does it create?
Well, the makers care. The stated motive is that the instrument should be affordable to everyone. What’s actually happening, as economics dictate it must, is a 6-36 month wait. Of course the makers also have complete control over the waiting list, and they’re using that control to decide who deserves to have one of their instruments (personal justification letters, etcetera).
So, in a nutshell, creative control. I disagree, but I get it.