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Sometimes called a sale of goods contract, a sales agreement, or a purchase agreement, a sales contract outlines the terms of a transaction between two parties: the buyer and the seller. These formal agreements are used to detail the services, goods, or property that is to be exchanged for payment or the promise of future payment. The result is a document that should be kept for legal and record-keeping purposes. In an effort to specify the conditions of the agreement, a sales contract identifies the:
Whether it's a small-scale transaction or a large-scale purchase, a sales contract should be used to ensure that the transaction goes smoothly for both parties. Actually, in the United States, a sales contract generally must be put in writing if the sale of goods is for more than $500 in order for it to be enforceable under the Uniform Commercial Code, with some exceptions depending on the circumstances of the contract. Though the UCC isn't federal law, it serves as a model that every state has accepted and implemented in some form. Although each state has the ability to modify its implementation of the UCC or to interpret it differently, most of the UCC’s basic principles are shared by all states.
Unlike oral contracts, which are only enforceable under specific circumstances, sales contracts clearly outline the contractual obligations and rights as well as the economic consequences associated with an agreement. Put simply, this document helps guarantee that the transaction will proceed in a way that's acceptable to both parties based on the agreed-upon terms, allowing you to protect your interests. This is because a sales agreement supplies the legal protections available to the buyer and seller if one of the parties fails to deliver what they promised when they promised it.
Sales agreements and bills of sale have pretty similar purposes, but the major difference between them is the amount of detail provided. While the sales contract talks about payment plans, warranties, and legal ramifications, the bill of sale is simply a form that signifies the transfer of ownership from one party to another, although it can include other information about the transaction if the parties choose to do so. In fact, it is sometimes used as a component of a more comprehensive sales agreement to provide proof that the goods were indeed exchanged.
Meet some lawyers on our platformSales contracts can require different or additional information based on the goods or services being exchanged. Regardless, you should at least include these details when creating a sales contract :
One of the first things that a sales contract should do is clearly identify the parties involved, which is typically just a buyer and a seller. The full names and contact information should be provided for all parties involved.
This is typically the most important aspect of a sales contract because it lists the exact goods or services that the buyer is paying for. For this reason, a description of goods should include key details, like the:
In the case of exchanged services, you would clearly detail the jobs being performed and any deliverables. For example, if you were creating a sales contract for building a brand's website, you might describe the pages, copy, photos, graphics, and other special features that would be involved with the project.
The payment is usually the term of a sales contract that is most negotiated, which is why it's so important to put it in writing as soon as you reach an agreement. Aside from the agreed-upon price, including any adjustments or deposits, your sales contract should outline:
In cases where the buyer isn't paying the full invoice right away, a promissory note is usually added to the sales contract. A promissory note is a document that goes into greater detail about the repayment terms, including any interest that will be charged and the schedule for repayment.
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Details about the delivery of the goods and/or services should also be addressed in a sales contract. This can include things like the:
It's also pretty common for a sales contract to include what's known as a force majeure, which is a clause that discusses the inability to deliver due to things that are out of both parties' control, such as riots, floods, and other natural disasters.
An inspection period isn't included in all sales contracts, but it can be a great way to bolster a buyer's confidence and give them a chance to examine an item to make sure that it meets the terms of the agreement.
The time allotted for an inspection period varies depending on the type of goods that are involved. For example, when perishable items are involved, buyers typically have to inspect and then accept or reject the goods as soon as they are delivered. On the other hand, when the sale involves more expensive items, like machinery, the buyer is usually given as long as a month to inspect the goods.
A warranty is a legally enforceable guarantee assuring a buyer that the goods or services provided will meet the expected level of reliability and quality. According to the Uniform Commercial Code, there are both express and implied warranties. While an express warranty is an affirmative statement made by the seller regarding the characteristics and qualities of the goods, an implied warranty is an unwritten guarantee that the goods they purchase will meet minimum requirements regarding the quality. In other words, these warranties automatically apply any time a buyer purchases goods from a seller.
If implied warranties are specifically disclaimed, excluded, or modified in a written agreement, like a sales contract, they no longer apply. That's why this section is such an important, yet sometimes overlooked, aspect of a sales contract. Without it, the seller could be unknowingly agreeing to certain warranties.
Depending on the goods or services you're providing, you can include these additional provisions in your sales agreement:
When doing business, it is in the best interest of both the buyer and seller to have an agreement in writing. Even though developing a sales contract does take more time, it can save you plenty of headaches in the future.
ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.
My name is Ryenne Shaw and I help business owners build businesses that operate as assets instead of liabilities, increase in value over time and build wealth. My areas of expertise include corporate formation and business structure, contract law, employment/labor law, business risk and compliance and intellectual property. I also serve as outside general counsel to several businesses across various industries nationally. I spent most of my early legal career assisting C.E.O.s, General Counsel, and in-house legal counsel of both large and smaller corporations in minimizing liability, protecting business assets and maximizing profits. While working with many of these entities, I realized that smaller entities are often underserved. I saw that smaller business owners weren’t receiving the same level of legal support larger corporations relied upon to grow and sustain. I knew this was a major contributor to the ceiling that most small businesses hit before they’ve even scratched the surface of their potential. And I knew at that moment that all of this lack of knowledge and support was creating a huge wealth gap. After over ten years of legal experience, I started my law firm to provide the legal support small to mid-sized business owners and entrepreneurs need to grow and protect their brands, businesses, and assets. I have a passion for helping small to mid-sized businesses and startups grow into wealth-building assets by leveraging the same legal strategies large corporations have used for years to create real wealth. I enjoy connecting with my clients, learning about their visions and identifying ways to protect and maximize the reach, value and impact of their businesses. I am a strong legal writer with extensive litigation experience, including both federal and state (and administratively), which brings another element to every contract I prepare and the overall counsel and value I provide. Some of my recent projects include: - Negotiating & Drafting Commercial Lease Agreements - Drafting Trademark Licensing Agreements - Drafting Ambassador and Influencer Agreements - Drafting Collaboration Agreements - Drafting Service Agreements for service-providers, coaches and consultants - Drafting Master Service Agreements and SOWs - Drafting Terms of Service and Privacy Policies - Preparing policies and procedures for businesses in highly regulated industries - Drafting Employee Handbooks, Standard Operations and Procedures (SOPs) manuals, employment agreements - Creating Employer-employee infrastructure to ensure business compliance with employment and labor laws - Drafting Independent Contractor Agreements and Non-Disclosure/Non-Competition/Non-Solicitation Agreements - Conducting Federal Trademark Searches and filing trademark applications - Preparing Trademark Opinion Letters after conducting appropriate legal research - Drafting Letters of Opinion for Small Business Loans - Drafting and Responding to Cease and Desist Letters I service clients throughout the United States across a broad range of industries.
