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Understanding the Key Elements of a Sales Contract

Updated: March 28, 2023
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5 Key Elements of a Sales Contract

The goal of any small business is to bring in income, which is usually done by making sales. In most cases, these sales will be small enough that no special documentation is needed. However, when the stakes are high, a sales contract should be used.

Going it alone in creating a sales contract is risky. A poorly worded agreement could come back on you should the matter be taken to court. To help, here are the key elements to include in any sales contract.

The Parties to and Date of the Agreement

This is standard to pretty much any contract, not just a sales contract. For a commercial agreement, this should include the legally registered name of your business and the name of the person or company who is purchasing from you. When signing the agreement, you should use both your name and your title at your company. The date of signing must also be included.

The Goods or Services Being Sold

It can be tempting to keep this part as simple as possible, but the more detail you give, the better you are protected. Give a detailed description of the goods or services being purchased, clarifying things such as the quantity being purchased, the duration of service, the standards the goods or services must meet, and any limitations you feel should be outlined to protect you.

The Details of Payment

The whole point of making a sale is getting reimbursed for the goods or services you provide. In this part of your agreement, you should make certain there is no ambiguity regarding payment. Specify how much is owed to you, when payment should be rendered, what payment methods are acceptable, and if this is to be a reoccurring sale, what the payment schedule will be.

Delivery Specifications

As the vendor, you want the expectations of you to be clear. A good way to do this is getting it put in writing. Cover aspects such as the time of delivery or a set window for delivery, where the goods or services should be delivered, what delivery methods are acceptable, any costs associated with delivery, and what you are liable for should there be a failed or damaged delivery.

The Inspection Period

As an honest business owner, you want to stand behind the goods and services you offer. At the same time, you do not want to be held responsible for problems that are not noticed in a timely manner. In your sales contract, define how long the buyer has from the date of delivery to inspect the goods or the results of the services and reject them.

These five elements must be included in any sales contract. However, there are other clauses that one might want to include depending on the type of goods or services being offered and what the legal requirements are in your jurisdiction. Online templates cannot account for the nuances that go into legal contracts.

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