Sales Agreement

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What Is a Sales Agreement?

A sales agreement is a legally binding contract that clarifies the terms of a transaction. Also known as a sales contract or an agreement to sell, this type of document generally involves two parties — the buyer is an individual or organization making a purchase, while the seller is an individual or organization selling the item in question.

You can use sales agreements to buy or sell either of the following:

  • Goods : Physical objects, such as vehicles or machines
  • Goods and Services: A physical item and related services, such as maintenance or installation

When Do You Need a Sales Agreement?

Without a sales agreement, you may not be able to protect your investment, or you may inadvertently accept liability for something out of your control. That's why you should consider using a sales agreement any time you buy or sell goods that require more than a simple transfer of ownership. If you intend to deliver the goods at a future date or if you want to transfer liability to the other party, a sales agreement can help you protect yourself or your business.

A standard sales agreement includes the following safeguards:

  • The buyer agrees to purchase certain goods or services, and the seller agrees to provide the requested number of goods and types of services.
  • The buyer agrees to make a purchase on a specific timeline, and the seller agrees to provide the goods and services on or by that date.
  • The buyer agrees to pay a certain price for the goods, and the seller agrees to accept that price.
  • Either party has recourse if the other violates the sales agreement.

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Which Terms Should a Sales Agreement Include?

Although a sales agreement can have customized sections, it should typically include the following terms:

  • Amendments: This element states the terms that both parties must follow to make any changes to the sales agreement, such as executing a written and signed agreement.
  • Assignment: The assignment clarifies whether either party can transfer their rights to another party. This section may include terms for assignment, such as if the assigning party must have written permission.
  • Buyer: This names the person who intends to purchase the goods or services.
  • Delivery details: This section lists any addresses, dates, or other terms if the seller has agreed to deliver the goods or services to the buyer.
  • Deposit: This element clarifies whether the buyer must provide a portion of the full amount as a partial payment and assurance that the transaction will be completed. A sales agreement should also state whether or not the seller may refund the deposit if either party cancels the contract.
  • Dispute resolution: This element explains how the buyer and seller intend to resolve any disagreements that may arise. In most jurisdictions, options include litigation, arbitration, or mediation.
  • Goods or services: The goods or services section covers everything involved in the transaction. A sales agreement may include an attached schedule that describes or lists the quantity of the goods or services.
  • Governing law: This specifies which jurisdiction's law the agreement will follow in the event that the parties do business in different states or countries.
  • Inspection: This states whether the buyer can examine the goods before the transaction is complete.
  • Liability: This element confirms that the goods may experience loss or damage and clarifies which party takes responsibility for them throughout the transaction. The seller may transfer liability to the buyer at several points, including when they ship the goods, when the buyer confirms receipt, or when the buyer accepts ownership.
  • Non-disclosure agreement: Also referred to as an NDA, this clause states that the buyer will not use the seller's intellectual property or data to produce the same or similar goods.
  • Notices: These clarify how the two parties intend to communicate about the transaction, such as via mail or email.
  • Ownership: The ownership section states when the buyer assumes ownership of the goods, which is typically upon delivery.
  • Payment amount: Every sales agreement notes the full amount that the buyer owes the seller in this section.
  • Payment dates: The date by which the buyer has to pay for the goods or services is also included. If the buyer has to make a series of payments, the sales contract may also include a payment timetable including amounts and dates.
  • Payment method: This section specifies how the buyer can pay, such as with cash, a certified check, an electronic deposit, or a credit card.
  • Seller: This names the person or organization that intends to sell the goods or services.
  • Severability: This section states that all other aspects of the agreement remain valid even if one part proves unenforceable.
  • Warranty: The warranty indicates the seller's guarantee regarding the condition of the state of the goods. Sellers can make a range of guarantees, such as claiming that the item has no claims against it or that it's in a reasonable condition for standard use. Sellers can also claim “as-is, which means that they make no guarantee about the goods' quality.

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Do You Need an Attorney for a Sales Agreement?

Although you can download and use a standard stales agreement as a contract, it's always in your best interest to contact an attorney. After all, a standard agreement may not provide you with adequate protection or shield you from liability. You can gain several advantages when you work with an experienced lawyer:

  • Personalization: A knowledgeable lawyer can ensure that your sales agreement includes all the correct information, including optional clauses and disclosures. If you need to modify the language in a standard agreement, an attorney can ensure that it's legally binding.
  • Liability: Any sales agreement you sign should limit the liability you accept during and after the transaction. An attorney can ensure that the contract limits your liability effectively.
  • Protection : Whether you're the buyer or the seller, a sales agreement should offer sufficient protection. An experienced lawyer can confirm that your contract includes the right terms to ensure that you receive the stated goods, services, or compensation.

How Is a Sales Agreement Different From a Bill of Sale?

A sales agreement is similar to a bill of sale, but the two documents have important differences . Unlike a sales agreement, a bill of sale:

  • Transfers ownership from the seller to the buyer
  • Lacks a detailed payment plan or a warranty
  • Includes fewer terms and provides less flexibility for either party

What Are Some Alternatives to a Sales Agreement?

Although a sales contract can apply to many transactions, it isn't always the ideal document for an agreement between two parties. Ask your attorney whether one of these standard agreements may be a better fit for your situation:

  • Real Estate Purchase Agreement: If the buyer intends to purchase a home, a commercial building, or another piece of property from the seller, a real estate purchase agreement may better clarify the transaction.
  • Purchase of Business Agreement: If the seller intends to transfer ownership of a business to the buyer, a purchase of business agreement can clarify each party's rights and responsibilities.
  • Services Agreement: If the seller is providing services or consulting rather than goods, a services agreement or professional services agreement (PSA) may better outline the transaction and protect both parties.
  • Promissory Note: If the buyer must borrow funds to purchase goods or services, the lender typically requires a promissory note, which includes a payment plan and terms.

No matter what type of sales agreement you need, the ContractsCounsel team can help. Get a free proposal and move your transaction forward with a legally binding sales contract.

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