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What Is a Sales Contract?
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:
- Goods or services
- Other important terms
When Should I Use a Sales Contract?
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 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. Though the UCC isn't federal law, it serves as a model that every state has accepted and implemented in some form.
What Are the Benefits of Using a Sales Contract?
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 Agreement vs. Bill of Sale
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. In fact, it is sometimes used as a component of a more comprehensive sales agreement to provide proof that the goods were indeed exchanged.
What Should I Include in a Sales Contract?
Sales 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 :
Identification of the Parties
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.
Description of the Services and/or Goods
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:
- Model number
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:
- How and when the buyer will receive an invoice
- The timeline for payment
- Acceptable payment methods, like email transfer, bank draft, certified check, cash, etc
- Whether payments can be made in installments or paid in one lump sum
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.
Image via Unsplash by @cytonn_photography
Details about the delivery of the goods and/or services should also be addressed in a sales contract. This can include things like the:
- Cost of delivery
- Method of delivery
- Place for delivery
- Time for delivery
- Liability for a failed delivery or damage
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 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:
- Governing Law: Also known as choice of law, this outlines which state law is applicable for the interpretation and enforcement of the contract.
- Severability: This provision is made to ensure that all other provisions are still valid and enforceable even if part of the contract is unenforceable or invalid.
- Confidentiality: In transactions where confidential information is shared, this provision explicitly limits the distribution of these private details.
- Breach of Contract: A breach of contract outlines what would happen if one party violates the contract, when a contract can be terminated, and any actions a party can take to recover their losses in the event of a breached contract.
- Notices: This section is especially useful if both parties need to remain in communication throughout the transaction because it describes how all communication should take place. Aside from the mode of communication, it sometimes even outlines the days and times that communication should occur.
- Amendments: An amendments section addresses the steps that should be taken in the event that the contract's terms and provisions need to be formally altered.
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.
Meet some of our Sales Contract Lawyers
Creative, results driven business & technology executive with 24 years of experience (13+ as a business/corporate lawyer). A problem solver with a passion for business, technology, and law. I bring a thorough understanding of the intersection of the law and business needs to any endeavor, having founded multiple startups myself with successful exits. I provide professional business and legal consulting. Throughout my career I've represented a number large corporations (including some of the top Fortune 500 companies) but the vast majority of my clients these days are startups and small businesses. Having represented hundreds of successful crowdfunded startups, I'm one of the most well known attorneys for startups seeking CF funds. My engagements often include legal consultation & advisory roles, drafting of NDAs, TOS & Privacy Policies, contracts and corporate law, business strategy advice & consulting, in-house counsel, Founder & entrepreneur guidance and other roles as needed by my clients. I hold a Juris Doctor degree with a focus on Business/Corporate Law, a Master of Business Administration degree in Entrepreneurship, A Master of Education degree and dual Bachelor of Science degrees. I look forward to working with any parties that have a need for my skill sets.
Seasoned technology lawyer with 22+ years of experience working with the hottest start-ups through IPO and Fortune 50. My focus is primarily technology transactions with an emphasis on SaaS and Privacy, but I also provide GC services for more active clients.
I am a California-barred attorney specializing in business contracting needs. My areas of expertise include contract law, corporate formation, employment law, including independent contractor compliance, regulatory compliance and licensing, and general corporate law. I truly enjoy getting to know my clients, whether they are big businesses, small start-ups looking to launch, or individuals needing legal guidance. Some of my recent projects include: -drafting business purchase and sale agreements -drafting independent contractor agreements -creating influencer agreements -creating compliance policies and procedures for businesses in highly regulated industries -drafting service contracts -advising on CA legality of hiring gig workers including effects of Prop 22 and AB5 -forming LLCs -drafting terms of service and privacy policies -reviewing employment contracts I received my JD from UCLA School of Law and have been practicing for over five years in this area. I’m an avid reader and writer and believe those skills have served me well in my practice. I also complete continuing education courses regularly to ensure I am up-to-date on best practices for my clients. I pride myself on providing useful and accurate legal advice without complex and confusing jargon. I look forward to learning about your specific needs and helping you to accomplish your goals. Please reach out to learn more about my process and see if we are a good fit!
I am a NY licensed attorney experienced in business contracts, agreements, waivers and more, corporate law, and trademark registration. My office is a sole member Law firm therefore, I Take pride in giving every client my direct attention and focus. I focus on getting the job done fast while maintaining high standards.
A twenty-five year attorney and certified mediator native to the Birmingham, Alabama area.
Longtime corporate real estate counsel with specialities in commercial leasing, contracts, corporate governance, and general small business/startup/entrepreneurship legal issues.
I absolutely love helping my clients buy their first home, sell their starters, upgrade to their next big adventure, or transition to their next phase of life. The confidence my clients have going into a transaction and through the whole process is one of the most rewarding aspects of practicing this type of law. My very first class in law school was property law, and let me tell you, this was like nothing I’d ever experienced. I remember vividly cracking open that big red book and staring at the pages not having the faintest idea what I was actually reading. Despite those initial scary moments, I grew to love property law. My obsession with real estate law was solidified when I was working in Virginia at a law firm outside DC. I ran the settlement (escrow) department and learned the ins and outs of transactions and the unique needs of the parties. My husband and I bought our first home in Virginia in 2012 and despite being an attorney, there was so much we didn’t know, especially when it came to our HOA and our mortgage. Our real estate agent was a wonderful resource for finding our home and negotiating some of the key terms, but there was something missing in the process. I’ve spent the last 10 years helping those who were in the same situation we were in better understand the process.