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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:
- Seller
- Buyer
- 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 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.
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, 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.
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
- Type
- Size
- Weight
- Color
- Quantity
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.
Payment Plan
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
Delivery
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.
Inspection Period
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.
See Sales Agreement Pricing by State
- Alabama
- Alaska
- Arizona
- Arkansas
- California
- Colorado
- Connecticut
- Delaware
- District of Columbia
- Florida
- Georgia
- Hawaii
- Idaho
- Illinois
- Indiana
- Iowa
- Kansas
- Kentucky
- Louisiana
- Maine
- Maryland
- Massachusetts
- Michigan
- Minnesota
- Mississippi
- Missouri
- Montana
- Nebraska
- Nevada
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Ohio
- Oklahoma
- Oregon
- Pennsylvania
- Rhode Island
- South Carolina
- South Dakota
- Tennessee
- Texas
- Utah
- Vermont
- Virginia
- Washington
- West Virginia
- Wisconsin
- Wyoming
Warranties
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.
Miscellaneous Provisions
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. The actions a party can take when a contract is breached, are also often limited by state laws.
- 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
Justin A.
I am an entrepreneurial lawyer in the Seattle area dedicated to helping clients build and plan for the future. I earned my law degree from the University of Chicago and worked in a top global law firm. But I found advising real people on legal issues far more rewarding. Reach out to discuss how we can work together!
Phocus L.
G'day, my name is Michele! I work with startups, entrepreneurs and small/medium-sized businesses across the country in a wide array of industries. I help them with all of their ongoing, daily legal needs. This includes entity formation, M&A, contract drafting and review, employment, asset sale & acquisition, and business sales or shareholder exits. I'm half-Australian, half-Italian, and I've lived the last 20+ years of my life in America. I've lived all over the USA, completing high school in the deep south, graduating cum laude from Washington University in St. Louis, and then cum laude from Georgetown University Law Center. After law school I worked for the Los Angeles office of Latham & Watkins, LLP. After four intense and rewarding years there, I left to become General Counsel and VP of an incredible, industry-changing start-up called Urban Mining Company (UMC) that manufactures rare earth permanent magnets. I now work for Phocus Law where I help run our practice focused on entrepreneurs, startups, and SMEs. I love what I do, and I'd love to be of help! My focus is on providing stress-free, enjoyable, and high-quality legal service to all of my clients. Being a good lawyer isn't enough: the client experience should also be great. But work isn't everything, and I love my free time. I've been an avid traveler since my parents put me on a plane to Italy at 9-months old. I'm also a music nut, and am still looking for that perfect client that will engage me to explain why Dark Side Of The Moon is the greatest album of all time. Having grown up in a remote, and gorgeous corner of Australia, I feel a strong connection to nature, and love being in the elements.
Antoine D.
In his firm, Talented Tenth Law, Antoine focuses on helping people maximize their protection and prosperity in the courtroom and the boardroom. His firm’s services include representing people in lawsuits involving breach of contract, many types of civil lawsuits and helping business owners win government contracts among other things.
Kelvin R.
Experienced business and contract lawyer. Our firm specializes in commercial litigation and dispute resolution.
March 14, 2022
Jessee B.
Whether you're thinking of starting your own business and not sure how to bring your vision to life, or you're a business owner, creative professional, creator, influencer, artist, musician, startup, nonprofit, or entrepreneur who wants to grow your business and protect your content and brand—I can help. Get experienced legal counsel, quality representation, and creative solutions customized to fit your unique needs. Services include: entity formation, business issues, planning, financing, and strategy; contract drafting, review, and negotiation; intellectual property protection; copyright and trademark filing; startup and nonprofit setup and guidance; real estate matters; property purchase, sale, and leasing; assistance with legal issues related to content creation, branding, design, writing, film, music, art, entertainment, social media, e-commerce, marketing, advertising, data and privacy compliance, and more. Questions? Let's work together. Reach out and say hello.
March 8, 2022
Stephanie C.
Alabama Licensed Attorney offering Freelance Services for Wills, Trusts, Probate, Family Law Documents, Criminal Matters, and Real Estate Closings.
March 10, 2022
Benjamin V.
My practice involves counseling businesses and individuals on a variety of contracts, such as business formation, technology/IP, real estate, leases, and even domestic relations agreements. Much of my practice is dedicated to litigation. As such, I approach contract and transactional work from a litigation perspective by advising clients of the risks involved in failing to develop proper contracts. It takes more than knowledge of the law to be a good lawyer. A good lawyer is honest and forthcoming with clients and has a counseling ethos. And, to me, a good lawyer stands in the shoes of the client when considering how to best serve that client. Whether my client is a business or an individual, I am passionate about helping my clients understand their rights, responsibilities, risks, and possibilities.
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ContractsCounsel User
Reseller agreement for SaaS software
Location: Florida
Turnaround: A week
Service: Drafting
Doc Type: Sales Agreement
Number of Bids: 3
Bid Range: $500 - $1,000
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ContractsCounsel User
Catering Contract
Location: Alabama
Turnaround: Over a week
Service: Drafting
Doc Type: Sales Agreement
Number of Bids: 3
Bid Range: $750 - $1,050
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