A Sales Agreement, also known as a Sales Contract or Sales of Goods Contract, is used to specify the terms of a transaction between two parties.
What can I use a Sales Agreement for?
You can use a Sales Agreement for purchasing/selling:
- Goods: a physical item or possession (e.g. computer, air conditioner, car, exercise equipment, animals, etc.)
- Services: performing duties in exchange for compensation (e.g. installing a dishwasher). If services are the only thing being provided, it is recommended you use LawDepot's Service Agreement.
- Goods and Services: the purchase of both a physical item as well as supplying aid (e.g. a computer and installing the computer)
- Real Estate: property, buildings, or land. If it is for the sale of a residential property, it is recommended you use LawDepot's Real Estate Purchase Agreement.
When creating your Sales Agreement, clearly describe the item and/or service. This should include a physical description and the quantity being sold.
Parties in a Sales Agreement:
Buyer: the individual or corporation purchasing a good or service from a seller.
Seller: the individual or corporation selling a good or service.
Determining Payment Details
In a service contract, you will need to determine a payment plan. Here are the decisions you need to make:
Payment Type: this is how the buyer intends to pay the seller. Payment can come in the form of:
- Certified check
- Promissory note
- Bank draft
- Email transfer, etc.
The seller should provide a receipt to the buyer for transactions involving cash.
Deposit: a deposit is a specified amount of money that a buyer gives to a seller as security that they will follow through on the transaction. If the buyer chooses to purchase, the deposit will go towards the purchase price. The deposit can be refundable or nonrefundable, meaning that either the deposit is returned to the buyer or kept by the seller if the deal does not go through.
It is important to include payment due dates for both the payment itself as well as the deposit in the Sales Agreement, if applicable, to make the transaction details clear.
Will the goods be delivered?
You may wish to include terms regarding where the goods will be delivered. This can be at the buyer's address, the seller's address, or at another specified location. The seller can be compensated after the buyer has received the goods, the seller has shipped them, or a Bill of Sale has been created.
Sales Agreement vs. Bill of Sale
While a Sales Agreement and Bill of Sale have similar purposes, a Sales Agreement offers a more detailed payment plan and provides warranties on the item. It also allows both parties more flexibility prior to completing the agreement by arranging terms to secure goods before they are purchased.
A Bill of Sale is a form evidencing that an item's ownership has been transferred from one party to another. It can be used as part of a Sales Agreement to prove that the goods officially changed hands.
Liability, Warranties, and "as is" in a Sales Agreement
Liability addresses the goods' risk of loss or damage. Liability can be transferred to the buyer once they:
- Have ownership through a Bill of Sale
- Receive the goods
- The seller ships the goods
Warranty refers to the guarantee that a seller makes about the quality and condition of goods.
Here are some of the promises a buyer can make regarding an item:
- They own it (e.g. the seller purchased the car from a dealership)
- The item has no claims or loans against it (e.g. there are no outstanding liens on a vehicle)
- The goods are fit for use (e.g. the motorcycle is fit for driving)
- The item does not infringe on patents or trademarks (e.g. the seller's invention is not a replica of someone else's patented design)
When a seller offers no warranties, they are selling the item "as is", which means they do not guarantee the quality of the goods to the buyer, and the buyer agrees. This condition only works if the seller has not purposely hidden any flaws.