A Purchase Agreement is a legal document between two parties, the Seller who wishes to sell a piece of personal property and the Buyer who wants to buy that property. The Agreement describes the terms and conditions of the sale and ensures that both parties will follow through on their promises regarding that sale.
It should identify the following basic elements:
- Seller: the person who has the personal property and wants to sell it
- Buyer: the person who will become the new owner
- Personal Property: a detailed description of the property
- Purchase Price: how much the Buyer will be paying for it
- Payment: how and when the Seller will be paid for it
What is the difference between a Purchase Agreement and a Bill of Sale?
A Purchase Agreement is signed before any property or money is exchanged. It is an agreement between the parties to enter into a future transaction and documents the details of what that transaction will be.
A Bill of Sale is signed during or after the exchange of money and property. It documents the transfer of ownership from the Seller to the Buyer, and acts like a receipt to the transaction.
As a reference, this document known by other names:
- Agreement to Sell Personal Property
- Sale and Purchase Agreement
- Contract for Sale of Personal Property
When a Purchase Agreement is Needed
If you are either selling or purchasing any personal property, you should consider documenting your transaction in a Personal Property Sales Contract. A written Contract will allow both parties to carefully consider and describe the details regarding the sale, and confirms each party’s understanding of how the transaction will take place.
It is also important to keep a record of the property that you sell for tax and accounting purposes. Selling property may have an impact on your tax return. The Internal Revenue Service (IRS) requires you to report all miscellaneous income, including income from the “barter and exchange of goods”. A tax lawyer or certified accountant can give you more information about how the sale of property may impact your tax return.
A simple Purchase and Sale Agreement could help prevent some of these consequences:
|1. Lost time||1. Lost time|
|Appearing in court to clarify ownership and title||Appearing in court to clarify ownership and title|
|Lawsuit to get full purchase price||Lawsuit over purchase price|
|Difficult to clear your name||Title transfer more difficult|
|2. Lost money||2. Lost money|
|Unexpected gift of property||Seller did not have legal title|
|Liable for fees and violations||Unfair seizure of illegal item|
|Did not get paid on time||Had to pay more money to get item|
|Penalties for improper sale||Purchased a faulty item or lemon car|
|3. Personal safety||3. Personal safety|
|Disgruntled purchaser expected the item to be in perfect condition||Faulty or defective car or item is a threat to public safety and your well being|
Most Common Uses for Purchase Agreements
Here are just a few things a Buyer or Seller might buy or sell using a Purchase Agreement:
- Car or truck
- Diamond ring
- Designer gown
- Sports equipment
- Concert tickets
A simple Purchase Agreement should generally have at least the following:
- Who are the Seller and the Buyer
- What is the item being sold
- Where are the Seller and Buyer located
- When will the item be delivered
- How much is the Buyer paying for the item
Here are some other details a Purchase Agreement might include:
- Governing Law: the state’s laws that will govern the Agreement
- Payment Plan: any down payment or installments and when they are due
- Representations: the Seller owns the item, but otherwise is selling it “as is”
- Taxes: the Buyer is responsible for paying any sales and use tax
Purchase Agreement Sample
The sample purchase agreement below details an agreement between a seller and a buyer. The seller agrees to sell an item to the buyer according to the specified conditions.