What Is a Sales Agreement and Why Does It Matter?
A sales agreement is a legally binding contract between a buyer and a seller that describes a transaction of services or goods. It outlines the details of the deal and can be written by either side. The agreement might cover a present sale, where ownership transfers right away, or a future sale, where it transfers later.
Many people call it a sales contract or a sale of goods contract. Under the Uniform Commercial Code (UCC), which most states follow, it’s defined as a “contract for sale.” A sale of goods contract usually includes:
- Who’s involved, what’s being exchanged, and the agreed price.
- Payment terms, delivery details, liability, and warranties.
A sales agreement contract gives both sides written proof of the deal and makes their responsibilities clear. That clarity helps prevent misunderstandings and provides a path forward when issues come up.
If payments are missed, goods are defective, or deliveries fall through, the agreement lays out what should happen next. It also gives lenders, insurers, and regulators the assurance they often need before approving a transaction.
When Should You Use a Sales Agreement?
A sales agreement is best used when the deal involves more than a simple, everyday purchase. It’s a wise choice for buying or selling goods like vehicles, animals, appliances, or equipment. It also works when goods come with services, such as a dishwasher sold with installation included.
These agreements are especially important for larger or more complex transactions, like:
- Cars, boats, or other high-value equipment.
- Deals where delivery happens later, and both sides need to stick to the terms.
Businesses often rely on them for bulk purchases from suppliers. They’re also important when liability needs to shift from one party to another. For small, routine purchases where ownership changes hands right away, though, you generally don’t need a formal agreement.
Use the Right Document
Other documents may fit better depending on the situation. A real estate deal, for example, calls for a purchase and sale agreement. And if you’re selling a business, you’ll need a business bill of sale.
How to Write a Sales Agreement
The strength of any sale rests on the terms written into the agreement. That’s why each section of a sales agreement contract needs careful attention, from identifying the parties to defining payment, delivery, and warranties.
1. Use a Sales Agreement Template
A sales agreement template sets out the key terms, who’s involved, the price, delivery, and risk. For sales of goods worth $500 or more, the Statute of Frauds requires a written contract to make an action or defense enforceable in court, which makes putting it in writing essential. With Legal Templates, you can quickly create a sales agreement that covers every detail and protects both sides.
2. Identify the Parties
List the full legal names and addresses of the buyer and seller exactly as they appear on government records. This ties the right individuals or businesses to the contract and avoids disputes about obligations.
3. Describe the Goods
Provide details on your sale agreement form, such as make, model, year, serial number, VIN, or hull number. State the condition, quantity, and any items included in the sale. For example, if selling equipment, note attachments or accessories included in the transfer.
4. Set the Purchase Price and Taxes
Record the purchase price in exact figures. Specify if sales tax or excise tax applies and identify the party responsible for payment. If financed payments are involved, state the amount due upfront and the funded amount.
5. Define Payment Terms
State the method of payment, such as wire transfer or certified check. If the purchase will be paid in installments, list each due date and amount. Include what happens if a payment is missed, such as late fees or forfeiture of the goods.
6. Clarify Delivery and Transfer of Risk
State if the seller will ship, deliver, or require the buyer to collect the goods. Specify the exact point when the risk of loss shifts. For example, “risk transfers to the buyer once the goods are loaded for shipment” or “risk transfers upon delivery at buyer’s premises.”
7. Include the Buyer’s Right to Inspect
If inspection is allowed, state the inspection period and the consequences if the goods fail inspection. For example, “Buyer may inspect the goods within 24 hours of delivery and reject them by written notice if they do not meet the specifications.”
8. Add Warranties or “As Is” Language
If the goods are sold “as is,” state that clearly. If warranties apply, describe them in detail, such as: “Seller warrants that the goods are free of liens, the seller has clear title, and the goods are fit for ordinary use.” Include the length of warranty coverage.
9. Confirm Seller’s Representations
Confirm in writing that the seller owns the goods outright and that no liens, security interests, or competing claims exist. This protects the buyer against ownership disputes.
10. Address Cancellation and Default
State any cancellation rights and the process for exercising them. Define remedies for default, such as retention of a deposit if the buyer cancels or damages owed if the seller fails to deliver.
11. Governing Law
Specify the state or country whose laws will govern the agreement. This is especially important for interstate or international sales to prevent legal disputes over which jurisdiction’s laws govern.
12. Dispute Resolution
Explain the process for resolving disagreements. This can include specifying that parties will first attempt to resolve issues through mediation or binding arbitration before going to court.
13. Sign and Date the Agreement
Provide signature lines for both parties with printed names and dates. Without signatures, the agreement is not enforceable.
Sample Sales Agreement
Take a look at the sample sales agreement below to see how it’s structured. Then download your own sales agreement template in Word or PDF to customize and use right away.
