What Is a Sales Agreement?
A sales agreement is a written contract that outlines the details of a sale between a buyer and a seller. It covers what’s being sold, the price, and the terms of the exchange. You can use it for one-time transactions or ongoing sales. This legally binding document protects the interests of buyers and sellers by defining their rights and responsibilities.
Once both parties sign, the agreement becomes legally binding. This mutual agreement creates a legal obligation for the transaction to move forward. If either party fails to meet the terms, the contract can help enforce the deal.
A sale of goods contract should include the names of the parties involved, a description of the items for sale, purchase price, payment terms, and other important transaction details. Our sales contract template helps ensure your sales contract is complete, easy to understand, and tailored to your needs.
Spanish Language Version
If you’re looking for a sales agreement in Spanish, use our Acuerdo de Ventas.
When to Use a Sales Agreement
Use a sales agreement contract when transferring ownership of physical goods—whether you’re selling everyday items or managing large transactions. This legally binding contract sets clear expectations for the purchase price, delivery terms, late payment penalty, and responsibilities of both parties.
It’s especially useful when:
- the sale involves delayed payment or delivery
- you’re transferring liability or risk of loss
- you need to document warranties or guarantees
- one or both parties want legal recourse if something goes wrong
Here are some examples of potential sellers and buyers who would need to use this agreement.
| POTENTIAL SELLER | POTENTIAL BUYER |
|---|---|
| Party supply store | Professional party planner |
| Clockmaker | Collector of specialty clocks |
| Office supply store | Start-up company |
| Car dealership | Rental car company |
| Winery | Wedding planner |
Sales agreements aren’t just for large businesses. Individuals, small shops, and independent sellers use them to avoid disputes and document the terms of a sale. In some cases—such as off-premises or door-to-door sales—buyers may also have the right to cancel under the Federal Trade Commission’s Cooling-Off Rule. [1] Including cancellation terms in your agreement can help avoid confusion.
Our sales agreement template helps ensure the contract covers key legal elements like item descriptions, delivery timelines, liability, and cancellation terms.
Sales Agreement vs. Other Contracts
Sales agreements are mainly designed for the sale of goods—not services or real estate transactions. If you’re exchanging money for a service, use our service agreement template. If you’re selling property, like a home or land, use our purchase agreement template. To transfer ownership of a company or LLC, try our business purchase agreement template.
What to Know Before Writing a Sales Agreement
When you write a sales agreement, you should learn about the types of goods you’re recording. You should also familiarize yourself with warranties, the concept of risk and loss, and buyer’s and seller’s duties. This knowledge can ensure you write a contract with the exact terms you want to outline.
Types of Goods in a Sales Contract
Goods are movable property that you can sell using a sales contract. They may include things like crops, electronics, or vehicles. Different categories of goods can impact the nature of the contract.
Existing goods physically exist when the seller and buyer sign the contract. They can be split into two subcategories: specific and unascertained goods. Specific goods are items agreed upon by both parties at the time of the sale. For example, the buyer may buy a piece of equipment with a serial number.
Unascertained goods have no specific distinction. For example, a farmer may purchase a bulk order of grain from a warehouse. The warehouse would have to sort out the grain before shipping it to the farmer.
Other types of goods include future and contingent goods:
- Future goods: Future goods don’t exist when the parties sign the contract. Instead, the seller must manufacture or grow them before giving them to the supplier.
- Contingent goods: Contingent goods depend on an event that may occur in the future. If the parties meet specified conditions, the buyer must purchase the goods listed in the agreement. If the conditions aren’t satisfied, the parties don’t have to go through with the deal.
Warranties in a Sales Agreement
Warranties are legally enforceable guarantees in a sales contract. The seller makes warranties to assure the buyer that specific facts about the sale or goods are accurate.
Without a sales agreement, warranties may apply automatically or not apply at all. Under the Uniform Commercial Code (UCC) [2] , there are two kinds of warranties: express and implied.
Express Warranties
An express warranty is a spoken or written promise about the transaction. For example, an express warranty may read that “The tractor includes a two-year warranty covering all parts and labor for manufacturing defects. Normal wear and tear, accidental damage, and improper maintenance are not covered.” Under this warranty, the seller must replace or repair the tractor if its quality or performance isn’t as promised.
Our template lets the seller and buyer state what express warranties will apply to the goods, if any.
Implied Warranties
An implied warranty is an unwritten promise that the goods will meet a minimum level of quality. [3] Buyers receive automatic warranties when they buy goods from a merchant. There are two implied warranties under the UCC:
- Warranty of merchantability: A warranty of merchantability implies that the goods will serve their ordinary purpose. For example, a purchase of a microwave implies that the microwave will be able to heat food.
- Warranty of fitness for a particular purpose: It applies when a buyer relies on a seller for a recommendation. For example, if a buyer asks the seller for paint for outdoor use and they sell the buyer paint for indoor use, they break this warranty of fitness for a particular purpose.
Implied warranties don’t automatically apply if sellers exclude or modify them in a sales agreement. A seller can use our template to expressly disclaim or modify implied warranties.
Risk of Loss in a Sales Contract
Risk of loss describes which party carries the risk of damage to the goods. It applies after they write the contract but before the buyer accepts the goods. The allocation of risk depends on the contract terms, UCC law, and shipping arrangements that the parties enter.
If the seller accepts the risk of loss, they may need to replace the goods or pay the buyer if they sustain damage before they reach the buyer. If the buyer takes on the risk of loss, they must pay for the goods even if they are damaged during shipment. The buyer may not have to pay if the seller breaches the contract.
Under Article 2 of the UCC, there are four risk-of-loss rules you should be aware of:
- Contract terms dictate: If the contract specifies who bears the risk of loss, those terms apply.
- Breaches affect the risk of loss: Any party that breaches the contract is liable for the risk of loss.
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When FOB terms apply: Where the seller needs to transfer the goods to the buyer through a common carrier, the risk of loss will transfer to the buyer when the seller completes its delivery obligations.
- FOB shipping contract: Transfers the risk of loss from the seller to the buyer once the seller drops the goods off with the common carrier.
- FOB destination contract: Transfers the risk of loss from the seller to the buyer when the goods arrive at the buyer’s destination.
- Merchant vs. non-merchant sellers: Merchant sellers keep the risk of loss until the buyer receives their goods. Non-merchant sellers transfer the risk to the buyer when they make the goods available. [3]
Consider a Letter of Intent (LOI)
If you want to buy or sell goods but aren’t ready to sign a sales agreement, you can sign a letter of intent to outline your agreement to negotiate.
Rights and Duties of Buyer and Seller
It’s essential to know the rights and duties of the buyer and seller when creating a sales agreement.
Buyers’ Rights & Duties
The buyer’s rights and responsibilities include the following:
- Duty to pay for goods when adequately tendered by the seller
- Duty to follow the terms of the contract
- Right to on-time tender of the goods
- Right to applicable warranties that weren’t disclaimed
- Right to the goods identified in the sales agreement
Sellers’ Rights & Duties
The seller’s rights and duties include the following:
- Duty to tender correct goods identified in the contract
- Duty to tender goods at the correct time
- Duty to tender goods in appropriate condition
- Right to timely payment for goods tendered to buyer
- Right to payment in the proper amount
How to Write a Sales Agreement
Follow these steps to create a clear, enforceable contract. Or save time by using our sales contract template—it guides you through each section and helps you avoid mistakes.
1. List the Buyer and Seller
Start by including the full names and addresses of all parties involved. If there’s more than one buyer or seller, make sure each person or business is clearly listed in the agreement.
For businesses, include the legal name, business address, and the name and title of the person signing on behalf of the company. You may also want to add a mailing address for legal notices.
Our sales agreement template makes it easy to include multiple parties and ensures no details are missed.
2. Provide a Description of the Goods
The contract should describe the goods sold. This should include:
- The type and quantity of goods
- Whether specific goods or unspecified goods are identified
- Whether they are existing or future goods
With Legal Templates’ fillable template, you can include several items in one form.
3. Include the Price and Payment Information
Clearly state the price of the goods. This can be a flat total or a cost per item. Make sure to explain any conditions that affect the price, such as who pays taxes or added fees.
Then, describe how the buyer will pay. Will it be a one-time cash payment? If so, you can send an invoice and request full payment upon delivery. If you’re offering a payment plan, outline the schedule and amounts. For delayed payments, consider using a promissory note to make the terms legally binding.
4. Determine the Delivery Method
Outline the process for delivering goods to the buyer, including the date and location of the exchange. Specify which party is responsible for paying shipping costs if you sell your stuff online.
5. Allocate Risk of Loss
The contract should state when the risk of loss or damage of the goods shifts from the seller to the buyer. This may be upon shipment or delivery.
6. Include a Right of Inspection Provision
The contract should include a provision as to whether the buyer can inspect the goods before delivery.
7. Establish Warranties
The warranties section should state what warranties cover the goods and disclaim any warranties the seller doesn’t wish to provide in the transaction.
8. Add Assignment Information
Either the buyer or the seller “assigns” or transfers its rights, obligations, or any benefits they will receive under this contract to a 3rd party.
For example, if the seller is a company that another company has bought, the seller may assign its rights under this contract to the new company. The new company would then be obligated to provide the goods to the buyer and receive payment.
9. Provide a Right to Cancel
If either party wants the option to cancel the agreement, include a termination clause in the contract. This clause should explain how cancellation works and whether any penalties or refunds apply. Without it, canceling the agreement may lead to legal issues or loss of a deposit.
Some federal and state laws also give buyers the right to cancel certain types of sales. For example, under the FTC’s Cooling-Off Rule, a buyer has three days to cancel a sale made at their home, workplace, or a temporary location. If this applies to your transaction, make sure to include the proper cancellation language in the agreement.
If a party needs to cancel after signing, they should use a notice of contract termination to do it formally and in writing.
10. Address Potential Breach of Contract
Include a section that explains what happens if one party doesn’t follow the terms of the sales agreement. This is known as a breach of contract. It should name the governing law of the contract and where legal disputes will be handled, if needed.
Then, choose how you want to resolve any disputes. Common options include:
- Court litigation – This happens when one party files a legal claim in court. A judge or jury hears the case and makes a final, binding decision.
- Arbitration – A neutral third party (the arbitrator) reviews the dispute and makes a final decision outside of court.
- Mediation – A mediator, also neutral, helps both sides work toward a compromise. However, the mediator’s suggestions are nonbinding.
Each method has pros and cons. Be sure to choose the one that makes the most sense for your situation, and include it in the agreement to avoid confusion later.
11. Add Signatures of Both Parties
Finally, the both the seller and the buyer signatures should be added to make the sales agreement legally binding.
Sales Contract Sample
View a free sales contract sample below to better understand how the form works. When you’re ready, create your own using our sales agreement template.
How Legal Templates Helps With Your Sale
Whether you’re selling furniture, construction equipment, or other items, you can use our sales agreement template to record the sale. Our seamless document editor walks you through each element of the sale, ensuring you dictate the transaction’s terms. Save your progress as you go and print it out when you’re ready. You can also download the final copy to your computer as a PDF or Word document.
With our sales agreement template, you can save time, complications, and money. Finalize sales faster under your specific terms so you can get paid without the headache.
Frequently Asked Questions
What’s the difference between a sales agreement and a purchase agreement?
A sales agreement is used for the transaction of goods like appliances, jewelry, and furniture. A real estate or business purchase agreement is typically used for larger transactions.
Can I create a sales agreement myself?
You can write your own sales agreement using Legal Templates’ fillable sales contract form. Review the terms with the other party before signing to ensure everyone’s on the same page.
Does a sales agreement have to be notarized?
While notarization is not necessary for a sales agreement to be legally binding, having a notary witness the parties’ signatures can prevent disputes that arise regarding the validity of the contract. If you’re selling real estate, notarization is often mandated by state law, but you can use a real estate purchase agreement for this transaction.
