In many businesses, employees often use
sales contracts during negotiations with clients. This document outlines the terms and agreements between the client and the company. Knowing how to understand sales contracts is key to a successful career.
This article provides a concise overview of sales contracts, outlining the essential information you need to know.
What is a Sales Contract?
Other names also know the sales contract. These include sales agreements, purchase agreements, or contracts for the sale of
goods and services. But regardless of name, its role is the same. Its purpose is to outline the agreement between two parties, the buyer and seller, in a transaction.
This type of document explains that products, services, or property are exchanged for either payment or a future payment. The idea is to keep the document for both record-keeping and legal affairs.
For a sales contract to be accepted, it must clearly identify the seller, the buyer, the goods or services, and any other relevant details deemed important.
When is a Sales Contract Used?
A sales contract can be used for both small-scale and large-scale purchases. It is used to ensure that both parties have an understanding and agreement on the transaction. In fact, there are laws about this.
For example, in the United States, under the
Uniform Commercial Code, goods for sale over $500 must be put in writing. This is not a federal law, but it serves as an essential model that each state has adopted and incorporated into its laws in various forms.
What is the Benefit of the Sales Contract?
The most significant benefit of the sales contract is that it clearly states the obligations of both parties and outlines the agreed-upon terms. It also refers to financial consequences and rights that are a part of the agreement. This makes it easier to protect your interests compared to other forms of contracts, such as oral contracts. Those are only enforced under specific circumstances.
A sales agreement provides a form of legal protection if one party fails to fulfill their end of the arrangement. This is why it is essential to retain it for record-keeping and legal purposes.
Difference Between the Sales Agreement and the Bill of Sale
Both the
sales agreement and the bills of sale have identifiable parts that make them eerily similar. However, there is one significant difference that sets them apart.
This comes down to the details of the agreement. For a sales contract, there will be written provisions
regarding legal issues, warranties, and payment terms. Meanwhile, the bill of sale is just a document that documents that something now belongs to the buying party. It can sometimes be used as a more formal sales contract to ensure proof that an exchange has occurred.
What Goes on a Sales Contract?
A sales contract will vary from person to person due to the different products and services involved. However, several details are needed.
Party Identification
The contract must clearly state who is involved in the agreement. Full names and contact information must be included on the form.
Description of the Products/Services
The most important part of the document is a section that clearly outlines what the buyer is purchasing. Therefore, a clear and detailed description is necessary. Some include:
- Color
- Model Number
- Quantity
- Size
- Type
- Weight
When it comes to services, a detailed description of the job to be performed is necessary.
Payment Plan
OF course, there is also the section that relates to payment. The payment is usually the most negotiated price agreed upon. That is why it is key to have this in writing.
There needs to be an outline regarding the payment, such as:
- Method and time when the buyer gets the invoice
- Payment timeline
- What forms of payment are acceptable
- Whether payments can be divided up or all at once
If payment is not made promptly, a promissory note will be added to the sales contract. It then provides further details about payment.
Delivery
The sales contract should also specify how the delivery is to be made. This includes the most method, place, and time for it.
Inspection Period
A smart way to make a buyer feel good about the sales contract is to have an inspection period. These are not required, but they provide an opportunity for the buyer to examine their product or service and ensure that it meets the terms of the agreement.
Warranties
Warranties are a legally enforceable guarantee that ensures the buyer’s purchase meets their expectations. There are both expressed and implied warranties under the Uniform Commercial Code.
Other Provisions
- Governing Law, which outlines state laws.
- Severability, which ensures that other provisions are valid even if other parts are invalid.
- Confidentiality ensures that private information remains confidential and is not disclosed.
- Breach of Contract to explain if a party breaks the contract.
- Notices to assist parties to remain in communication with each other
- Amendments that cover additional needs to the sales contract
Conclusion
And there you have it — a quick guide to what sales contracts are all about. Hopefully, this helps you in your business career.
