April 12, 2022

Your Guide To Understanding Sales Agreements

A sales agreement is sometimes called a sale of goods contract or a purchase agreement that details the terms of a transaction between the buyer and the seller. These formal contracts are used to outline the services or goods being sold in exchange for payment or with the promise to pay in the future. In a bid to formalize the relationship between the parties, and to seal the agreed conditions, a document is drafted for legal and record-keeping purposes which serve as a contract. Besides the buyer and seller, witnesses of the parties will become legally binding at the time of signing a contract. A sales agreement identifies the following items: 

  • Seller
  • Buyer
  • Goods 
  • Other important terms

It’s a wise idea to have a sales agreement when you plan to buy or sell something because it clearly defines the obligations and rights of both the buyer and seller. It also outlines penalties for parties in case of a breach of the whole agreement or any of its provisions. This document protects the interest of both parties and ensures that a transaction should proceed as per the consensual terms. Thereby, affording more legal protection to your interest.

A sales agreement can be used for a small-scale transaction to a large-scale purchase to ensure transparency and a hassle-free transaction for both parties. Primarily, in the US, if the sale of goods is more than $500, a sales agreement must be used to formalize the transaction and also make it enforceable under the Uniform Commercial Code. In the US, all contracts are governed by UCC, which is a federal law. Its purpose is to make business activities more predictable and efficient by making business laws highly consistent across all American states.

In this article, we’ll try to acquaint you with some types of the sales agreements, and the important elements that you may consider including: 

Types of Sales Agreements

As there are different categories of goods, services, and properties available in the market, there are many types of sales agreements to cover it. We’ve jotted down common ones for you: 

  • Real estate sales contracts are used for private homes, commercial properties, or agricultural land
  • Automobile sales agreements for cars and heavy vehicles
  • The materials sales contract is used by organizations making large scale purchases for their supply chain
  • Shareholders use share sales agreements for buying and selling companies’ shares in the market 
  • Assets sales agreements are used by companies in merger deals to acquire the assets of another enterprise

Elements of a sales agreement

When drafting or reviewing a sales agreement, the contractual parties should know what elements need to be included and which terms are most important in a sales contract.

Having a full-fledged knowledge of sales agreements can help you to safeguard your rights and ensure smooth sales transactions. There are several important elements to include in a sales agreement. A strong agreement may include the following terms:


1. Identification of the Parties

A sales agreement should outline the number of parties involved in a sale transaction, generally, a buyer or a seller. It should identify the full names of each person; their contact information should also be provided. 

2. Details of the Goods and/or Services

A sales contract needs to provide details of the goods or services that are being purchased by a buyer. For clarity, and to avoid any discrepancy, a detailed description of goods should include the following:

  • Model number
  • Type
  • Color
  • Size
  • Weight
  • Quantity

In the case of services, you would provide a detailed description of the job to be performed and enlist the agreed deliverables. For example, in a sales agreement for creating a law firm’s website, you would provide a list of pages to include, any customized photos, and other features you may want to include on the website. 

3. Inspection Period

Typically, this is the most important aspect of the contract, which is often ignored by most buyers. An inspection period gives plenty of time to the buyer for inspecting the goods delivered to him and thus the contract empowers a buyer to reject if goods are different. However, it must be noted that the inspection time of goods is different, depending upon their type.  For example, perishable goods are required to accept or reject immediately. However, for non-perishable goods such as vehicles, or heavy machines, a buyer may require a little more time to inspect and take the decision accordingly. 

4. Warranties 

In a sales contract, a warranty serves as a legal guarantee to ensure a buyer that the goods provided will meet the expected level of quality. Primarily, these warranties apply as soon a buyer purchases goods from a seller. This section is an important part yet is overlooked sometimes in a sales contract. 

5. Payment details

The payment is often the most negotiated term of a sales agreement that’s why it's so important to make it a part of the agreement as soon as possible to avoid any confusion in the future. The payment details should include the following:  

  • How and when the buyer will pay
  • The payment timeline 
  • Acceptable modes of payments like a check, cash, etc
  • Whether payments will be made in installments or paid in one lump sum

Final thoughts! 

While doing business, it’s important and in the best interest of both parties to put down their commitment in an agreement to avoid any legal actions in the future.  

Undoubtedly reviewing a sales agreement takes a lot of time. Therefore, we recommend you sit back, relax, and let SpeedLegal take care of the reviewing process for you. Our contract review automation service can save your precious time, as well as save you up on the humongous cost of seeking a lawyer’s manual review service.

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