Bill of sale is the legal documentation between a buyer and a seller about transferring the ownership of the sellers’ possessions in exchange for cash or trade. It acts as a receipt of the trade between two parties to prevent any conflicts between the purchaser and the sellers.
The bill of sale is widely used as legal evidence for the transfer of ownership of a product, personal property, or vehicle from one person to another. All in all, a bill of sale refers to a documented and legally recognized record of a transaction.
What is a Bill of Sale?
Definition: Bill of sale is defined as a documented legal proof, or receipt that details the transaction between a seller and buyer in which the seller transfers ownership of a product or personal property to the buyer. This is a legal document and issued after finalizing the deals of the transaction.
The main reason for drafting a Bill of sale is to avoid frivolous conflicts between sellers and the buyers, and it works as a written proof to solve such matters. A Bill of sale is crucial when you want to sell your personal properties, vehicle, or anything that belongs to you personally.
Importance of a Bill of Sale
A bill of sale is a recorded legal document that shows the details of a transaction. It contains all the information regarding the sale of any goods, as well as the transference of any properties, from one party to the other. It acts as an agreement between seller and buyer.
It decreases the possibility of disagreements between two trading parties and helps anyone or any organization maintain transparency regarding the trading.
A Bill of sale secures the transfer of properties or any selling items by drafting a proper document to prevent misunderstandings between the sellers and buyers. Indeed, it is a beneficial aspect for any transaction that requires help from the laws.
The key features of the Bill of sale include:
- Bill of sale is legal documentation between two parties for transferring the ownership in exchange for equal properties or money
- It’s a legal document to avoid further misunderstanding between both parties
- A Bill of sale is also known as a sales receipt, proof of sales
History of the Bill of Sale
Bills of the sale were prevalent as common law since at least the Middle Ages. They were commercially in the shipping industry, plus when the common public started to own more personal goods in the Victorian era, these bills of sale came became popular as a form of consumer credit.
Bill of sale was originally associated with any written document through which evidencing of the absolute disposition of personal property for value occurred.
But since these bills of sale were not having any legal merit under U.S. common law, there were so many frauds and deceits taking place. Then bill sale laws were introduced for curbing their misuse.
The very first of such laws was the Bills of Sale Act 1854 that was later repealed and re-enacted and a new act came into existence as the Bills of Sale Act 1878. Then further evolution led to the Bills of Sale Act 1882.
Some of the definitions of bills of sale during its evolution have also been quite pivotal in describing its booming significance. According to Black’s Law Dictionary-
Bill of sale is an instrument for the conveyance of title to personal property, absolutely or by way of security.
Omotola defines a bill of sale as a form of legal mortgage of chattels, while Bullen and Leake and Jacobs define it as-
A document transferring a proprietary interest in personal chattels from one individual (the “grantor”) to another (the “grantee”), without possession being delivered to the grantee.
Types of Bill of Sale
There are two types of it- absolute bill of sale & conditional bill of sale. An absolute bill of sale does not offer any security. It is only the simple evidence of a transaction. But a conditional bill of sale, on the other hand, provides security regarding the payment. Let’s have a detailed look at both of these-
1. Absolute bill of sale
Absolute bills of sale are not involved in representing any type of security, as they are just documents used to act as evidence for the transfers, assignments, and other assurances of personal possessions. They can be understood as the contracts of sale of goods under the sale of goods law or common law of contract.
2. Conditional bill of sale
This type of bill of sale is associated with any transfer of personal possession to a person through security for the payment of money. In this, transfer of ownership completes when certain conditions are met.
How to create a Bill of sale?
You can create a Bill of sale all by yourself by using a few templates. Follow these easy steps now:
1. Include property details
Property details are vital to set up a legal document. If you are selling your personal property, provide the location, areas, and other necessary information.
But, for selling some products, you need to mention the type, the model, ID number (if available), or different item details. It helps to have a clear idea about the type of the product or property.
2. Collect information from both parties
Before taking help from the court, you need to submit the buyers’ and sellers’ thorough details. So, mention the permanent addresses of both parties along with their current address (if available).
A Bill of sale can contain information of more than one buyer or seller. For dealing with a company, you need to collect the incorporated name instead of the business name.
3. Set the price
To draft a document, details are crucial, and to fulfill that purpose, you need to provide the exact price of the property or items. This is required to merge the tax amount with the total cost and jot down all the details to make a payment form. A purchaser mainly creates the payment through demand draft, cash, internet banking, or promissory note.
Demand drafts are the most secured methods to transfer funds, and the promissory note is a legal document where the buyer ensures the seller clears the payments on a loan basis.
4. Mention the presence of loans
The presence of loans against your property is one of the essential matters to discuss before making any transaction. So, note down the correct details on the name of the lender, current amount, and the interests rate or any other monetary terms. In most cases, a purchaser doesn’t buy such properties because it’s a huge responsibility to clear all the debts.
5. Be crystal-clear
If you have any other issues not mentioned, you should specify them to avoid further conflicts with the laws and the purchaser. You should be transparent and use accessible language so that everyone can understand the facts.
6. Sign the papers
The last and the most important thing is signing in the documents. Set a reasonable date for both parties to present and sign the documents. There is an option called “unsure”, and by selecting it in the questionnaire, you can choose a favorable date to print the documents. A witness is mostly not required to create a Bill of sale, but having one always validates any dispute.
Bill of Sale Vs. Invoice
A Bill of sale is a legal document that informs the transaction of money in exchange for private properties or selling items. But, the invoice is a document issued by the sellers for the buyers to notify them about the total payment that is due yet.
On some occasions, a bill of sale and an invoice work together where the invoice is made before the transaction, and after that, the Bill of sale is issued to keep evidence about the purchase history.
Bill of Sale vs Sales Agreement
You can understand a sales agreement as a contract that enables you to incorporate more detailed information related to the sale of products and services while on the other hand bill of sale can be understood as a receipt that acts as the proof of purchase but not necessarily has any contractual bearings.
Example of Bill of Sale
During buying or Selling a Vehicle, the bill of sale has a very prominent use while transferring ownership of a vehicle from the current owner to a new owner-
- First of all, the process will begin with negotiation of the term of the agreement occurs for buying or selling the motor vehicle.
- Then buyer should obtain the VIN or vehicle identification number of the vehicle, and after that, obtaining a copy of the few vehicle documents will be the next step.
- The seller should gather the title and registration of your vehicle along with the Vehicle Bill of Sale, Photo ID, and Odometer Reading Disclosure Statement.
- Now, the seller and buyer of the vehicle are ready to complete the sale. The buyer should bring the funds and the seller should bring the vehicle.
- Finally, a bill of sale will be signed between seller and buyer to sign over the vehicle title to the buyer to transfer ownership
Bill of sale is an essential key for legalizing the purchasing and staying far away from arguments regarding the purchase.
But, before signing in any documents of the Bill of sale, it’s important to check if it’s legal or not. And always keep copies of the documents for both the sellers and buyers is the most efficient way to avoid fraud.
How important do you consider a bill of sale during buying, selling, or transferring ownership? Share your opinion with us in the comment section below.