Sales Agreement can be understood as a contract in which Seller and Buyer agree upon the terms and conditions of the purchase.
You must have gone through different terms such as Purchase Contract, Home Purchase of Agreement, Agreement of Sale, Contract of Purchase, Sales Contract, Earnest Money Agreement, etc. – All these terms are used for the Sales Agreement.
In this article, we are going to discuss the sales agreement to understand what it is, why it is essential, what should be included in it and a sample of the sales agreement. So, let us start unfolding the concepts-
The sales agreement is the one document that is executed and signed as well as delivered to two parties. The buyer and the seller would be the parties who need to have at least two witnesses for the sales agreement to be proper.
The document is created on the non-judicial stamp paper.
When there is a transaction of buying and selling going on for some immovable asset, there is a final sale deed that is appropriately registered.
This is what we know as the sales agreement in the first place. This document is something that is legally valid and is also enforceable for some of the people for sure.
After the buyer as well as the seller, has concluded all the negotiations and the deal has been finalized, all of the terms and conditions regarding the particular transaction are appropriately recorded in the sales agreement.
So, this can be said without a single speck of doubt that this particular agreement is significant. This is the document that can be considered as the basis for most of the actions which are taken by the parties for sure.
Some of the key provisions that should be part of your sales agreement are-
- Description of the Parties and Goods
- Liquidated Damages
- Representation of Warranties and Guarantees
- Governing Law/Execution
After being aware of the introduction of the sales agreement, let us now understand why sales agreement should be used
What Is the Use of a Sales Agreement?
When it comes to the sales agreement, these are usually made to ensure that the seller and the buyer won’t have any trouble in sealing the deal in the first place.
The agreement helps in ensuring the right bond between the buyer and the seller, regardless of the cost in the best way. So, this is a document that is mostly used in the business sales front along with some other supply departments which are used for some publicly stated entities.
There are obligations for the buyer and seller which are outlined in the document.
If there is a borrower, then there might be a mention of some obligations for them as well.
Let us provide you with an example-
A proper sales agreement would dictate the fact that any supplier will be obligated to provide certain goods to the buyer for a specified period.
In return for this, the buyer might have to make a bond that they will not engage in business with some other supplier that has the same goods.
The sales agreement also tends to be a massive part of the entire real estate industry in the best way.
Hence, there is not a single speck of doubt when we say that it is one of the most important documents that would take part in any sales transaction of some sort. That is one of the main reasons why people need to know about it in the best way.
Let us now have a detailed look at the key things that should be included in your sales agreement –
What Does The Sales Agreement Contain?
One of the most common questions that people tend to have about sales agreement is what exactly the sales agreement contains.
A proper and excellent sales agreement would have all the bits and pieces of information which are in relationships that are taking place between the buyer and the seller.
The contact information, along with the names of both parties, is included.
Along with that, there is some information about prices, sales quantities, goods descriptions, and transfer details as well.
Apart from that, there is also a mention of the shipping and payment details.
The list doesn’t end here as the proper sales agreement would also have some details about the return policies.
There are some other pieces of information which can be included in the sales agreement, and we are about to mention it right here-
- Information about the warranty for some defective or damaged goods
- The period within which the buyer will be allowed to inspect the products provided by the seller
- The state laws tend to govern the entire agreement of the sales. This can be different in the case of different states.
- Modification and renewal terms are also included in the sales agreement in the best way.
Not just that but the sales agreement might also have a proper provision which states that the deal is the only legally binding document that can be used for the transaction between both parties.
There might be some other documents as well, but then they need to be referenced in the sales agreement.
There are certain cases where at least two witnesses sign the actual agreement in total. However, this might change based on the state and the business laws that prevail there.
Below we are going to have a more lucid look upon the critical parts of a typical Sales Agreement-
Your sales agreement needs to specify the price that you are thinking to offer for the property, goods or service.
In this, you will be covering the details about the amount of deposit. This is also known as earnest money or down payment.
3. Time Limit
Your sales agreement should also include the information on the duration for which the contract will be valid.
4. Closing Date
It tells about the time when a deal will be finalised.
5. Moving Date
It updates about the time when the buyer will be allowed to get the ownership of the buyer’s goods or service.
6. Escrow Agent
This term is used for the individual who will be holding the earnest money.
7. Closing Agent
It talks about the individual who does the coordination with both the parties for finalizing the deal.
8. Items Included
It should include the details of all the things that are included in the purchase. For instance, if the agreement is for a house, it should consist of details about the items such as furniture, appliances, carpeting, etc.
9. Items not Included
Your sales agreement should also specify the items that are not part of your sales agreement.
10. Legal Description
It should talk about the legal description of the deal between the seller and buyer.
11. Clear Title
Your sales agreement should also include a clause that talks about guarantee that the seller gives a clear title to the buyers through abstract of title, certificate of title, or title insurance policy.
12. Inspection Clause
In case the buyer wants some inspector to check the item involved in the deal, its procedures should also be included in the sales agreement.
13. Date of Walk-through Inspection
Your sales agreement should consist of the exact date when you might walkthrough for inspection of the item/property before the closing date.
14. Liquidated Damages Clause
This condition in sales agreement talks about the obligation that the seller might have to pay a fixed amount of money every day after the occupancy date when the seller was supposed to give ownership to the buyer.
The Execution of a Sales Agreement
After the agreement has been prepared and verified by both parties, it is not all set to be executed.
Once the document has been executed and also has been delivered to both parties, they are practically bound to follow all the terms and conditions mentioned there and act according to it.
Any single violation that happens to the terms which are mentioned in the agreement will make the violator or the defaulter compensate the party which has been aggrieved with the help of proper legal adjudication.
This is one of the most important things that people have to keep in mind when they are trying to create a proper and binding legal sales agreement for a transaction. It might not be necessary to register the sales agreement, and it depends on the wishes of both parties for sure.
Some of the critical things important for Sales Agreement Execution are-
1) Main Clauses of Sales Agreement of a Proper Attorney Include
- Exact descriptions of the asset or assets sold.
- Definite clauses for stating that the asset is sold as it is by the seller and the buyer has adequately inspected the asset purchased
- Warrant by the seller that they are the legal owner of the asset/property/goods/items being sold
- Clauses about the terms of payment and the amount, plus the inclusion of dates if payments need to be made in installments
- Phrases for the delivery terms (it is essential when the sales agreement is being prepared for the large items)
- Not leaving any room for any sorts of misinterpretations
2) Seller Guarantees in a Sales Agreement
- Buyer will purchase the specific amount of goods
- Buyer will make the purchase of the goods at a particular time
- Buyer will make the purchase of the goods for a specific price
- Buyer will never back out of the agreement once the seller has devoted capital for producing the goods
3) Buyer Guarantees in a Sales Agreement
- Seller will sell the specific amount of goods
- Seller will sell the goods at a particular time
- Seller will sell the goods at a specific price
- Buyer will not get affected by the market changes
Sales Agreement Sample
In the example mentioned above of a sales agreement, you can see how the buyer agrees to purchase five baseball cards from the seller. Different parts of this sample sales agreement associated details are-
1) Seller Information
Who is selling the goods?
- Enter the full name or registered name
What is the seller’s contact address?
- Enter street address
- Enter the city
2) Buyer Information
Who is purchasing the goods?
- Enter the full name or registered name
What is the buyer’s contact address?
- Enter street address
- Enter the city
3) Description of Goods
Is more than one type of good being sold?
What is the total amount due for the goods being purchased?
Who will be responsible for paying taxes on the goods?
How will payment for the goods be made?
- The seller will send an invoice to the buyer
- According to a payment schedule in the agreement
5) Delivery Information
How will the goods be delivered?
- Shipped by the seller
- Picked up by the buyer
Risk of Loss
When will the risk of loss of the goods pass to the buyer?
- Upon shipment – buyer assumes the risk of loss as soon as the seller ships the goods
- Upon delivery – buyer assumes the risk of loss only when the seller has delivered the goods
Right of Inspection
Does the buyer have the right to inspect the goods before acceptance?
6) Special Provisions
Is the seller providing any warranties concerning the quality or condition of the goods?
- No, selling the goods “as is.”
Right to Cancel
Does the buyer have a statutory right to cancel the transaction?
Do you want to include any other provisions?
Seller Representations and Warranties
The seller acknowledges that the goods are free from any security interest or other lien or encumbrance.
- Yes, I acknowledge the above.
The seller acknowledges that there are no outstanding titles or claims of title in the goods.
- Yes, I acknowledge the above.
7) Final Details
In the event a dispute arises, how will it be resolved?
- Court litigation
- Mediation then arbitration
Does either party need to write permission to assign its rights to a third party?
- Yes, the buyer
- Yes, the seller
- Yes, both the buyer and the seller
- What is the date of this sales agreement?
- Which state’s laws will govern this letter?
Sales Agreement Wrap Up!
So, that is all you need to know about the sales agreement.
We hope that this article was able to provide you with all the information that you needed to know about the concept of the sales agreement.
While participating in a deal, opting for a sales agreement is inevitable.
In case you do not opt for the sales agreement, you will not be able to comprehend your contractual obligations and rights. You will also be not aware of the legal remedies, economic consequences of the risks, and different protections that you may get from the law.
So, how important do you consider the use of sales agreement in business deals?
Did we miss any of the critical concepts associated with the sales agreement? Share your views with us in the comments.