There are many different types of sales contracts, and each comes with its own set of challenges, opportunities and considerations.
At the highest level, however, sales contracts can be sorted into two camps with one simple question: Are you selling to a business or to other consumers?
Special Considerations for Consumer Sales Contracts
Consumer sales contracts give rise to federal and state consumer protection law concerns that should be addressed accordingly. The key federal agency responsible for implementation of consumer protection legislation related to sales of goods is the Federal Trade Commission (FTC). The FTC has a number of resources and guides (e.g. including advertising guidelines) that may assist in preparing consumer sales contracts and related marketing material.
Certain sales contracts such as resellers agreements or distribution agreements also create unique issues that are beyond the scope of this blog post. For example, reseller or distributor agreements are usually structured as a master sales agreement under which goods are sold to the reseller or distributor from time to time. Master sale agreements generally include a term and termination rights, whereas one-off sale agreements do not have any term or termination provisions. Certain reseller or distributor agreements are also structured as drop shipping arrangements and may also include quarterly and yearly forecasting obligations.
Description of the Goods
In any sales contract, the first key issue to consider is the description of the goods that are subject to the sale. Are they off-the-shelf goods or custom-made? If custom-made, can the requirements be changed? Certain custom-made products may require consent of a third-party to use such third-party’s material.
Payment is also an important part of the contract. How will payment be made? One delivery or post-delivery within a certain period of time? Who will be responsible for bank transfer, merchant or credit card processing fees?
The next key issue is how delivery will be made. Is the buyer responsible for picking up the goods from seller’s location or is the seller responsible for the delivery of goods? No matter where the goods are delivered, the buyer is generally responsible for acceptance of the goods. If the buyer is not physically present to take delivery, should the buyer appoint an agent to accept delivery? What happens if the goods are not acceptable? Is the sale final or are the goods returnable for non-conformance on or after delivery?
Warranties and Limitation of Liability
The extent of the warranty depends on the type of product and the offering the manufacturer is willing to make to users. Most sale agreements do include a limitation of liability clause that limits the manufacturer’s and/or seller’s liability either to a pre-set dollar amount (e.g. the price of the purchased goods) or to certain types of claims.
Certain sale agreements may also include indemnification obligations on the seller to indemnify the buyer for certain types of damages.