1. Business Sales Contract
2. What Is a Sales Agreement?
3. How to Draft a Sales Contract

Business Sales Contract

Drafting a business sales contract is a very important skill for all business owners. There are different ways in which a business contract can be used in businesses every day for a variety of transactions. The sales contract can be a saving grace if you end up with a buyer or seller that does not keep up his or her end of the bargain.

What Is a Sales Agreement?

A sales contract is a type of agreement between buyers and sellers that covers a sale and the delivery of goods or services. It will comprehensively list all terms and conditions of the sale, including how much it will cost and how it is delivered.

An international sales contract will be covered by the United Nations Convention on Contracts for the International Sales of Goods. This is also known as the Vienna Sale Convention. Under the CISG, a contract will have to be over $500 in writing to be enforced.

For the sale of personal property, a contract must be worth at least $500 before any type of enforceable contract needs to be in writing. Any amount less than that can be covered under an oral agreement to be enforceable.

A contract that has to be in writing in order to be enforced can be within the Statute of Frauds. This statute dates to 1677 when English Parliament declared that certain contracts had to be in writing. Today, all states have some form of the Statute of Frauds.

A written contract must specify all the parties included, what is being sold, and many particular terms and conditions according to the Uniform Commercial Code (UCC). In some states, the amount and form of payment also must be specified. However, the UCC does not require any form of sales contract; a memo or collection of papers will suffice.

According to the UCC, you are allowed to enforce a written sales contract even when material terms are left out and not signed by all parties to the contract. One party cannot create a sales contract that is against the other party. All enforceable contracts have to be signed by the party in which the contract is being enforced.

Purchase orders, pro forma invoices, or an order acknowledgement can be considered a formal sales contract.

  • Purchase orders are issued by a buyer and is sent to sellers. They state what type and the cost of the goods and services that are purchased along with additional material terms including the timeframe of which the order will be filled.
  • Pro forma invoices are sent to a buyer as a response to an oral agreement or purchase order. They can help enable the buyer to get a line of credit to make a purchase in international transactions. It generally will include all terms and conditions for the sale.
  • An order acknowledgement can be used to establish the position of the seller in the event of a dispute. It is dragged by the seller when a purchase order is received. It will not repeat any details of the purchase order, but it can clear up any extra details such as delivery dates. When the order acknowledgement is also signed by the buyer, it can then be used as a contract.

How to Draft a Sales Contract

Identity of the Parties/Date of Agreement

Identifying the parties is the first topic that should be addressed in a sales contract. In general, this would be the name of your business, as well as the name of the other company you are working with. When you sign the form, you need to include your name and your title.

In the first paragraph of the sales contract, you need to make sure the date that the contract is signed and executed is very clearly stated.

Description of Goods and/or Services

The contract should describe what is being purchased or sold. It needs to describe the goods or services, how much is being sold, as well as the industry standards, if any, that they must meet.

Payment

Price is a crucial part of a sales contract and must be in writing once you reach an agreement. It should also include the timeframe of the payment, the form of payment, and a description of the agreed payment schedule.

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