What Is the Definition of Purchase Agreement?
The definition of purchase agreement is a type of contract that outlines various terms and conditions related to a sale of goods.3 min read
2. What to Include
3. Do You Need an Attorney?
The definition of purchase agreement is a type of contract that outlines various terms and conditions related to a sale of goods.
What a Purchase Agreement Is Used For
A purchase agreement is a legally binding contract between a buyer and seller. These agreements usually relate to the buying and selling of goods instead of services, and they can cover transactions for just about any type of product. In real estate, a purchase agreement outlines the purchase price and other conditions under a title transfer.
Usually, purchase agreements are used when the purchase price is more than $500, but they may also be used for smaller transactions. They're common in real estate and home sales.
They're widely used in the telecommunications industry. For instance, a customer may buy different communications packages, so that agreement is a “volume purchase agreement.”
Purchase agreements protect buyers and sellers from the risk of a breach of contract.
Consider this example: John and Anna want to buy a home. They fall in love with one, so they start negotiating with a realtor. Everything looks good, and they sign a purchase agreement. The agreement details the following:
- The couple's move-in date
- How John and Anna will pay for the home
- A contingency clause that explains the couple must first sell its old home and move funds into an escrow account
In the purchase agreement, the seller must declare that the home has no lead paint. Once John and Anna's old house sells, the escrow account confirms this, and the sale is complete.
What to Include
A well-written purchase agreement should include all of a transaction's relevant information. It needs to be clear and specific so that no misunderstandings arise regarding the various terms.
A basic agreement should include the following information:
- Buyer and seller information, such as names, addresses, and phone numbers
- The type of product or goods involved
- The type of sale
- Contact information for witnesses or cosigners
- Sale price
- Agreement date
- Terms related to duration
- Delivery and shipping terms, when applicable
- Dates relating to fulfillment of various requirements
- Whether amendments or revisions to the agreement are allowed
- Options in the event of any legal disputes
Purchase agreements are usually much more complicated than simple purchase receipts or invoices. These agreements often detail the different conditions that each party must meet in order to complete the sale.
Purchase contracts may describe the following:
- Terms of financing, since most people who buy homes can't afford to pay cash for the entire purchase price
- Who's responsible for closing costs
- Home inspection requirements
- Closing date
Your jurisdiction will determine exactly what's included in the contract. The contract may have a contingency that a buyer needs to sell his current home before having the necessary funds to complete the transaction.
You'll find a possession date in a real estate purchase agreement, which specifies the date a buyer can take control of the property. The agreement may also dictate who holds earnest money deposits and outline cancellation in clear terms.
Both parties typically list any repairs the seller is responsible for, his responsibility to declare environmental hazards (such as lead), and his guarantee that no third-party security claims exist, such as a lien. In return, the buyer must legally meet his financial obligations. The contract will outline how a seller can seek legal remedies if the buyer doesn't hold up his part of the bargain.
Do You Need an Attorney?
From simple transactions to complicated business or real estate procurements, purchase agreements are common. You should consult a business attorney if you need help writing or reviewing a purchase agreement.
A lawyer can assist you with the various terms and provisions in a purchase agreement to ensure the protection of your interests. In addition, should a legal dispute arises, your lawyer can represent you if you need to file for damages.
Simple receipts are often fine for small purchases, but for major transactions, it's common to enter into a contract. Make sure you understand all of the terms and conditions before you sign an agreement. The right legal professional can be very helpful for this.
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