Sales Contract: Everything You Need to Know
A sales contract is a binding agreement that all parties must agree to in exchange for money, products, or services. 3 min read
2. Contract Details
3. Domestic and International Contracts
4. Purchase Agreements
5. Sales Agreement Importance
A sales contract is a binding agreement that all parties must agree to in exchange for money, products, or services. Sales contracts are also called sales agreements and are used to record contractual terms between two parties. A sales contract forges a bond between buyers and sellers in regards to goods, securities, or any other form of personal property. Such parties in sales agreements include:
- A buyer (comprising of an individual or business) buying a service or good from the seller
- The seller offering a service or good in exchange for money or another service
The written agreement allows the buyer and seller to know what’s expected of them in the arrangement.
Your sales agreement should include the following details:
- Whether it is a product sale for services or goods
- The sellers and buyers and what they’re offering
- The date when the contract becomes valid
- Whether a seller or provider will receive a single sum or installment payments
- Whether conflicts and disputes will be resolved via arbitration
- Confidential or non-disclosure information
- Terms of delivery
- Warranties by a service provider or seller
Domestic and International Contracts
Domestic contracts are governed under the Uniform Commercial Code in the United States, and international sales contracts are governed under the United Nations. The UCC states that contracts for sales goods over $500 should be in writing. The same standard applies to securities sales, including the amount involved in the transaction. Other sales involving personal property at a minimum of $5,000 must be in writing as well. Otherwise, oral agreements are just as binding as a standard agreement.
Contracts that must be on paper fall under the Statute of Frauds. The Statute of Frauds goes back to 1677, a time when the English government mandated that various contracts should be in writing. The aforementioned parts define what sales contracts must be in writing, according to the UCC.
Moreover, each state has its own version of the Frauds Statute. Under UCC rules, a written sales agreement should detail the following:
- Involved parties
- Product or service being sold
- Special conditions or terms
Certain states may also mandate that the payment type and amount be noted as well. With that, the UCC does not require formal sales contracts, and paper collections or memorandums will be enough. The UCC also permits a written sales agreement to be enforceable, even if the contract does not include material terms or is not signed by all parties.
With that, a single party may not draft a sales agreement by his or herself that will bind another party, and the contract must be signed by a defendant, or the one to whom the contract will be enforced.
Purchase orders are issued by a buyer and relayed to the seller. It states the following:
- Amount and type of goods that need to be bought
- Any other terms such as time limits
A pro forma invoice is something that a seller uses and gets sent over to the buyer in response to an oral agreement or purchase order. For international transactions, a pro forma invoice may allow the buyer to open credit lines to pay for any ordered goods. A formal order acknowledgement is also useful in establishing the position of the seller in cases of any disputes. The order acknowledgment is created by the seller in response to purchase orders, which does not entirely report the purchase order details, but it should make the details clearer, such as scheduled deliveries.
When the acknowledgment order is signed by the buyer, it becomes a certain kind of sales contract. Regarding international transaction, the Vienna Sale Convention only applies to nations that have agreed to it, and the United States has agreed to the terms. Each country that signed the convention may also claim a maximum of five reservations.
For instance, the United States stipulates that the convention will apply to American businesses only when a transaction involves another nation that has agreed to the terms. A majority of the conventions match the UCC, with a few exceptions:
- The acceptance of offers that include requests for modifications or additions, constituting a counteroffer
- There is no section requiring that the agreement be in writing to be enforceable
- The period in discovering damaged merchandise could be two years.
Sales Agreement Importance
Sales agreements also provide a common understanding between seller and buyer, minimizing conflicts in the process. When disputes occur, the sales agreement can help provide a fair settlement. Failure to include such a provision could result in legal disputes.
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