Sales Purchase Agreement: Everything You Need to Know
A sales purchase agreement is a legal contract obligating a seller to sell and a buyer to buy a product or service. It's mostly used in all types of businesses.3 min read
A sales purchase agreement (SPA) is a legal contract obligating a seller to sell and a buyer to buy a product or service. You will typically use a sales purchase agreement in all types of businesses, though they are most commonly used in real estate deals. An SPA will provide the framework of the deal and outline what is in the transaction, the process of the transaction, and any exclusions.
The contract will give both the buyer and the seller the chance to negotiate terms and price. An SPA can be used for both one specific transaction or for frequent transactions that will be used over a period of time outlined in the contract. An SPA will:
- Dictate terms of sale
- Contain information about buyer and seller
- Serve as a record for deposits made during negotiations
- Create a record of transactions that have already occurred
- Serve as the official record of a sale
Sometimes product agreements will go by other terms such as:
- Contract For Sale of Goods
- Product Contract
A sales agreement will include both the information related to the buyer as well as the seller in regards to one or multiple transactions.
Use of Product Sales Agreement
A product sales agreement can be used for the sale of a good such as a possession, item, or a service where a duty is performed in exchange for compensation. A contract can also lay out the agreement for a transaction that includes both goods and services, such as purchasing a computer and the installation of it. The agreement should clearly describe the item or service, give a physical description, and list the quantity being sold.
Determining the Payment Details and Delivery of Goods in a Service Agreement
The payment plan or transaction needs to be specifically described in the contract, including what payment type will be accepted. Some of the payment types that can be listed in a contract include:
- Certified Check
- Promissory Note
- Bank Draft
- Electronic Transfer
If a cash transaction is being made, the buyer should be provided with a receipt. The agreement may also require a deposit, which is a specified amount of money that is paid by the buyer as a security that they will proceed with the transaction. If the purchase goes through, the deposit will be credited toward the purchase price. The agreement defines whether or not the deposit is refundable or nonrefundable if the purchase fails to go through.
Along with deposit information, you will also want include payment due dates as well as the terms in which the goods will be delivered. This will include where the goods will be delivered or where the buyer can take possession of them.
Difference Between a Sales Agreement and a Bill of Sale
A sales agreement and a bill of sale both have the same purposes, though a sales agreement is often more detailed and provides information on the warranties of the item. A sales agreement also offers more flexibility in the arrangement of terms and delivery of the goods.
A bill of sale is a piece of evidence that the ownership of the item has been transferred from the seller to the buyer as proof that the goods have exchanged hands. A bill of sale occurs after the transaction has been made.
What Do the Terms, Liability, Warranties, and "as is" Mean in a Sales Agreement?
The term liability refers to the risk of loss or damage of the goods involved in the transaction. The liability of the product can be transferred from the seller to the buyer when:
- The buyer has gained ownership through the Bill of Sale
- The buyer has received the goods
- The seller has shipped the goods
In a sales agreement, a warranty is the guarantee that the seller is making about the goods or the conditions of the goods they are supplying. Some of the warranty promises that are commonly made in Sales Agreements include:
- The seller owns it
- There are no claims against the item
- The goods are fit for use
- The goods do not infringe on intellectual property rights
If a seller provides no warranties on the items, they are selling them "as is," which means the condition has no guarantee.
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