What is Contract of Sale: Everything You Need to Know
What is contract of sale? Anyone who plans to be involved in any form of transaction should be aware of sales contracts and what they entail. 3 min read
2. Essentials Elements of a Contract of Sale
Updated October 2,2020:
What is contract of sale? Anyone who plans to be involved in any form of transaction should be aware of sales contracts and what they entail. Both buyers and sellers will have important roles to play during the course of a sale for it to go smoothly.
Contract of Sale
A contract of sale is an agreement between a seller and a buyer. The seller agrees to deliver or sell something to a buyer for a set price that the buyer has agreed to pay. With these contracts, the transfer of ownership happens when the buyer pays and the seller delivers.
This contract changes somewhat in situations where the seller cannot yet deliver the item that is sold. It also changes when the buyer cannot yet pay the full price. Both parties can still agree on transferring the ownership to the person buying in these situations—as long as the seller is ready to deliver what is being sold. The contract is then subject to resolutory condition, meaning if the buyer fails to make the payment, the seller takes the item back.
An invoice is an example of a sales contract. In the U.S., a domestic sales contract is regulated by the Uniform Commercial Code. According to Article 2 of the Uniform Commercial Code, contracts for the sale of goods over $500 have to be in written form to be enforced.
When selling other types of personal property, the total sale has to be at least $5,000 before a contract is required to be put in writing. If not, an oral contract can be enforced as a binding agreement.
Many contracts of sale are very simplistic while others have more detailed information, such as a description of the property being sold along with the address, the price, deposits, and closing dates.
Any contract that is required to be put in writing in order to be enforced is within the Statute of Frauds. This statute dates back to 1677, when English Parliament decreed that some contracts had to be in writing.
Portions of the UCC define the different types of sales contracts that have to be in written form. Also, each state will have its own form of the Statute of Frauds.
According to the UCC, a written contract needs to name:
· All parties invoiced in the sale
· What is being sold
· Special terms to the contract
· The amount of the contract
· The type of payment method
The UCC does not require a formal sales contract. You may use a collection of papers or a memo to satisfy the requirements of a sale. The UCC will allow the enforcement of a written contract even if some of the material terms are not included or if it is not signed by all parties involved. One party cannot, however, declare a sales contract on its own that will bind someone else. Enforceable contracts have to be signed by a defendant, or the person to which the contract is expected to be enforced upon.
In some instances, an invoice, purchase order, or an order acknowledgement can be declared a formal sales contract.
· Purchase orders are written by a buyer and sent to a seller. They will state the amount and type of goods that are being purchased, the cost, and other information pertinent to the sale.
· An invoice is written by the seller and sent to the buyer in response to the purchase order or other forms of transaction.
· An order acknowledgement helps establish the position of the seller in the event of a dispute. It is created by a seller in response to getting a purchase order. It will clarify additional details of the sale, including scheduling the delivery if necessary. If an order acknowledgement is also signed by a buyer, it then becomes a sales contract.
Essentials Elements of a Contract of Sale
These six elements are essential for any contract of sale:
1. Two parties
2. Items to be sold
4. The transfer of ownership
5. A contract of sale
6. An agreement to sell
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