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An Exhaustive Guide on Sales Contract

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Contract plays a very important role in personal lives as well as in business law. While you’re buying or selling any sort of goods, it’s imperative that you know the legal implications that come with a sale contract.  

However, a sales contract is not something you’d need at every step of your life. Suppose you’re buying a pack of gum from your nearest gas station. That won’t require a sales contract, will it? 

Why?

Because in this case, the terms of sales are mentioned clearly. Since it is a one-off transaction, you’ll not need any other clarification to establish the sales.  

However, you’d need a sales contract when it comes to doing B2B transactions. In this case, the sales contract plays an important role.  

In this case, you’ll learn about the different implications of a sales contract and how you might draft one. You’ll also learn its benefits and types.  

Understanding Sales Contract

Understanding Sales Contract

A sales contract is technically a legally binding document that is made between a buyer and a seller. The contract constitutes details of the exchange and different terms of sale. You can even include product and service descriptions in the document. A good sales contract would leave no doubt in the party’s mind and their rights and obligations during this transaction.  

However, remember to always seek legal advice before you sign any sales contract. Sales contracts are generally very straightforward and don’t have a lot of complex jargon. But yes, always be aware if you see any small prints or surprises.  

What To Add to a Sales Contract?

What To Add to a Sales Contract

You might be wondering what to add to a sales contract. Will the signatures of both parties suffice? Or do you need more details about it in the contract? Well in the case of a sales contract, it’s both.  

Don’t worry, we will elucidate the common elements you need to know before drafting or signing a sales contract. Make sure you tick on all the below checklists while going through a sales contract.  

Details of Both The Parties

Even though this won’t particularly be a very extensive section, you should definitely include this in your contract. The contract should entail the names, addresses, and contact details of the concerned parties.  

Usually, the contract just includes the buyer and the seller. However, when you’re dealing with a business, it’s ideal if you list the relevant details of contact of the parties included.  

Description of Goods and Services

Description of Goods and Services

A contract is not valid if you do not include a description of the goods and services in the sales contract. You should include the necessary details of the product like its name, model, weight, size, and color. You can also add any other key identification detail to it if you want. Remember, the quantity should also be clearly mentioned in the section.  

Keep in mind that if you’re selling services rather than goods, you should elaborate on the type of service you’re providing. Mention about the work scope with the timeframe for the service to be done.  

Payment Terms

Payment Terms

Any contract is invalid without a proper offer. The price and the payment methods are the key components of any sales contract. Remember to mention taxes and GST in the contract. Also, add the appropriate pricing with it. There should be a proper outline of the payment terms as well. This would also include the due dates of the payment alongside the method of payment. Remember to add the fact that as a seller you should provide the buyer with an invoice. This invoice should also be mentioned in the contract itself.  

Delivery and Supply Instructions

In the delivery section of the outline must mention the product delivery alongside its date and the kind of delivery service. We recommend that you even include the costs of delivery alongside the details of which party is responsible for paying these costs. It’s always best to include a clause regarding the discussions that might occur if the delivery is deemed to be impossible.  

Information About Warranty

The contract must mention all the information about the warranty. It should even include an additional warranty document.  

Other than that, the basic details of the contract should even be there as well which will express the difference between express and implied warranties.  

An implied warranty is a form of unwritten guarantee that the goods might meet the conditions without the reliability of the implied documents.  

Inspection Period  

It’s pivotal that when you write about the sales of a good or service, it should also come with important terms about return policies. This allows them with a buffer time to inspect the goods and ensure that they are meeting the expected quality as mentioned in the contract. Hence, always include an inspection period in your contract to safeguard yourself from any complicated legal implications.  

Confidentiality Clause  

If the transfer is all about sensitive and confidential information, it’s pivotal that you always include a confidentiality clause alongside it. It will protect you from any unwanted release of sensitive information as a result of the transaction.  

Breach of Contract  

Coming in at last, but it is one of the most important aspects of proving of the legal basis of a contract. You should mention the consequences that might take place if one party breaches the contract. Always try to include in the contract the grounds on which it can be terminated. Also, mention the grounds for termination of the contract alongside its severability. The severability clause primarily states all the provisions of the contract that prove the validity and the enforceability of the contract.  

Sales Contract: Types and Differences

Sales Contract: Types and Differences

When you’re selling a product or service, you should come up with adequate precautions. This helps you not to face any more legal implications and makes your legal documents to be much more ironclad. Here we will elucidate some different variations of sales contracts. They are:  

Sales Agreement

Sales agreement acts as the crux of any sales contract. It is a contract between the buyer and seller about what’s being sold. These contracts are used on both personal and professional basis. These contracts include confidential information about both parties and how these. It will also mention the different terms of liability if one of the parties fails to honor the sale.  

Order Form

Order Form

These are a variant of sales agreements. Unlike, sales agreements and can take any form, order forms on the other hand have a standardized format that gets designed and is issued to blank buyers. The buyers can then fill out the order form understand their specific needs and then return it to the seller. As the seller accepts the clauses, it then becomes an ironclad binding contract.  

Order forms facilitate simplifying the overall ordering process and collect similar information from every buyer. By using a well-organized order form, it will be easy for your clients to know beforehand about the access to the specific product or service they require.  

With this, you wouldn’t always have to consult a legal team to submit a new order. Order forms are primarily used by organizations selling standardized services and goods. It doesn’t wiggle enough room for customization, unlike a sales agreement.  

Change Order Form

This form is not responsible for any form of sale directly. It facilitates the buyers to request a proper change in any pre-existing or long-term orders. They change according to the legally bound addendums. They adjust clauses from existing contracts and add new terms and conditions to those agreements.  

Master Service Agreement

Master Service Agreements or MSAs cover contracts that cover a long-term contractual relationship between two parties. It is an umbrella contract explaining the overall terms and conditions in all future agreements taking place between the parties. It comes up with a proper basis for business relationships by delineating any basic contractual term.  

Statement of Work

Some sales contracts help in providing detailed information based on what the buyer gives to their sellers. It adds a detailed section about the scope of work with other standard details of sales.  

Terms of Service

Terms of Service

Often known as terms and services, a standard service agreement, or even terms of use- it consists of different clauses that define user interactions. Digital products primarily embody these clauses. They’re even added to other online stores and even in software. Websites and digital applications also are a part of standard service agreements.  

Upsell and Renewal Agreements 

These might sound similar to change orders, but they aren’t. These contracts talk about a reference of long-term agreements and alter ways of how it works. However, when you see a change order is supplementary to other agreements, in that case, upsell or renewal agreements often supersede them.  

However, both renewal contracts and upsell contracts are way more different from one another. A renewal contract is a type of order form chosen by the client to renew a previously written contract.  

An upsell contract, on the other hand, is a variant of a renewal contract that includes different kinds of goods and services.  

Final Thoughts

These are some of the basic things you need to know about a sales contract. We hope you found this blog to be informative and helpful.  

Is there anything we missed out on? Let us know.

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