What is a Sales Contract
A sales contract is an agreement made between a seller and a buyer which shall include the delivery and sale of goods, various securities as well as many other personal properties. A sales contract can also be called a sales of goods agreement or purchase agreement. In addition to buyers and sellers, witnesses would also become legally binding of the party when signing a contract. The article below discusses important elements, advantages, and disadvantages of a sales contract.
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Important elements of a sales contract
Mention Parties and Date of agreement
A sales contract must include the intent of the participating parties. The names of legal entities of your business and name of the individual or the name of a legal entity of the company which you are doing business with. The first paragraph of the Sales agreement/contract must include the date of agreement prepared as well as executed.
Description of Goods and Services
A sales contract must clearly mention all the goods and services which are being sold between the buyer and seller. The sales deed must mention a detailed description of goods and services at the delivery time such as number of goods, industry standards must be met for the goods and services, duration of services etc.
Delivery
A sales contract must mention all aspects related to the delivery of the goods and services, such as the place of delivery, time of delivery, cost of delivery, the method of the delivery as well as the liability of a party in the event of failure of delivery completely or failure of delivery on time or any damage occurred during the delivery. The sale deed must also include all events such as act of God, flood, fire, riots etc. which do not fall under the control of both parties.
Payment
The price of the goods and services is most difficult and is the most commonly negotiated element of the sales contract. Hence, it is important to include the mutually decided price in written form the moment it is decided. In addition, the contract must mention the time of payment, payment installments as well as the method of payment as well.
Breach of Contract
This section includes what must be done in case one of the parties to the sale deed fails to keep the commitment, waiting time before terminating the contract, at what point a party could terminate the contract and what remedies must be taken to recover the contract.
Warranties
The section about warranties would include all quantity, quality requirement as well as reliability, in addition, this section must also include all warranty disclaimer previously agreed upon by both parties.
Confidentiality
Under this section, it would be made clear with whom the information could be shared and what actions must be taken in case of a breach of confidentiality.
Legal
This part of the sales deed must mention all state laws which shall be applicable and in case of a breach where the lawsuit would be filed, who shall be responsible in case of charges of litigations, or litigation would be carried out in a court of law or through arbitration.
Advantages of a Sales Contract
Minimizes Risks
A sales contract will be advantageous as it would reduce the risks of loss and the company getting sued. A proportion of the risk will be reduced by mentioning the terms of a particular agreement clearly and having it signed by all the necessary parties.
Signing a sales contract would provide you grounds to take legal action in case the conditions of the sale contract could not be met with.
Clarity
Sales contract would be useful to provide clarity to employees and both seller and buyer. Sales contract contains all important details related to the contract and expectations from each party. Contract would make both parties stay true to what they agreed to when signing the deal.
Disadvantages of Sales Contract
Time and Money
Huge amount of time could be taken to prepare a detailed and accurate sales contract. The respective party would have to appoint a lawyer to draft an airtight and detailed sales contract which may cost a lot of money.
In addition to the above mentioned pros and cons, having a sales contract drafted would have many other plus minus points as well. However, in order to ensure a safe business transaction, it is important that you have a sales contract drafted or reviewed by an experienced advocate.
Lead India offers you a team of experienced advocates who have been successfully handling cases related to contracts, sales or purchase of goods or property or any other matter related to the civil law. Hence, if you wish to ask a legal question or seek free legal advice online, you may contact us.
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