Sales Contract
A sales contract is a legally binding document between a buyer and seller. The document includes the details of the exchange, the terms of sale, clear product or service descriptions and more. A good sales contract should leave no doubt in either party’s mind about their rights and obligations during a transaction.
Before signing any contract, you should always seek legal advice, however, the best sales contracts are straightforward, easy to understand, with no small print or surprises.
Benefits of using a sales contract
There are several reasons to use a sales contract in your business dealings, including:
Transparency between parties
Clear expectations of obligations
A contract is enforceable by law
Basically, a sales contract protects both the buyer and seller against anyone deviating from what’s been agreed during a sale.
What to include in a sales contract
What defines a contract? Is it each party’s signature, or the details included in the contract? Well, in a sales contract, it’s both. Below are the most common elements of a sales or business contract.
1. Details of parties involved
Usually, this section won’t need to be extensive, but you should include the names, addresses and contact details for all parties concerned. Usually, this is just a buyer and seller. When dealing with a company, it’s a good idea to have the relevant contact person’s details included.
2. Description of goods or service
The description of the goods or services offered needs to be accurate on every sales contract. Depending on the product, you should include important details such as the name, model, size, weight, colour and any other key identifying details. The quantity should also be clearly shown in this section.
If you’re selling services rather than goods, this section may be longer and more detailed, such as the scope of work to be performed and the length of time the service will take.
3. Prices and payment terms
The price is always a key component of a sales contract. Remember to include applicable taxes, such as GST. Along with pricing, you should also outline the payment terms. This will include the due date of payment and how payment is to be made (cash, bank transfer etc). It will also state the date at which the buyer should receive an invoice. A good tip is to also include any information related to non-payment or late payment, such as interest or late payment penalty details.
4. Delivery or supply instructions
The delivery section should outline where the product is to be delivered, by what date, and through which delivery service. You can also include the cost of delivery and details about which party is responsible for paying the cost. It’s always a good idea to include a clause that discusses what should occur if delivery is impossible due to causes outside of either parties’ control.
5. Warranty information
The warranty for all goods and services is important and may be provided in more detail using an additional warranty document. However, basic details should still be included in the sales contract. It’s important to know the difference between express and implied warranties. An express warranty is a detailed statement from the seller regarding the quality of the goods. An implied warranty is an unwritten guarantee that the goods will meet certain quality standards.