What Should Be Included in a Sales Agreement?

Sales agreements are often full of fine print and obscure legal terminology, but most of them boil down to a handful of basic points. When you draft a sales agreement, be sure to include these provisions to ensure clarity and enforceability:

1. Description of the Parties and Goods. The Sales Agreement must contain a detailed identification of the parties involved in the transactions and the goods or services for sale. What is the selling party offering to provide? When will they provide it? If extensive or ongoing, this list may be in the form of a separate list or schedule attached as an exhibit.

2. Cost. The sales agreement must address the compensation or cost for the items, including the total payment due, along with the time and manner of payment. If the buyer plans on paying in installments, the agreement must describe the installment plan.

3. Delivery. The sales agreement must address all aspects regarding delivery of the goods. Which party will be responsible for physically delivering the goods? When is this delivery to occur? Will the buyer be inspecting the goods before delivery? When must this inspection occur? If necessary, will conveyance of title occur at the delivery point or at a later date? This provision must carefully answer all these questions and address any other applicable delivery issues.

4. Liability. The agreement must identify which party is responsible if the goods are lost or damaged during delivery. Usually the seller is liable for damages if damage occurs during delivery, however this may not always be the case and can be drafted otherwise.

5. Escrow. In applicable cases such as real estate or wholesale sales agreements, the agreement must identify whether or not the buyer will be depositing money in escrow, which bank will be acting as escrow agent, and when and on what conditions the escrow money will be released.

6. Liquidated Damages. The sales agreement may contain a liquidated damages clause. This clause should state that in the event of breach, the breaching party shall be liable for all of the losses, including lost profits, suffered by the non-breaching party.

7. Representation of Warranties and Guarantees. If applicable, the agreement should contain any applicable covenants, warranties, or guarantees the seller is making in respect to the goods being sold. This may include a guarantee that the seller is the lawful owner of the goods and the goods are owned free and clear from any liens, encumbrances, or title disputes.

8. Disclaimer. If applicable, the agreement may contain a disclaimer provision, stating that the goods are being sold "as-is," and the seller will not be liable for any defects, patent, latent, or otherwise. This provision is usually reserved for the sale of used goods.

9. Integration. The agreement should include a clause which recites that the agreement represents the entire agreement between the parties with respect to the subject matter involved, and that all prior agreements, express or implied, oral or written, are hereby superseded by this agreement.

10. Severability. The agreement should recite that if any provision of the agreement is deemed void, invalid, or unenforceable, that provision shall be severed from the remainder of the agreement, and all remaining provisions shall continue in full force and effect.

11. Modification. The drafter of the sales agreement may want to state that except as otherwise provided, the agreement may be modified, superseded, or terminated only upon a written and signed document of the parties. This will prevent confusion that may occur if the parties were able to modify the agreement orally.

12. Governing Law / Execution. The agreement should conclude by identifying the governing jurisdiction, most likely the state where the contract was signed or goods delivered, and should contain signature lines for all parties involved.

These are the most important provisions of a sales agreement. Each provision should be drafted carefully to avoid confusion or differences in contract interpretation.