phone icon 888.881.1139 M-F: 6am - 7pm PST · Sat & Sun 9am - 1pm PST
Menu Toogle menu

The 5 Essential Elements of a Sales Contract

When creating or reviewing a sales contract (a.k.a. sales of goods agreement or purchase agreement), it is vital to know which terms are most important and what things to watch out for. Knowing this will help you to avoid problems with the transaction down the road and ensure that your interests are being well protected.

A sales contract is a contract that lays out the terms of a transaction of goods or services. It identifies:

  • the buyer,
  • the seller,
  • the goods, and
  • other important terms.

Above all, pay close attention to the following elements:

Description of the Goods

The description of the goods is usually the most important term in a sales contract. This is because there is a lot of room for error with the description. Be sure that it identifies the exact goods the buyer wants to purchase and includes all the relevant details, such as:

  • type,
  • model number,
  • weight,
  • color, and
  • size.

This will ensure that the seller delivers the correct goods. Problems with the other terms of the agreement tend to resolve themselves so long as the buyer gets what they bargained for.

Delivery Instructions

Delivering late or to the wrong location is another easy way to make a transaction fall apart. Therefore, make sure the contract is clear about the time and date of delivery, the delivery location, and which party is responsible for the risk of loss of the goods while they are in transit.

Inspection Period

Many sales contracts leave out the inspection period. This period gives the buyer time to inspect the goods after delivery and reject any nonconforming goods. The inspection period varies depending on the type of goods involved.

For Instance...

With goods that have a short shelf life, such as perishable food items, buyers are usually required to accept or reject upon delivery. However, with more expensive items, such as machinery, buyers often have anywhere from a couple days to a month to inspect.

Warranties from the Seller

Buyers often overlook the warranties being made by the seller. There is no such thing as “standard warranties.” Warranties vary across industries and from company to company, so be sure to closely review the seller’s promises. Are the goods being sold “as-is”? Is the seller disclaiming the warranties of merchantability or fitness for a particular purpose? If so, this might undo any verbal promises about the goods made by the seller.

Payment Details

Obviously, the total price of the goods is important, but don’t forget about the other payment details. Will the goods be paid for in installments or in one lump sum? Does the seller require a specific method of payment? If the buyer won’t be paying right away, it is common for the parties to also execute a promissory note to spell out the repayment terms in greater detail. Among other things, this allows the seller to charge interest and outline a repayment schedule.

How to Create a Sales Contract and Promissory Note

Use our customizable sales contract template and promissory note template forms to create the legal documents that you need right now.