A Purchase / Sale Contract is a legally binding agreement between the buyer and the seller that states the details, clauses and condition of the sale. It also extends to the exchange process, if any, involved in the sale at the present moment or in the future.
Purpose of the Purchase and Sale Contract
Purchase /Sale contract acts as a legal document in writing that can be kept on record and be used in cases of proprietary conflicts. It also serves as a manifestation of the terms agreed upon to protect the rights of both the buyer and the seller.
Contents of an Ideal Purchase / Sale Contract
A well drafted contract must be prepared to include the following information
- Name and Identify the parties involved –The full and legal names of the buyer and the seller and any other co-owner or financier or guarantors should be stated on the contract.
- Details of the Item of Sale – The agreement must provide the description and components of the sale item in detail. If it’s a real estate agreement, the address of the property must be printed on the document. It must also have provision to document additional items included in the sale and the items excluded from the sale.
- Purchase price stated – The amount of sale price or a post dated payment ascertainable amount must be written in the contract.
- Terms and Conditions – Any clauses, liabilities or disclaimers must be stated in the terms section. In case of any specific clause or condition of transference of the ownership of the item must be declared in the document.
- Tax Details – If the sale is eligible for any additional taxes or mandatory taxes levied on it, details of that must go on the document too.
- Bill of Sale – The Bill of Sale must be included as an attachment into the purchase/sale contract.
Types of Common Purchase/Sale Contracts
Contract agreements work for any kind of valid sale, but the most common types of Contracts are classified in accordance to their purchase and payment modes. Listed are some common contracts:-
- Lump Sum Purchase Contract: This kind of agreement constitutes purchase and payment of the product in a single installment, paid immediately or on an agreeable date when the contract is signed or consignment is delivered.
- Installment Payment Contract: This kind of agreement constitutes payment of the product is done in periodic installments. The delivery may be immediate but
returnable in case there is a default in the installments somewhere before completion of payment.
- Requirements Agreement: This kind of contract allows the seller to provide the buyer with the purchaser’s requirement list for the product before the end of the term of agreement.
- Output Contract: This contract works in the exact opposite of a requirements agreement .In this kind of contract, the buyer confirms purchase of all of seller’s output of a certain product during the term of the agreement.
How to prepare a Purchase/Sale Contract
Hire an efficient experienced contract attorney or experienced lawyer to draw a contract to reduce the risk of future conflict and to protect your legal rights and interests.