This is a formal agreement between a buyer and seller that lays out the terms of sale and delivery of goods and services, securities and any other items. It covers terms and conditions of the agreement e.g. price and delivery.

A contract provides information on the details of the agreement to minimize chances of disputes hence it is safer for any contract to be put in writing for future reference.

Importance of sales contracts

It does not matter how well and how long you have dealt with a customer, every deal agreed has to be put in writing for the benefit of the two parties. A sales contract prevents miscommunications that can strain a good relationship between a buyer and seller. A seller can end up losing a customer in case he makes a mistake in one aspect of a sale.

Sales contracts ensure proper execution of the deal agreed. It provides extensive details of the deal including prices, the quantity of products, names of parties involved, order dates and times, delivery dates and terms of payment. The contract also includes the ways for settling conflicts in case it has been breached.

The main reason for having a sales contract is protection in case of legal action. If the buyer or seller does not fulfill the terms and conditions stipulated in the contract, one can seek legal address. Contracts provide legal backup and help the courts or any other form arbitration decide whether the agreement was valid by examining the details of the contract and determining the appropriate actions.

Elements of a sales contract

  • Description of the goods. Description of goods is the most crucial element in a sales contract. All the goods the customer intends to buy should be identified and all relevant details included. The description includes the type of good, the model number, weight, color and size of the goods for correct delivery.
  • Delivery instructions. The contract should clearly indicate the time, date and location of the delivery for a successful transaction to take place. It should also state the responsible party in case goods are lost in transit.
  • Inspection period. This is the period given to the buyer to check all the goods delivered to make sure they meet the standards and conditions stated in the contract. Any nonconforming goods are rejected.
  • Warranty. The contract should clearly state the warranty period for the seller’s product and the conditions to be met for the warranty to be valid in case the buyer issues a claim. Before signing the contract, the buyer should review this section to avoid the seller issuing a disclaimer in case of product failure.
  • Details of payment. The total price of goods should be included, the form of payment, if the goods or services will be paid for in installments, a one-time payment or a promissory note in case of later payment.