A sale of goods contract is one of the most important agreements a business owner can enter into. You may be writing a contract so you can offer your goods and services to customers. Or maybe you’re reviewing a new contract as you make a major purchase. In either situation, understanding what language to include (or keep out) can save you a bundle.
“Most businesses are selling a good or service. A well-constructed sales contract template is an important asset and business tool.”
Business Attorney Trevor Brewer
Our team at BrewerLong business law attorneys has put together a roadmap to crafting a great contract for the sale of goods. When drafting or reviewing sales contracts, we can help you craft a favorable deal for your business.
Defining a Sales Contract
A contract for the sale of goods sets out the terms of a transaction between a buyer and a seller. This document goes by many different names. Perhaps you’ve heard it called a purchase contract, a sales agreement, or a sale of goods contract. Whatever name you call them, these contracts set out the terms of sale of items or services between two parties.
Under most circumstances, a sale of goods contract contains at least the following terms:
- A clearly identified buyer,
- A clearly identified seller,
- A definition or description of the goods or services to be sold, and
- Any other terms that can help define or specify the terms of the contract.
The goal is to make a contract as definite as possible so the buyer knows what they’re buying and the seller knows what they’re selling.
Using a Sales Contract
You can use sales contracts for any size of transaction. Contracts govern deals ranging in value from ten dollars to ten million dollars. The most important purpose of a contract is to protect both parties’ interests during a transaction.
In the United States, most states have adopted something called the Uniform Commercial Code (UCC). The UCC requires certain contracts to be in writing. For instance, contracts for the sale of goods over $500 require a written contract. While this is not a federal law, most states have adopted the UCC, Florida included.
It’s also important to note that written contracts, like sales contracts, are generally easier to enforce than “handshake deals.” Oral contracts are enforceable only in unique circumstances. Having a written contract for the sale of goods with the parties identified and schedules for payment and delivery is best for your business. It makes a court’s job in enforcing the deal much easier in the event something goes wrong.
Drafting a Sales Contract: Six Points to Success
Good, careful, and thorough drafting of a sales contract is your insurance policy against expense and heartache down the road. Talking with an experienced business lawyer can help. Our team at BrewerLong business law attorneys has extensive experience helping business owners with sales contracts. Whether you’re drafting or reviewing a contract for the sale of goods, we can help.
One: Identify the Parties
Make sure the contract for goods and services clearly identifies the buyer and seller. Confirm that all the identifying information is correct. If necessary, ensure that it in some way identifies any parent, affiliate, or partner of a buyer or seller that may later need to be liable for a party’s debts.
Two: Identify the Services or Goods the Contract Covers
Identifying what the contract covers is possibly the most important part of the contract for sale of goods. This is where you’ll need to get as picky as possible with your language. An experienced business lawyer can help you with drafting. Goods might be defined by any of the following:
- Lot or SKU number;
- Make;
- Model;
- Size and weight;
- Type;
- Color; and
- Other identifying details like defects, blemishes, or markings.
When selling services, the process is slightly different. Something called a Statement of Work (SOW) usually describes the services to be performed. SOWs are usually appended to the contract. SOWs usually contain a fair amount of detail about the services that the parties agree to perform.
Three: Confirm Details of Payment
Getting paid is the other most important part of a contract for the sale of goods. You’ll want to negotiate this term to your satisfaction, whether you are the buyer or the seller. A sales contract typically includes the agreed-upon price in the written contract. It also includes the terms of payment (like whether the contract will be paid in installments or all at once). Sales contracts typically also include terms that specify what happens in the event of a default (i.e., the buyer fails to pay).
Four: Confirm Details of Delivery of Services or Goods
Including delivery details in a sales contract is an essential part of the written instrument. Whether you’re delivering a sailboat or accounting services under your contract, it’s very important to know when and how to deliver.
In certain contracts, usually for ones for bespoke products like specialty goods or software code, the sale of goods contract may include an inspection period. This period typically allows the buyer to confirm the product is fit for use before paying in full. If your contract has a provision like this, make sure you speak with an experienced business lawyer before finalizing the agreement.
Five: Negotiate the Appropriate Representations and Warranties
Contract warranties are representations by the seller that whatever’s being sold will meet certain standards. Contracts will usually contain certain express warranties about the reliability of the goods being sold. However, look out for potential waivers of warranties. Be sure to negotiate the appropriate protection for yourself and for whatever product you’re buying. And be skeptical of any seller who wants to sell you something as-is!
Six: Negotiate Situation-Specific Contract Provisions
Most contracts have just a few situation-specific provisions like “choice of law” and “confidentiality” that need to be addressed before signing. A contract for the sale of goods is no different than any other. A few things for you to consider as you finalize your drafting or review are:
- Choice of governing law,
- Level and duration of confidentiality provisions,
- Consequences for breach of various contract provisions, and
- Notices under the contract.
While these last few provisions may not seem like a big deal, they often can be. A choice of law provision can sometimes mean the difference between having a disputed contract enforced or not. And providing correct information for notices can spare you the heartache of being unable to enforce your rights under a breached agreement.
In business, the message is clear: Get it in writing.
Wrapping Up Your Sales Contract
Whether you’re selling a great product or you’re making the biggest purchase in the history of your business, we at BrewerLong business law attorneys are here to help. We’ve worked with hundreds of Florida business owners to craft sale of goods contracts to benefit their businesses. Contact us online today to discuss how we can help you. We’re also available by phone to discuss ways to assist your Florida business.
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