- Use a purchase agreement if you are a buyer or seller in a transaction that involves the sale or purchase of goods valued at $500 or more. You probably noticed that sometimes sales of far less than $500 involve the use of a purchase agreement; the practice has become standard in a wide array of business settings simply because it offers legal protection to both buyer and seller.
- Use a purchase agreement when you engage in a business transaction that culminates in the transfer of tangible goods or commodities. The agreement functions as a legal specification of the money paid by the buyer and it enumerates the goods transferred by the seller. Other details you might find outlined in a purchase agreement are the date that the property is actually transferred to the buyer, how the transfer will be done, and also what steps must be taken to undo the transaction (if the seller offers this kind of option).
- There are various types of purchase agreements. You may use a home purchase agreement---also known as a real estate contract---or a bill of sale. Depending on the business setting and the goods or commodities for which ownership is transferred, purchase agreements often have different names, even though they fulfill the same basic function.
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Purchase agreements may be absolute or conditional. An example of an absolute purchase agreement is the bill of sale offered by a furniture seller to a furniture buyer. When you purchase a table, pay for it, and agree on delivery of the item, you receive a purchase agreement that also doubles as your receipt.
In contrast, a conditional purchase agreement usually offers the seller the right to take back an item that is used to secure a loan. A prime example is your home. If you take out a mortgage and sign a purchase agreement on the piece of real estate, it is a conditional agreement and offers the lender the specific right to take back the property---foreclose on the home---if you fail to pay as agreed. - You have the option to amend some purchase agreements. Some purchase agreements add this consideration to their initial makeup, and if certain predetermined situations arise, the parties to the agreement may negotiate an amendment. For example, if you sell a software package that you wrote, you may include in the purchase agreement a clause that makes you the only vendor authorized to perform repairs, updates, or upgrades to the software. Thus, while the buyer has the right to run and use the software, you retain intellectual ownership to it and do not run the risk of someone else copying or altering your codes and competing with you.
