What Makes a Purchase Agreement Binding?

Purchase agreements are used for many buying and selling transactions. This article explains purchase agreements, their common uses and the required and optional provisions.

What a Purchase Agreement Is

A purchase agreement is a written agreement between two or more parties to buy and sell something. You generally use one when you buy or sell something for more than $500. Usually purchase agreements are for the sale of goods, but you can use them for other transactions.

Uses for a Purchase Agreement

Besides the sale of goods, a purchase agreement is used in real estate transactions, both residential and commercial. Business owners also sometimes use them when buying or selling a business.

Requirements for a Binding Purchase Agreement

For your purchase agreement to be binding, it must contain certain terms. Initially, it must have the same terms as a legally binding contract, defining the purpose and the parties involved. It must include an offer, acceptance and consideration for the purchase. The offer is a proposal by one person to buy something from another person. As the buyer, you must truly intend to make the offer and cannot be simply making small talk. An acceptance is the seller's expressed agreement to the offer. Consideration is something of value given in payment for the purchase (normally money). Finally, the agreement should be in writing and signed.

Other Provisions in a Purchase Agreement

In addition to the required terms, you may include other provisions such as the date the items purchased must be delivered; what happens if either you or the other party fail to follow through on the agreement; whether the agreement can be amended; the interest rate the buyer must pay if payment is late; any other conditions to the sale; and what happens if the goods being sold are destroyed. These and other provisions are included at your and the other party's discretion.

Drafting a Purchase Agreement

If you are contemplating a purchase agreement, you should consider consulting a lawyer in the city where you live to ensure that you include all essential terms, include as many protections as possible and comply with state law. You may be able to get a purchase agreement form online or at a legal supply store. However, you need to ensure that any form is updated to include recent changes in the law. In addition, you must be certain to get the proper directions so that you fill the form out correctly and legally.