Sales Agreement Definition

Sales contracts are vital to operating a business.

A sales agreement is vital in the conduct of business, specifically because it is a binding legal document that provides remedies in law or binding arbitration if the agreement is breached by one of the parties to the agreement. Given its legal ramifications, it is important to know precisely what constitutes a "binding" sales agreement.

Sales Agreement Definition

Sales contracts are legally binding agreements.

According to BusinessDictionary.com, a sales agreement, also called a sales contract, is a "formal contract by which a seller agrees to sell and a buyer agrees to buy, under certain terms and conditions spelled out in writing in the document signed by both parties." Sales contracts in the United States are governed by the Uniform Commercial Code (UCC). The UCC does not require a formal sales contract to be enforceable. For example, an invoice, a written check, even an oral agreement can be considered forms of binding sales contracts. Enforceability of oral agreements is subject to challenge; a formal sales contract offers concrete evidence. Statutory law in most states requires that certain contracts be formalized in writing and signed to be enforceable. Contracts for the sale of land, for example, are enforceable only when formalized in writing and signed.

Purpose of the Sales Contract

Sales contracts are vital in the event of legal disputes.

It is not unusual for disputes to occur between parties during the conduct of business. The sales contract in writing is evidence of a binding agreement if ever needed in the event of potential litigation. Such incidents may arise over disputes involving key delivery dates or the specific details contained within a complex business transaction. Instances such as these validate the usefulness of sales contracts when written proof is vital to resolving legal disputes. As a practical matter, companies should keep blank copies of basic contract forms on file for use whenever hiring independent contractors and tradesmen to confirm and bind the essential elements of an agreement while memories of the details are fresh.

Elements of an Enforceable Sales Contract

Boilerplate basic sales contracts are readily available online by doing a search for "sales contracts," or they can be purchased at the local office supply store. Contracts need not be elaborate affairs to be enforceable. Consequently, a businessperson can prepare a simple document whenever the need exists. The key elements of the document should include the identification of both parties to the agreement, their respective roles in the agreement, a clear description of the agreement (the deliverables), the payment and payment terms, delivery or due dates, other terms and conditions as may be appropriate (warranties, taxes, disclaimers, liability limitations) and finally, acceptance of the contract as evidenced by the signatures of the two parties.

Breach of Contract

The usual recourse for a breach of contract is for the injured party to sue for money damages equivalent to the financial loss resulting from the failure to perform. In unique situations where money damages do not compensate for a failure to perform, the court may order the offending party to "perform" according to the stipulations in the contract. An example of the latter is a real estate contract where the seller reneges on selling the property according to the terms of the contract.

Utility is a Function of Enforceability

Sales contracts have utility only to the extent that they are binding and enforceable. The contract must be accurate, contain all the relevant provisions of the transaction and be signed by the parties to the agreement. The parties must have the necessary capacity to contract in that they are not minors, inebriated or otherwise mentally incapacitated. Furthermore, the contract must not be "either trifling, indeterminate, impossible, or illegal."

References

• BusinessDictionary: Contract Of Sale Definition
• AllBusiness: Important Provisions of Sales Contracts
• ExpertLaw: Contract Law - An Introduction
• The Lectric Law Library: Legal Definition of a Sale