Elements of a Good Sales Contract
In business exchanges, everyone benefits from a well-written contract. All too often you speak to a buyer, agree to terms, shake hands, and walk away secure in the belief that you have a valid contract, until there is a problem. A well-prepared contract gives you peace of mind, may prevent future lawsuits, and can benefit you immensely during litigation.
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Write it down
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Negotiate terms, then get a written document which can be used in a court proceeding to demonstrate your understanding of the agreement. Include all terms, term changes, and new terms to the agreement, until both parties are satisfied. Review it carefully, and strongly consider having someone else review it (perhaps an attorney) to ensure its meaning is clear and you fully understand, and agree to, the document before signing it.
Define all terms
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Name the parties to the contract, their business titles, and the location where the contract will be executed Describe the item or services being exchanged and define the terms of the exchange as to unit amount; price per unit; total units purchased; and the total cost. If a term can be defined by more than one method, try to use the method that is best for you and include its definition in your contract.
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Payment acceptance
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Identify all methods of acceptable payments in your contract. Provide a written explanation as to how bills are calculated, when bills are sent, when payment is due, and when payments are considered late. Describe the penalties for late payments, the amount of interest earned on late payments, and how interest is calculated.
Delivery
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Work out all details of the delivery plan. Outline the procedures for packaging and transportation along with their costs. Determine when ownership of the product begins and who assumes the loss of items broken in transport. Write down warranty and quality guaranty terms. Be as specific as possible.
Breach
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Negotiate terms for a breach of your contract. Write down the procedures you will follow when the other party fails to perform. Define time limits before stopping future shipments, providing further services, or taking legal action.
Non-transferability
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Add a contract clause to keep your contract with the same buyer. If there is to be a transfer of your contract to a third party, ensure that the transfer requires your written approval before the contract is sold. Keep express rights to approve future buyers for this contract.
Applicable Laws
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Prevent the seller from filing litigation in their state and requiring you to litigate in unfamiliar territory. Choose the state laws, the venue, in which legal action will be carried out should it be required. Determine if mandatory arbitration is to your advantage or if you prefer to proceed by law suit. Consider adding a prevailing party clause for attorney fees, court costs, and collection costs.
Signature
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Have the buyer sign the agreement in your presence or have it notarized if it is not. Once you sign the agreement it to becomes a valid contract. You can accept a faxed signature on a contract, but insist on having the contract with an original signature returned to you.
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Resources
- Photo Credit two businessmen shaking hands image by Alexey Klementiev from Fotolia.com
