• Free Business Sales Agreement Template
• Free Printable Purchase Agreement Template
• Simple Business Sale Agreement Template

Sales Contract Template (Free Sample) Here is What's in the Sales Contract Template: A simple (but general purpose) contract between a seller and buyer Details sales terms, delivery details, parties involved, and more. Free Business Sale Agreement Template for Microsoft Word. Download this free business sale agreement template as a Microsoft Word document to help you negotiate the sale of your business to a third party. GET FREE TEMPLATE. Get your free template! Complete the form below to get your free template. 22+ Sales Agreement Template – Free Word, PDF Document Download When a buyer wants to purchase a product or property from a seller, it completely depends on terms and conditions which are there in the sales agreement.

THIS SALES CONTRACT (this “Agreement” or this “Sales Contract”), effective as of [DATE], is made and entered into by and between [BUYER NAME], a company organized and existing in [STATE], with offices located at [ADDRESS] (hereinafter the “Buyer”), and [SELLER NAME], a [STATE] company, with a registered address located at [ADDRESS] (hereinafter the “Seller”).

Whereas, Seller is the manufacturer and/or distributor of [PRODUCT DESCRIPTION], and

Whereas, Buyer wishes to purchase from Seller, and Seller wishes to sell to Buyer, such products, solely upon the terms and conditions contained in this Sales Contract, and on no other terms, unless mutually agreed,

Now, Therefore, in consideration of the foregoing premises, and of the mutual promises and covenants herein contained, the parties, intending to be legally bound, do hereby agree as follows:

1. APPLICABILITY.

PandaTip: This sales contract assumes provides the terms under which your clients can place orders for your products. Streamline contract creation with the PandaDoc.

The Buyer may place orders (“Order(s)”) with Seller for Seller products and all such Orders will be governed solely by the terms and conditions contained in this Sales Contract, unless otherwise mutually agreed. Any oral understandings are expressly excluded. Seller shall not be deemed to have waived the terms and conditions contained herein if it fails to object to provisions appearing on, incorporated by reference in, or attached to any Buyer order form, and those provisions are hereby expressly rejected. No contrary or additional terms or conditions contained in any Buyer order form shall apply unless agreed to in writing and signed by an authorized representative of Seller. Additionally, Seller reserves the right to reject any Order submitted to it by Buyer.

2. DELIVERY.

Delivery shall be made within the time specified on Buyer’s Order or in accordance with Seller’s quoted lead time and monthly delivery rate, whichever is later. Transportation charges shall be prepaid and Buyer shall reimburse Seller upon receipt of an invoice for such charges. Seller shall have the right to make early, accelerated and/or partial shipments in advance of the contractual delivery schedule, in its sole and absolute discretion.

3. INSPECTION.

The Buyer shall inspect and accept, or reject products delivered pursuant to the Order immediately after Buyer takes custody of such products. In the event the products do not comply with the applicable Seller drawings or specifications, the Buyer shall notify the Seller of such nonconformance and give the Seller a reasonable opportunity to correct any such nonconformance. The Buyer shall be deemed to have accepted any products delivered hereunder and to have waived any such nonconformance in the event Seller does not receive notification that the products delivered hereunder do not comply with the Seller’s drawings or specifications, within fifteen (15) days after the Buyer takes custody of such products. Unless otherwise agreed, Buyer shall have no right to conduct inspection at Seller’s facility. In the event the parties hereto mutually agree that Buyer may inspect Seller’s product at Seller’s facility, any such inspection shall be conducted with reasonable prior notice by Buyer to Seller and at reasonable times, on a non-interference basis, and such inspection shall not include the right to establish mandatory inspection points or enter proprietary or competition-sensitive areas of Seller’s facility.

PandaTip: The timeframes in the above paragraph can certainly be modified to suit your needs.

4. CHANGES.

Seller at all times reserves the right, and is entitled in its sole discretion, to make changes, additions or improvements to the products being delivered under an Order without liability or any obligation to incorporate such changes, additions or improvements into any item or product manufactured, sold or delivered prior to incorporation of the change, addition or improvement.

5. PRICES AND PAYMENTS.

Prices and payments will be in United States dollars, and payment shall be made in United States currency. Invoice terms are net 30 days unless otherwise specified. Prices quoted are believed to be accurate; however, Seller reserves the right to correct any inadvertent errors in these prices prior to acceptance of the Order. Seller reserves the right to modify or withdraw credit terms at any time without notice and to require guarantees, security or payment in advance of the amount of credit involved. In the event payments are not made in a timely manner, Seller may, in addition to all other remedies provided at law, either: (1) declare Buyer’s performance in breach and terminate this Order for default; (2) repossess the goods for which payment has not been made; (3) withhold future shipments under this Order until delinquent payments are made; (4) deliver future shipments under this Order on a cash with Order or cash in advance basis even after the delinquency is cured; (5) charge interest on the delinquency at a rate of 1-1/2% per month or the maximum rate permitted by law, if lower, for each month or part thereof of delinquency in payment plus applicable storage charges, or inventory carrying charges; or (6) recover all costs of collection including reasonable attorney’s fees; and (7) at Seller’s option combine any of the above rights and remedies as provided by law.

6. SETOFF.

All amounts that Buyer owes Seller under an Order shall be due and payable according to the terms of an Order. Buyer is prohibited from and shall not set off such amounts or any portion thereof, whether or not liquidated, against sums which Buyer asserts are due it, from its parent affiliates, subsidiaries or other divisions or units under other transactions with Seller, its parents, affiliates, subsidiaries or other divisions or units.

7. WARRANTY.

As used in this Section “Nonconformance” means a failure to comply with or failure to operate due to noncompliance with applicable Seller drawings or having defects in workmanship or material. Normal wear and tear and the need for regular overhaul and periodic maintenance shall not constitute a Nonconformance.

Seller warrants that at time of delivery to Buyer, its Products will comply with applicable Seller drawings and will be free from defects in workmanship and material. These warranties shall run to the Buyer, its successors, and assigns. This warranty is valid for twelve (12) months after Seller’s shipment of the Product. The warranty period for Seller’s repair or replacement of the failed product only, covered by the warranty, shall be the unexpired portion of the original warranty or 6 months after shipment of the repaired or replaced product, whichever is longer.

Buyer must notify Seller in writing of the Nonconformance of any Product within the warranty period and return the Product to Seller within thirty (30) days after such discovery. Prior to return of the Product to Seller, Buyer must obtain a Return Material Authorization (RMA) from Seller. Seller reserves the right to return to Buyer any Product received without a valid RMA. In the event Seller is unable to confirm Buyer’s reported Nonconformance, Buyer agrees to pay Seller an Evaluation/No Defects Found Charge, the amount of which shall be as specified in Seller’s Return Material Authorization. Seller’s obligation and Buyer’s remedy under this warranty is limited to either repair or replacement, by Seller’s election, of any Product Nonconformance. Seller agrees to assume round trip transportation costs for a nonconforming Product in an amount not to exceed normal shipping charges to the nearest facility designated herein for warranty repair of products delivered under an Order. The risk of loss or damage to all Products in transit shall be borne by the party initiating the transportation of such Products.

PandaTip: The above language provides a fairly detailed return procedure. Feel free to customize this section to suit your needs.

Seller shall not be liable under this warranty if the Product has been exposed or subjected to:

1. 1. Any maintenance, repair, installation, handling, transportation, storage, operation or use which is improper or otherwise not in compliance with Seller’s instruction; or

   2. Any alteration, modification or repair by anyone other than Seller or those specifically authorized by Seller; or

   3. Any accident, contamination, foreign object damage, abuse, neglect or negligence after delivery to Buyer; or

   4. Any damage precipitated by failure of a Seller supplied Product not under warranty or by any Product not supplied by Seller.

THIS WARRANTY IS EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES, WHETHER WRITTEN OR ORAL, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR PARTICULAR PURPOSE WHICH ARE HEREBY EXPRESSLY DISCLAIMED. IN NO EVENT SHALL SELLER BE LIABLE FOR INCIDENTAL, CONSEQUENTIAL, PUNITIVE OR SPECIAL DAMAGES OF ANY KIND. NO EXTENSION OF THIS WARRANTY SHALL BE BINDING UPON SELLER UNLESS SET FORTH IN WRITING AND SIGNED BY SELLER’S AUTHORIZED REPRESENTATIVE.

PandaTip: Without the above language, certain implied warranties under law may be essentially inserted into the arrangement. These warranties typically go far beyond what would typically be warranted by a Seller.

8. EXCUSABLE DELAY.

The Seller shall be excused from delays in delivery and performance of other contractual obligations under this Order caused by acts or omissions that are beyond the reasonable control and without the fault or negligence of Seller including but not limited to Government embargoes, blockades, seizure or freeze of assets, delays or refusals to grant an export license or the suspension or revocation thereof, or any other acts of any Government, fires, floods, severe weather conditions, or any other acts of God, quarantines, labor strikes or lockouts, riots, strife, insurrection, civil disobedience, war, material shortages or delays in deliveries to Seller by third parties. If the excusable delay circumstances extend for six months, either party may, at its option, terminate this Order without penalty or liability and without being deemed in default or in breach thereof.

9. CANCELLATION.

Buyer reserves the right to cancel any portion of this Order affected by a default of Seller or any insolvency or suspension of Seller’s operations or any petition filed or proceeding commenced by or against Seller under any state or federal law relating to bankruptcy, arrangement, reorganization, receivership or assignment for the benefit of creditors.

10. DISPUTES.

Except as otherwise specifically agreed in writing by Buyer and Seller, any dispute relating to an Order placed by a Buyer incorporated in the United States which is not resolved by the parties shall be adjudicated by any court of competent jurisdiction. For Orders placed by a Buyer incorporated outside the United States, the parties shall resort to binding arbitration under mutually agreed procedures.

11. APPLICABLE LAW.

This Agreement shall be interpreted in accordance with the laws of the jurisdiction in which the Seller’s facility accepting the Order hereunder is located, exclusive of any choice of law provisions. The Seller and Buyer expressly agree to exclude from this Agreement the United Nations Convention on Contracts for the International Sale of Goods, 1980, and any successor thereto.

PandaTip: Feel free to change the State of governing law to a specific State in lieu of the above language.

12. EXPORT.

Unless otherwise agreed, Buyer shall be responsible for compliance with the export control laws and regulations of the U.S. Government, and when required by such laws and regulations shall obtain validated export and re-export licenses required for goods, services and technical data delivered under this Order. Seller shall not be liable to Buyer for any failure to provide goods, services or technical data as a result of any following U.S. Government actions: (1) refusal to grant export or re-export license; (2) cancellation of export or re-export license; or (3) any subsequent interpretation of U.S. export laws and regulations, after the date of this order, that limits or has a material adverse effect on the cost of Seller’s performance on this Order.

13. LIMITATION OF LIABILITY.

Seller’s liability on any claim for loss or damage arising out of, connected with, or resulting from an Order, or from the performance or breach thereof, or from the manufacture, sale, delivery, resale, repair or use of any product covered by or furnished under an Order shall in no case exceed the price allocable to the product or part thereof which gives rise to the claim, except as provided in the paragraph entitled “Patent Indemnity”. In no event shall Seller be liable for special, incidental or consequential damages. Except as herein expressly provided to the contrary, the provisions of this Order are for the benefit of the parties to the Order and not for the benefit of any other person.

14. NONDISCLOSURE AND NON-USE OF SELLERS INFORMATION.

Buyer agrees that it will not use Seller’s data for the manufacture or procurement of products which are the subject of this Order or any similar products, or cause said products to be manufactured by or procured from any other source, or reproduce said data and information or otherwise appropriate them without the written authorization of the Seller. Buyer agrees that it will not disclose or make available to any third party any of Seller’s data or other information pertaining to this Order which is proprietary to Seller without obtaining Seller’s prior written consent.

15. PATENT INDEMNITY.

Except insofar as an Order calls for products pursuant to Buyer’s designs, drawings or specifications, Seller agrees to pay the amount of any final judgment against Buyer resulting from a suit claiming that any commercial products manufactured or furnished hereunder, by reason of their manufacture, sale or use, infringes any United States patent which has issued at date of contract, and Buyer’s reasonable costs and expenses in defense of such suit if Seller does not undertake the defense thereof, provided Seller is promptly notified of the threat or commencement of such suit and is offered full and exclusive control to conduct the defense or settlement thereof.

Seller’s indemnity shall not apply where infringement would not have occurred from the normal use for which the products were designed. No responsibility is assumed for actual or alleged infringement of any foreign patent. Seller’s liability for damages hereunder is limited to those computed solely on the value of any products sold to Buyer. In no event shall Seller be liable for consequential damages or costs applicable thereto. In the event of any claim that a product furnished hereunder infringes any United States patent, Seller may at its option and expense (a) procure for Buyer the right to continue using the product, or (b) replace or modify the product so that it becomes non-infringing, or (c) grant Buyer a credit for such product, less a reasonable depreciation for use, damage, and obsolescence upon its return to Seller. Buyer agrees to pay all costs and expenses incurred by Seller in its defense and the amount of any judgment against Seller, in any suit or proceeding against Seller based upon a claim of infringement, resulting solely from the Buyer combining any product furnished hereunder with any item not manufactured or furnished by Seller or from the sale or use of any such combination by Buyer. Seller shall also indemnify Buyer’s Buyers and agents for such infringement, if and to the extent that Buyer has agreed so to indemnify them, but to no greater extent than Seller has indemnified Buyer herein and under the same conditions as set forth herein. In the event any product to be furnished under this Order is to be made in accordance with drawings, samples or manufacturing specifications designated by Buyer and is not the design of Seller, Buyer agrees to defend, indemnify and hold Seller harmless to the same extent and subject to the same requirements as set forth in Seller’s obligation to Buyer as above. The above is in lieu of any other indemnity or warranty, express or implied by Seller, with respect to intellectual property (patents, trade secret, mask works, trademarks, copyrights, or the like).

16. SOFTWARE LICENSE.

PandaTip: If software is not provided, this section can be deleted.

In the event that any software or software documentation is provided to Buyer by Seller in any form whatsoever under an Order and no software license agreement governing this sale has been signed between Buyer and Seller, Buyer agrees to accept the terms and conditions stated below effective the date of the first delivery hereunder:

1. 1. Subject to the terms and conditions herein, the Seller grants to Buyer a nonexclusive, nontransferable license to use the software or software documentation provided herein: (i) in the course of the normal operation in or with Seller products which are installed, or are intended to be installed, on aircraft, (ii) in the analysis or the formatting of reports using data from such Seller products or, (iii) on Seller or non-Seller products that are used to test, maintain, download, or process information compiled by Seller products.

   2. Making copies of software or documentation except for one copy for archive purposes is prohibited unless specifically authorized by Seller in writing. Should such copying be authorized, Buyer will reproduce and include all Seller proprietary and copyright notices and other legends in the same manner that Seller provides such notices and legends, both in and on every copy of licensed software and documentation and in any form.

   3. The software license and rights granted by Seller to Buyer hereunder are personal to Buyer. The licensed software and documentation may not be sub-licensed, transferred, or loaned to any other party without Seller’s prior express written consent, except that Buyer may transfer the licensed software and documentation in conjunction with the resale of any flight equipment or Seller supplied test equipment in which the licensed software and documentation is installed or with which it is used. Such permission to transfer is contingent upon the resale or transfer of Buyer’s agreement to use and protect the confidentiality of the licensed software and documentation under the same or similar terms as those set forth in this software license. Buyer will, however, notify Seller in writing of the transfer of the licensed software and documentation.

   4. Buyer agrees to utilize all licensed software and documentation only as authorized herein. Buyer may not either itself or with the assistance of others, make modifications to the licensed software and documentation, including, but not limited to, translating, decompiling, disassembling or reverse assembling, reverse engineering, creating derivative or merged works, or performing any other operation on licensed software and documentation to recover any other operation on licensed software and documentation to recover any portion of the program listing, object code or source code or any information contained therein.

   5. Buyer agrees to accept and retain licensed software and documentation in confidence. Buyer agrees to take appropriate action by instruction, agreement or otherwise with Buyer’s employees, or agents or other persons who are permitted access to licensed software and documentation as follows to inform said employees, agents or other persons who may come into contact with it of the confidential nature of licensed software and documentation; and to satisfy its obligations under this software license with respect to use, copying, and protection and security of licensed software and documentation.

   6. This software license is effective as of the date of first delivery hereunder and shall continue until terminated by Buyer for any reason whatsoever upon thirty (30) days prior written notice to Seller, provided Buyer ceases using and either returns or destroys Seller software and documentation; or by Seller, if Buyer does not comply with any of the terms and conditions of this software license and Buyer fails to remedy such failure within thirty (30) days after having received notice from Seller of such failure.

   7. Notwithstanding the warranties provided elsewhere herein, Buyer acknowledges that licensed software and documentation may be aircraft or sensor specific and, as such, may require reasonable adjustment or refinement to suit Buyer’s specific requirements. Buyer shall provide reasonable aid to Seller in accomplishing such adjustments and refinements. Such reasonable adjustments or refinements shall commence on the date of delivery and be provided by Seller to Buyer for a period not to exceed ninety (90) days unless otherwise provided for in writing.

   8. Buyer agrees that it will not use the license software and documentation in the performance of a contract, or subcontract, with any Government in a manner so as to affect Seller rights to licensed software and documentation. If Buyer desires to use the licensed software or documentation in the performance of a contract or subcontract with a Government, prior to such use, Buyer shall consult with Seller as to the procedures and use of restrictive markings required to protect the ownership interest of Seller.

   9. This license and sale is subject to the laws and regulations, and other administrative acts, now or hereinafter in effect, of the United States and other governments and their departments and agencies relative to the exportation and/or re-exportation of licensed software and documentation. Buyer acknowledges that it will be responsible for compliance as necessary with such laws, regulations and administrative acts.

   10. Seller agrees to use reasonable efforts to secure any licenses or permits as may now or hereafter be required by the U.S. Government in connection with the performance of Seller obligations under this Order, but this will not be deemed to require any performance on the part of Seller which cannot lawfully be done pursuant to the laws, regulations and acts referred to above.

17. SPECIAL TOOLING AND DATA.

Unless otherwise agreed in writing, all material, software, data processes, equipment, facilities and special tooling, which term includes but is not limited to jigs, dies, fixtures, molds, patterns, special taps, special gages, special test equipment, other special equipment and manufacturing aids and replacements thereof, used in the manufacture of products covered by an Order shall be and remain the property of Seller. Seller retains all rights, title and interest in drawings, engineering instructions, specifications, and all other written data, if any, furnished with the products.

18. TAXES.

The prices quoted herein do not include sums necessary to cover any taxes or duties including but not limited to Federal, State, Municipal excise, sales or use taxes or import duties upon the production, sales, distribution, or delivery of goods or furnishing of services hereunder. Any taxes or duties that are due and owing hereunder shall be paid by the Buyer. Accordingly, Seller reserves the right to revise its price after the execution of this Order between the parties to include any and all taxes or duties that may become due hereunder and Seller may invoice Buyer for said additional amount. This clause shall survive the acceptance and complete performance of this Order by the parties herein.

19. ASSIGNMENT.

Neither party shall assign this Order or any portion thereof without the advance, written consent of the other party, which consent shall not be unreasonably withheld. The non-assigning party shall not have any obligation to an assignee of the assigning party unless such consent is obtained.

20. WAIVER.

Failure by Seller to assert all or any of its rights upon any breach of this Order shall not be deemed a waiver of such rights either with respect to such breach or any subsequent breach, nor shall any waiver be implied from the acceptance of any payment or service. No waiver of any right shall extend to or affect any other right Seller may possess, nor shall such waiver extend to any subsequent similar or dissimilar breach.

21. SEVERABILITY.

If any provision of these Conditions of Sale is determined to be illegal, invalid, or unenforceable, for any reason, then such provision shall be deemed stricken for purpose of the dispute in question, and all other provisions shall remain in full force and effect.

In Witness Whereof, this Agreement is duly executed by the duly authorized representatives of the parties as set forth below:

[SELLER NAME]

_________________________________ ______________

[NAME], [TITLE] DATE

[BUYER NAME]

_________________________________ ______________

[NAME], [TITLE] DATE

A Sales Agreement, also known as a Sale of Goods Agreement, is a written document between a buyer who wants to purchase goods and a seller who owns those goods and wants to sell them. In general, goods are something that you can use or consume that are moveable at the time of the sale, including watches, clothing, books, toys, furniture, and cars.

A simple document will identify the following basic elements:

• Seller: The full name and contact information of the party selling the goods
• Buyer: The full name and contact information of the party purchasing the goods.
• Goods: A detailed description of the goods being purchased, including the amount being purchased.
• Price: The total price to be paid for the goods, including any deposits or adjustments.
• Payment: How the seller will invoice buyer and how and when the buyer will pay for the goods.
• Delivery: When the goods will be delivered from the seller to buyer, and where they will be delivered to.
• Warranties: Whether the seller is selling the goods “as is” or will provide a warranty on the condition of the goods.
• Inspection: Whether the buyer has the right to inspect the goods within a specified period of time.
• Risk of loss: Which party will be responsible for the costs if there is damage between the time the goods are shipped and the time the goods are delivered.

The Statute of Frauds requires that contracts for the sale of goods priced at $500 or more must be in writing to be enforceable.

These additional elements can also be included:

• Dispute resolution: Whether disputes regarding the agreement will be resolved through mediation, arbitration, or through the courts.
• Governing law: Which state’s laws will control the enforcement and interpretation of the agreement.
• Amendments: How to formally change the terms and provisions of the agreement.
• Assignment: Whether a party needs written permission to transfer its rights under the agreement to another party.
• Notices: How the parties will communicate and send notices to each other.
• Severability: The remainder of the agreement will still be valid in the event that part of the agreement is unenforceable.
• Entire agreement: Both parties’ intentions that the agreement is complete and final.

A Sales Agreement may also be called:

• Agreement for Sale of Goods
• Agreement to Sell
• Sales Contract

The sale of goods is governed by Article 2 of the Uniform Commercial Code and has been adopted by nearly every U.S. jurisdiction.

When Do I Need a Sales Agreement?

After finally opening your own small widget store, you’ll want to start turning a profit. On a larger scale, maybe you are a wine distributor looking to enter into a long-term, high volume contract with a chain of restaurants, and want to maximize your profits on a specialty wine popular at the moment. Or maybe you are a widget connoisseur looking to purchase widgets for your collection, or a local restaurant trying to expand your wine list and selection.

Either way, you’ll want to make sure that you have an agreement in writing to ensure that it’s smooth sailing until the money and goods have been exchanged, and both you and the other party will want to know what to do if there are any hiccups along the way. This agreement can be used for a range of sales of goods, from small-scale purchases to large-scale contracts.

Free Business Sales Agreement Template

For certain sales contracts, namely those that are entered into at a location that is NOT the seller’s permanent place of business, the buyer has a statutory right to cancel the contract until midnight of the third business day after the sale. For more information on this “cooling-off” period, check your state laws and the Federal Trade Commission.

Here are some examples of potential sellers and buyers who would need to use this agreement.

A seller can choose to deliver the goods and invoice the buyer later for payment. Create a custom invoice.

Consequences of Not Using One

If you don’t have a Sales Agreement, you risk failing to understand your contractual rights and obligations, the economic consequences of the risks, and the legal remedies and protections available to you at law. This agreement lays a strong foundation and framework for all steps in an otherwise complicated process and provides how to address and remedy them should something go wrong.

A successful individual or business relies on being able to maximize profits by anticipating the largest sales periods and knowing how much inventory is needed to meet the demand. Without a sales agreement, you or your business may not be able to sell or secure inventory at the best prices, failing to maximize profits.

Free Printable Purchase Agreement Template

Your buyer may suddenly decide not to buy from you, in which case you would be left with unexpected inventory and no recourse. Or your seller may find a buyer willing to pay more, leaving you with no inventory and angry customers.

A simple Sale of Goods Agreement can help guarantee the following:

Sales Agreement PDF Sample

The sample sales agreement below details an agreement between the seller, ‘Ramon J McMillan’ and the buyer, ‘Gerald I Lockhart.’ Under the terms specified, Gerald I Lockhart agrees to purchase five baseball cards from Ramon J McMillan.

Looking to buy or sell personal property instead? Use our Personal Property Purchase Agreement.

Warranties in Sales Agreements

Without a written sales agreement, certain warranties regarding the goods may either automatically apply or may not apply at all. Warranties are legally enforceable promises or guarantees assuring the buyer that certain facts or conditions about the goods are true. Under the Uniform Commercial Code (UCC) there are two kinds of warranties – express warranties and implied warranties.

Express warranties: An express warranty is an affirmative statement by the seller about the quality and characteristics of goods. An example of an express warranty is an electronics retailer telling a customer, “We guarantee your newly purchased television against defects for three years. When you bring a defect to our attention, we will replace or repair it.” However, an express warranty can be created even when the seller did not intend to create one. If the Sales Agreement has a description of the goods that the buyer relies upon in making the purchase, an express warranty is created that the goods will conform to that description. Similarly, if the seller provides a sample of the goods to the buyer, an express warranty is created that the goods will conform to the sample. Having a written agreement allows both the seller and buyer to clearly state what, if any, express warranties will apply to the goods.

The words “warrant” or “express” do not need to be explicitly stated to create an express warranty.

Implied warranties: An implied warranty is an unwritten promise that the goods being purchased will meet a minimum level of quality. Essentially, these are automatic warranties buyers receive when they purchase goods from a merchant. There are two implied warranties arising under the UCC.

1. Warranty of merchantability: A merchantable good is one that is “fit for the ordinary purposes” for which goods of that type are used. An example is when a buyer purchases a bicycle intended for road cycling. There is an implied warranty that the bicycle is suitable for road cycling. However, if the buyer uses it for mountain biking, the buyer is not using the bicycle for its intended purpose, and there is no warranty of merchantability. Nonetheless, if the buyer is able to show that even under ordinary road cycling circumstances the bicycle is defective, then there would be a violation of the warranty of merchantability.

2. Warranty of fitness for a particular purpose: If the seller knows or should know that (1) the buyer intends to use the goods for a particular purpose and (2) the buyer is relying on the seller’s skill or judgment to select the appropriate goods, an implied warranty that the goods will fit that purpose if created. An example is a homeowner purchasing paint to paint a house. If the seller recommends a certain paint, but that paint is not suited for painting houses, then the seller has breached this implied warranty of fitness for a particular purpose.

Implied warranties do not automatically apply if sellers clearly and conspicuously exclude or modify them in a written record, such as a Sales Agreement. Therefore, without a written agreement clearly disclaiming these implied warranties, the seller may unknowingly be providing certain warranties to the buyer.

Simple Business Sale Agreement Template

What is risk of loss?

Risk of loss is a term that determines which party should carry the risk for damage to the goods after the sale has been completed, but before delivery. If the seller carries the risk of loss, he or she will have to send the buyer another shipment of goods or pay the buyer damages in the event the goods are damaged before delivery. If the buyer carries the risk of loss, the buyer will have to pay for the goods, even if they are damaged during shipment. Furthermore, a seller can expressly disclaim or modify implied warranties under the UCC.

Under Article 2 of the Uniform Commercial Code, there are four risk of loss rules you should be aware of.

1. The terms of the agreement between the parties will control the risk of loss.
2. If there is a breach or wrongdoing by a party, then that party is liable for risk of loss.
3. Where the seller needs to transfer the goods to the buyer through a common carrier (a transportation service such as a ship, truck, plane, etc), then the risk of loss will transfer to the buyer only when the seller completes its delivery obligations. This is called a Free on board (FOB) term. There are two types of FOB shipments; a FOB shipping contract, and a FOB destination contract.
4. A FOB shipping contract transfers the risk of loss from the seller to the buyer once the seller drops the goods off with the common carrier.
5. A FOB destination contract transfers the risk of loss from the seller to the buyer only when the goods arrive at the buyer’s destination.
6. Where the seller is a merchant, the risk of loss will shift to the buyer only when the buyer receives the goods. If the buyer never receives the goods, then the seller still carries the risk of loss.

If you know you want to buy or sell certain goods, but haven’t agreed on all of the details or aren’t ready to sign a Sales Agreement, you can first sign a Letter of Intent to outline the terms and your agreement to negotiate.