8 Things to Think About Before Signing a Sales Contract
Sales contracts are, perhaps, the most common kind of agreements that small businesses get into. Owing to their importance, it is imperative for businesses to understand the considerations that are the most important parts of sales contracts. Here are a few of them:
A sales contract needs to specify the identities of the parties getting into the agreement. In a commercial agreement, this will involve the name of your small business along with the name of the business you will be doing business with. It is also recommended to include the date of signing, owing to how the usefulness of contracts is dependent upon time.
While drafting a sales contract, the description of goods will, arguably, be the most consideration. The description of your goods needs to be exact, owing to how even a small deviation can completely alter the goods that you will end up getting. Considering the room for error, it is imperative for the buyer to include exactly the goods that they wish to purchase, along with all of the relevant details concerning type, weight, size, colour etc. This will ensure that the seller is able to deliver the exact goods that the buyer asked for.
When you speak of sales contracts, delivery is of utmost importance as well. Delivering the wrong items or delivering them late has got the potential of making a sales transaction fall apart. This is the reason why it is of utmost importance for the contract to specify the exact date and time of delivery and the location also. On top of that, the involved parties also need to decide upon bearing the risk of the loss of goods while they are in transit.
One of the worst things that you can do is leave the inspection period out of the sales contract or have a generic inspection period for all of the involved items. The inspection period is the amount of time that the buyer has got to inspect the delivered goods and return the items that are nonconforming to the order placed. Items with a shorter shelf life are usually rejected or accepted on delivery, while machinery items give the buys more time to inspect.
Buyers are generally of the perspective that different items—from different sellers—come with the same, general warranty. However, they could not be any more mistaken. Warranties on products vary from product to product, from company to company. What this means is that the buyers need to pay close attention to the details of the warranty that is being provided by the seller. Instead of taking the sellers’ promises on face value, buyers need to evaluate and review them closely. Remember: there is no such thing as a “general warranty”!
The buyer will, obviously, need to make a payment to the seller in exchange for the goods, right? Well, not only does the sales contract need to indicate the price that has been decided upon but it needs to highlight other payment details also. For instance, the sales contract needs to indicate if the payment will be made in instalments or in a single, lump sum amount. The method of payment and the need of a promissory note are all matters that need to be highlighted in the sales contracts.
The Ownership Title
One of the few things that sellers can include in a sales contract, for reducing their risk, is the retention of title clause. The retention of title clause will ensure that the seller has got the ownership title of the goods until the buyer makes the complete payment. This is especially useful in commercial sales that involve payments in instalments. If the buyer is unable to clear all of the outstanding dues by the due date, then the seller has got the right to claim the sold item back.
The sales contract also needs to make provisions for a scenario where the contract might be breached by either of the two parties involved. The contract should clearly state the conditions of a breach and the remedies that a party might be able to recover out of the situation. Conditions for contract termination need to be addressed as well.
When you consider the frequent need of small businesses to enter into commercial sales contracts, you have got to say that they need to put great thought and consideration in their drafting!