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 What Is a Sales Contract?

The term contract refers to a legally binding document detailing the terms of an arrangement between two parties. A contract also notes the obligations of each party involved in the contract. Contracts may be written or oral; however, there are several types of contracts that are only legally enforceable when they are written.

A sales contract is a specific type of contract for the sale and purchase of consumer goods. The term is mostly used for describing the sale of goods that are ready to be introduced into the general market. The term sales contract is not usually used to describe the sale of services.

Sales contracts generally involve the sale of products at a wholesale price, and in wholesale quantities. A sales contract is most commonly utilized for larger purchases, such as a sales contract for selling a business. Another example would be a sales contract for selling a vehicle or piece of real estate.

Sales contracts are governed by both state and federal contract laws. Such laws that govern the sale of goods are unique in that they commonly address the standards of professional conduct required of merchants. An example of this would be people who specialize in the sale of a specific product.

As merchants have more experience and knowledge than those who are not engaged in business, and as such, they are held to different standards. So, the laws that govern sales contracts for merchants generally include special exceptions for various circumstances. These laws are codified in the Uniform Commercial Code (“UCC”).

When a dispute arises involving the sale of goods, the UCC is the body of law that governs such disputes. However, a sale of goods dispute is only governed by Article Two of the UCC. Every other article in the UCC governs a different type of transaction.

What Information Should be Contained in a Sales Contract?

What is contained within a sales contract will vary according to what is being sold. They are utilized to cover a broad range of business agreements. The suggested information requirements for a valid, legal sales contract include some of the following:

  • The parties to the sales contract;
  • The type of product that is being sold;
  • The date or dates of the sale;
  • The price and quantity of the goods being sold;
  • Payment method;
  • Terms of payment; and
  • Delivery and shipping terms, if applicable.

When a sales contract contains such information, contracted parties may avoid violations and miscommunications. The document should be clearly written and as specific as possible. A sales contract may also contain additional information regarding the relationship between the seller and the buyer. An example of this would be if two merchants have a long history of making the exact same transaction every year. Their contract could state the terms concerning the renewal of that contract.

A more specific example of a sales contract would be a wholesale Halloween clothing producer creating a contract with a retailer. The contract is for the bulk sale of holiday specific t-shirts. The retailer could purchase large quantities of the wholesale product, every fall, with that contract being renewed every year. An interested consumer may also create a similar contract with the retailer.

Are the Requirements Different for Land Sales Contracts?

Land and real estate are considered a special type of consumer product. Generally speaking, the sale of real property will be subject to the statute of frauds. What this means is that all land sales contracts must be in writing; they may not be oral contracts. If a land sale contract is not in writing, it generally will not be considered valid by a court.

Additionally, the contract should describe the land and/or property through boundaries and measurements, rather than by landmarks. This is due to the fact that landmarks may move, disappear, or change, whereas boundaries and measurements will not. The property should be identifiable based on the description contained in the contract alone.

What if There Has Been a Breach of a Sales Contract?

A breach of contract occurs when one party has failed to fulfill their side of the agreement. An example of this would be how the terms of a contract guide the parties in what they must do, and how they should do it, in order to maintain their promise. If a party does not do what the contract instructs, the non-breaching party will likely be allowed to take legal action against the breaching party. The non-breaching party can file a lawsuit against them in court.

A court will assess whether the breach was a substantial breach, or only a minor one. This will help the court determine what type of damages the breaching party should be required to pay. There are three main ways in which a party can be held liable for breach of contract. This includes:

  • An Anticipatory Breach: Often referred to as anticipatory repudiation, this type of breach occurs when the breaching party tells the non-breaching party that they will not be fulfilling the terms of their contract. Once the other party has been notified, they may sue for breach of contract;
  • Minor Breach of Contract: A minor breach of contract occurs when a party fails to perform a small detail of the contract. The entire contract has not been violated, and can still be substantially performed. This also occurs when there is a technical error with the contract. Examples of technical errors could include a wrong date, price, or typo within the terms of the contract; and
  • Material or Fundamental Breach: These are the most common types of breaches that are cited as the basis of a breach of contract action. These occur when the breach is so substantial that it essentially cancels the contract. This is because the breach renders performance by either party impossible.

There are various remedies for breaches of sales contracts. The most common remedy involves the court issuing a monetary damages award for the non-breaching party. These remedies exist to compensate them for losses directly flowing from the breach.

Another common remedy for a breach under sales contract law is for the court to issue an injunction. This is an action requiring the breaching party to perform their contract duty. An example of this would be how the injunction may require a non-paying party to transfer payment to the other party. Alternatively, the injunction may require one party to deliver goods that were not shipped.

If a party has knowingly breached the contract, it is important for them to immediately take all necessary steps to fix the breach. They should attempt to correct their mistake before the other party becomes aware of the breach; or, at least before they can file a lawsuit against them.

Before filing a breach of contract claim, it is important to review the contract for any clauses stating whether a lawsuit may be brought. An example of this would be how the contract terms may only allow the parties to enter into mediation or arbitration in order to resolve an issue. There could also be a time limit or procedure that the parties must follow before they may file a lawsuit.

Do I Need a Lawyer for Assistance With a Sales Contract?

Whether you are entering into a sales contract or are experiencing issues with one, you should consult with a skilled and knowledgeable contracts attorney. An experienced contract attorney can determine whether the sales contract is sound, or what your next steps should be. Additionally, an attorney can also represent you in court as needed.

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