A purchase agreement is a legally binding contract between a purchaser and a seller. It is a legal document that outlines the different terms and conditions that are related to the sale of goods. Sometimes, purchase agreements are known as purchase and sale agreements.
Purchase agreements are usually used for the sale and purchase of goods and not services. Agreements for services are usually known as “service agreements.”
What are Purchase Agreements Used For?
There are many different types of purchase agreements. Purchase agreements can be used for transactions for the sale and purchase of almost any type of good. In most cases, purchase agreements are used in cases where the goods being sold are over $500.00. However, purchase agreements can be used for goods of any amount.
Most purchase agreements are used to create duties for the parties to the agreement, known as the buyer and seller. The agreement may require the seller to sell a specific item at a set price. The agreement may also require the seller to deliver the item at a set date and time.
Most purchase agreements place requirements on the buyer as well. This may include a requirement to pay the full price for the item. It may also include a requirement to accept delivery of the goods.
Some purchase agreements may include a mutual requirement for the buyer and seller to only deal with one another. For example, the agreement may require the buyer promise to only purchase the good from that particular seller who will sell that good for a fixed price. Some agreements may contain terms for future dealings between the buyer and seller.
Purchase agreements are commonly used in real estate for the sale of a home or other type of property. Purchase agreements for real estate are often complex documents. These agreements are usually created after a negotiation process as a means of finalizing the terms of the sale.
Purchase agreements are also commonly used in the telecommunications industry. An example of this is when a consumer purchased a communications package. This is known as a “volume purchase agreement.”
What is Included in a Purchase Agreement?
A purchase agreement should include any and all information that is relevant to the transaction. A well-written purchase agreement should include all details necessary to avoid any future misunderstandings regarding any part of the transaction. A purchase agreement may include:
- Information about the buyer and the seller including names, phone numbers, and addresses;
- Contact information of any witness or co-singer;
- The products or goods involved;
- The type of sale;
- The quantities and prices of the goods;
- The agreement date;
- The duration of the agreement;
- The terms of shipping and delivery;
- The dates for fulfillment of any conditions or requirements;
- Whether or not the agreement can be amended or revised; and
- Whether, in the event of a dispute, litigation is an option.
Purchase agreements are usually much more complex than an invoice or a purchase receipt, also known as a bill of sale. Purchase agreements usually provide the requirements each party must fulfill for the sale to be completed.
What are “Absolute” Versus “Conditional” Purchase Agreements?
There are differences between absolute purchase agreements and conditional purchase agreements. An absolute purchase agreement is very similar to a receipt. It does not contain any restrictions or conditions to be placed on the buyer. It only states the basic terms of the transaction. An absolute purchase agreement is used for record keeping and in the event the product needs to be returned.
Conditional purchase agreements generally cover security deposits and the securing of loans. These agreements allow the seller to take possession of an item or piece of property used for securing the loan in the event the buyer does not make the required payments. An example of this is when a home is foreclosed upon because the mortgage was not paid.
Disputes involving both absolute and conditional purchase agreements can result in a lawsuit. In most cases, the legal remedy is a damages award. This is intended to reimburse the non-violating party for economic losses they may have incurred.
What Are Some Examples of Purchase Agreement Breaches?
Either party to a purchase agreement can breach the agreement. The parties usually include a buyer and a seller. Examples of breaches of purchase agreements include:
- Selling the goods to another party at the last minute;
- Failing to deliver the goods on time;
- Delivering the wrong type of goods;
- Failing to make full payment or payments;
- Refusing to make the purchase; and/or
- The use of fraud by either party.
One common example of a purchase agreement breach occurs when a seller agreed to sell to a specific buyer but sold to a different buyer. In these types of cases, the seller may be required to reimburse the buyer for their lost opportunity.
If a purchase agreement breach is litigated, it can be proven in a number of ways. In most cases, courts will review the original terms of the purchase agreement to determine if there has been a breach. The court will also examine the conduct of both parties following the alleged breach.
What Are Some Remedies for Purchase Agreement Violations?
Remedies are available for a breach of purchase agreements. Purchase agreements are legally binding documents, like contracts, that create legal duties between parties. A violation of a purchase agreement may be remedied in a similar way as a breach of contract.
Remedies for purchase agreement violations can be legal or equitable. Legal remedies involve monetary damages for the non-breaching party. Equitable remedies use non-monetary solutions to resolve a dispute.
Legal remedies may include damages. These damages could be a monetary award to cover the economic losses caused by the breach. For example, the recovery of the payment price. Damages may also include a monetary award to cover other losses “flowing from” the breach. These may include a loss of business profit caused by the breach.
Equitable remedies include non-monetary options to resolve the dispute, such as:
- Reformation, or rewriting of some or all of the contract;
- Rescission of the contract, or cancelling the contract in its entirety; and/or
- Injunction, or requiring the seller to deliver the goods.
How Are the Remedies Determined?
How remedies are determined depends on several factors. These may include:
- Contract laws of the state;
- The terms of the agreement; and/or
- The facts surrounding the purchase agreement violation.
Some purchase agreements outline the remedies that the parties should seek in the event of a violation. Some purchase agreements may allow parties to litigate disputes while others may require alternative dispute resolutions such as mediation or arbitration.
Do I Need a Lawyer for Help With a Purchase Agreement?
Purchase agreements are commonly used for a wide variety of transactions. They can be simple, such as a receipt, or complex, such as the purchase of a home. A business lawyer can assist with drafting or reviewing a purchase agreement. A business lawyer can explain all aspects of a purchase agreement and ensure your interests are being protected.
In the event of a lawsuit over the purchase agreement, a business lawyer can represent you during court proceedings. A business lawyer may also help you receive damages in the event a purchase agreement was breached.