A contract is a legally binding document that outlines the terms of the agreement between the parties. Contacts provide the obligations for the parties involved.
Contacts may come in written or oral form. There are, however, types of contracts that are only legally enforceable when they are in writing.
Sales contracts are specific types of contracts for the sale and purchase of consumer goods. This term is mostly used to describe the sale of goods that are ready to be introduced into the general market.
Sales contract is not a term that is typically used to describe the sale of services. A sales contract, in general, involves the sale of products at a wholesale price and in wholesale quantities.
Sales contracts are commonly used for larger purchases, such as for selling:
- A business;
- A vehicle; or
- A piece of real estate.
Sales contracts are governed by both federal and state contract laws. The laws governing the sale of goods are unique because they commonly address the standards of professional conduct required of merchants.
One example of this would be individuals who specialize in the sale of a certain specific product. Because merchants have more knowledge and experience than individuals who are not engaged in business, they are held to a different standard.
Therefore, the laws that govern sales contracts for merchants typically include special exceptions for various circumstances. These laws are found in the Uniform Commercial Code (UCC).
If a dispute arises that involves the sale of goods, the UCC is the body of law that governs these disputes. A dispute involving the sale of goods, however, is governed only by Article Two of the UCC.
Each other article in the UCC governs a different type of transaction.
What Information Should Be Contained in a Sales Contract?
What is included in a sales contract varies according to what is being sold. Sales contracts are used to cover a broad range of business agreements.
In order to create a valid, legal sales contract, the following information should be included:
- 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 the sales contract contains this information, the parties to the contract can avoid miscommunications and violations. The contract should be drafted as clearly and as specific as possible.
Sales contracts may also contain additional information about the relationship between the buyer and the seller. For example, if the two merchants have a long history of making the same transaction each year.
Their contract may outline the terms concerning the renewal of that contract.
One specific example of a sales contract would be a wholesale Halloween clothing producer entering into a contract with a retailer. The contract would be for the bulk sale of holiday specific shirts.
A retailer could purchase large quantities of the wholesale product each fall with the contract being renewed every year. An interested consumer could also create a similar contract with the retailer.
What Is a Service Agreement?
Service agreements, or service contracts, are found in some sales contracts and warranties. Basic warranties usually provide general assurances of quality or craftsmanship.
Service agreements may go beyond this by stating the exact services that the consumer is entitled to in case a product breaks or fails. A service contract may be optional or, in some cases, are included as a standard feature of the warranty.
Service agreements are common for consumer products, including:
- Electronics; and
- Other items that need regular updating or repair.
The cost of a service agreement benefit is typically included in the overall service price in addition to any costs that are associated with the basic warranty. These agreements may also be referred to as a sales and service contract, especially in the context of vehicle purchases.
What Do Service Agreements Cover?
In order to understand what services agreements must cover, it is important to review what contracts must contain. A legal contract is an agreement that is enforceable under contract laws.
Most legal contracts are written and signed. In certain jurisdictions, an oral agreement may also be recognized as a legal contract.
In general, it is best for a contract to be formalized in writing, especially if the subject matter governs a complex arrangement or is valuable. Legal contracts may be used by both organizations and individuals, including corporations and businesses.
Legal contracts have to be entered into in a way that is fair for both parties and is free from:
- Coercion; or
In order for contracts to be considered valid, they must fulfill all of the legal requirements for valid contracts that are set forth by federal and state laws. A legal contract must meet the following requirements:
- Offer and acceptance: One party must make an offer and the other party needs to accept the offer;
- Both offer and acceptance need to be done in a manner that is clear and unambiguous;
- Assent: Both parties to a contract must mutually assent, or agree, to the terms of the contract;
- They should be clear as to the terms, words, and definitions used in the agreement; and
- Consideration: Each party is required to exchange something of value;
- For example, one party is typically providing service or goods in exchange for monetary payment.
Certain types of contracts must be in writing, including contracts for the sale of real property and contracts for the sale of goods worth over a certain amount, usually over $500.
The terms that must be included in a service agreement in order for it to be valid depend on the individual products and the agreement itself.
Service agreements can cover issues such as:
- Replacement of worn parts;
- Diagnosis and troubleshooting;
- Upgrading of parts or software;
- Dispatching of a company service representative to conduct in-home or on-site repairs;
- Access to streamlined customer service; and
- Refunds and returns.
How Are Service Agreements Created?
As noted above, many companies will include a service agreement as a standard aspect of the sale of their products. This means that every customer may be entitled to services when they make a purchase.
In certain cases, a service agreement can become a point of contention if the parties are negotiating the sales contract. For example, a salesperson may spend a significant amount of time negotiating what services the customer is entitled to.
After the negotiations, the agreed-upon terms of the negotiation will be finalized in the service agreement.
What if I Have a Legal Dispute Over a Service Agreement?
Similar to any other provision in a contract, a service agreement may lead to legal disputes. This may happen for many different reasons, including errors in the wording of the terms or if the seller fails to provide the services.
Lawsuits over service agreements will usually result in an economic damages award to reimburse the non-breaching party for their monetary losses. For example, if the seller failed to provide repairs as promised in the service agreement, they may be required to reimburse the customer for any losses that were directly caused by their breach.
Do I Need a Lawyer for Help With Service Agreements?
A service agreement can be an important aspect of many businesses and customer transactions. It may be helpful to consult with a contract lawyer if you need assistance creating, reviewing, or editing a service agreement.
In addition, your attorney can provide you with legal representation if you have to file a lawsuit when a dispute arises.