Important Provisions of Sales Contracts

Many businesses generate revenue from direct sales. If your business is one of them, you need a contract that sets the price, terms and conditions for each sale. Having your clients sign an all-encompassing sales contract will help prevent disputes about payment terms, late penalties, and other details.

A sales contract doesn’t need to be an elaborate document; in fact, many of them take the form of fine print on the side of a purchase-order form or an invoice. No matter what type of sales contract you use in your business, make sure it includes these elements:

  • Price. Make sure the correct price is listed. Any discounts, installation charges, and delivery charges should also be included.
  • Price adjustments. If you are entering into a long-term contract, consider how price adjustments will be handled.
  • Taxes. Ensure that the purchaser is responsible for all sales tax.
  • Payment and credit terms. State when payment is due. If payment is not required immediately, spell out payment terms, including any discounts for early payments or finance charges for late payments.
  • Warranties. Ideally you want to have limited warranties, but improving on the standard 90-day warranty may give you a leg up on your competition. Typical warranties state that goods will be free from defects and will conform to designated specifications for a definite period of time.
  • Disclaimers. Most sales contracts contain the following standard disclaimer: “There are no other warranties, express or implied, including merchantability or fitness for a particular purpose.” Disclaimers are usually put in capital letters or in boldface type to stand out and to comply with certain provisions of the Uniform Commercial Code (UCC). The UCC helps simplify the laws governing commercial transactions and keeps them uniform among various jurisdictions. However, states often have variations in their commercial codes, so it is important to take that into account.
  • Limited-liability claims. A sales contract should attempt to limit your liability. A typical clause for liability states that the seller’s maximum amount of liability is equal to the purchase price. Although clauses that limit liability aren’t always enforceable and won’t necessarily hold up in court, there’s no harm in including a sentence that states you’re not responsible for consequential damages, punitive and speculative damages, or lost projects.