Written by Avvo Staff

Purchase Contract

A purchase contract, also known as a sales contract, states the price, terms, and conditions for the sale of a particular product. Purchase contracts vary in form and content depending on the business and type of product being sold.

Facts about purchase contracts

A purchase contract may simply be the fine print on the back of an invoice or purchase order. The contract's terms and conditions are automatically accepted once the item is paid for. Purchase contracts may also take the form of a document signed by the parties.

Purchase contracts may be written or oral. However, any sale or purchase of an item that costs over $500 must, by law, be in writing. The contract must be offered and accepted and provide for an exchange of goods that are of value to be valid.

The Uniform Commercial Code (UCC), created to streamline commercial transactions between the 50 states, requires purchase contracts to comply with certain provisions. This usually takes the form of a disclaimer, often written in bold type, which prohibits the application of any express or implied warranties to the product, with the exception of any warranty stated in the contract. Most states have adopted the UCC, but there may be variations in the states' interpretation of the code.

Elements of purchase contracts

Most purchase contracts should include:

Price. The correct price, including any discounts, delivery fees, or installation charges. Should also contain information on price adjustments if the contract is long term.

Terms. States when payment is due if not upon receipt. Should include payment credits for early payment or finance charges for late payment, if applicable. Should also note that the buyer is responsible for all sales taxes.

Warranty. Usually offered for a limited time. Should state that product will be free from defect and conform to designated specifications for a set time.

Disclaimers. Should comply with UCC regulations (see above).

Limited liability clause. Typically limits seller's maximum amount of liability to equal the product's purchase price. May also include language saying seller is not responsible for lost profits or damages caused by the product's malfunction.

It's important to note that limited liability clauses may not be enforceable nor hold up in court.

If you are drafting a purchase contract

It's a good idea to have a lawyer review your purchase contract no matter what form it takes. A lawyer can ensure the contract is comprehensive, adheres to your state's commercial code, works in your favor, and offers the right protections.

Additional resources:

All Business: Important Provisions of Sales Contracts

Cornell University School of Law, Legal Information Institute: Uniform Commercial Code, Article 2, Sales

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