Free Sales Contract

An "assignment" of a contract occurs when one party to a contract transfers its contract rights and obligations under the contract to a new third party. For various reasons, the non-assigning party may not feel comfortable dealing with a stranger to the original contract. Therefore, it is common for the parties to prohibit assignments without the prior written consent of the non-assigning party. This option allows the non-assigning party the opportunity to evaluate the proposed new party and the risks involved in allowing the assignment.

If a party to a contract fails to meet its contract obligations, usually to perform an act or deliver prescribed goods or make a payment by a prescribed deadline, that party is in "breach" or "default" of the contract.

When one party defaults under a contract for the first time, or in a non-material way, that default does not necessarily entitle the non-defaulting party to immediately terminate the contract. Rather, it is recommended, and often required by the contract, that a notice of default be given and an opportunity to cure. If, after a reasonable period of time, the problem is not corrected, then a notice of termination, due to the default, may be given. What constitutes a "reasonable" period of time within which to cure the default varies according to the circumstances. If the cure period is not specified in the contract, then the time period given must be long enough to reasonably allow the defaulting party a chance to correct the problem. This program provides documents that can be used to send a Notice of Contract Default and a Notice of Contract Termination.

The Sales Contract includes an optional paragraph that obligates the parties to protect from disclosure the other party's "proprietary" or "confidential" information. "Confidential information" is information that is unique to a specific business or individual, and is not available from other sources. Additionally, information is confidential if unauthorized disclosure could result in harm to the owner. Some examples of "Confidential information" might include customer lists, trade secrets, products, business plans, financial statements, and manufacturing processes.

Confidential information includes information that is unique or for which the owner might suffer loss if it was disclosed. For Contracts regarding services the provision also includes an optional sentence that requires the return of documents to their owner, upon request.

The Provider may also offer the Recipient a discount for prompt payment. For example, the contract may provide that "Payment terms are 2% discount within 10 days, net due 30 days from invoice date." If the Recipient makes the payment within the 10 days, the buyer can take a discount of 2%. After the 10 day period, the Recipient has an additional 20 days to pay the invoice (for a total of 30 days) without discount before any penalty for late payment.

A Contract for Services should include provisions that (i) make it clear that the document contains the entire agreement of the parties; (ii) require any changes to the contract to be in writing and signed by the party affected by the change; (iii) preserve the remainder of the contract if one of its provisions is unenforceable; and (iv) specify which state's laws will govern any disputes between the parties.

Because the Service Recipient will frequently be the owner of the goods being produced or worked on, or the property to which the services are being provided, it is possible that the Service Recipient could be liable to a third party who is injured by the Service Provider. For example, if the Service Recipient has retained the Service Provider to build a garage on the Service Recipient's property, a person injured on the work site by the Service Provider may sue both the Service Provider (as the negligent party) and the Service Recipient (as the owner of the property where the injury occurred).

In order for the Service Recipient to avoid paying for the negligent acts of the Service Provider, it is common for the Service Provider to agree to indemnify the Service Recipient for any damages or injuries caused by the Service Provider. Thus, in the above example, such a provision would provide that if the injured party recovered a judgment against the Service Recipient in a lawsuit, the Service Provider would have to repay the Service Recipient for any amount of the judgment paid by the Service Recipient, plus the Service Recipient's other related costs such as attorney fees.

The Recipient should promptly examine and test at least a sample of each shipment of goods upon delivery, before the goods have been changed from their original condition. Generally, the Recipient is responsible for determining whether the goods are suitable for their intended use. The Provider should be notified immediately in writing if the goods are not acceptable, including the reason for the rejection. Arrangements can then be made for the return or replacement of the rejected goods.

Payment terms vary depending on the services/goods provided and the parties involved. Often, the Recipient agrees to pay for the services in a lump sum upon completion of the services in the agreement. For Contracts regarding the sale of goods, the Recipient often agrees to pay for the goods at the time of the order or upon delivery.

This program provides the option of making payment installments on specific dates, such as monthly or quarterly, or after a specific event has occurred, such as completion of various stages of the project. For example, a Sales Contract regarding goods can direct payments be made over time upon the delivery of certain items. Another option is to pay for the services based on an hourly fee and the number of hours required to complete the services. If the contract is for services to be provided on an ongoing basis, installment payments may be preferred.

It is very important that the contract identify exactly what products are being purchased. The description can include words and/or item numbers, the quantity purchased and the unit price.

The contract should also specify the minimum quality standards or technical specifications that apply to the goods, if any. These standards can be described in the body of the contract itself, or the contract can refer to other documents for the standards, such as the seller's written quotation, an attached exhibit, or published industry standards. Product standards are important because these standards will be used to determine whether or not the delivered goods are acceptable.

The Uniform Commercial Code (UCC), which has been adopted by most states in an effort to impose standard provisions onto all contracts for the sale of goods by "merchants" (businesses), includes implied "warranties" about the goods that the seller automatically makes to the buyer. Unless these warranties are affirmatively disclaimed in the manner prescribed by the UCC, they operate to hold the seller liable for the failure of the goods.

There are two standard types of warranties imposed by the UCC: "merchantability", and "fitness for a particular purpose." The warranty of merchantability is implied to protect the buyer if the product fails to work. In other words, the goods must do what they are supposed to do. For example, a toaster must toast. Goods must be "fit for the ordinary purposes for which they are used."

Although all goods under the UCC carry the implied warranty of merchantability, it can be disclaimed by meeting two requirements:

• The disclaimer must specifically mention the term "merchantability"; and

• The disclaimer must be "conspicuous" (standing out).

The warranty can also be disclaimed by language stating that the buyer takes the goods "as is" or "with all faults."

In certain situations, the UCC also imposes a warranty of fitness. The warranty of fitness applies in limited instances where the seller is aware of a particular or special need of the buyer and in fact the buyer purchases the goods in reliance on the seller's affirmations. Again, to disclaim this warranty, it must be in writing and must be conspicuous. The implied warranty of fitness is also defeated when the buyer inspects and accepts the goods or when written disclaimers state that the goods are taken "as is." The UCC expressly provides for the recovery of "consequential" damages as the result of a breach of warranty (when no disclaimer exists or a disclaimer is ineffective). Consequential damages are indirect losses to the buyer arising from the failure of the goods to meet the buyer's requirements of which the seller was aware, for example where personal injuries or property damages resulted. To avoid liability for such extensive damages, sellers frequently attempt to restrict their liability for consequential damages. But it is difficult for a seller to escape liability for personal injury to the buyer or to third parties who come into contact with the goods. Product liability insurance should be obtained to cover these claims.

The contract may also provide that interest will be charged for payments not received when due. Most states have laws governing debt collection and interest (such as usury statutes), especially where the debtor is a consumer rather than a business. You should verify that the amount to be charged for late payments does not violate federal, state or local law.

Finally, the contract provides an optional provision which allows the seller to treat a failure by the buyer to make a payment when due as a material (major) breach of the contract. This gives the seller the option to terminate the contract.

The purchase agreement should identify which party bears the cost of damages to the goods while in transit to the buyer. The basic rule is that the risk of loss shifts to the buyer when the goods change ownership in compliance with the contract terms. For example, if the contract calls for "F.O.B. ("free on board") at buyer's place of business", the seller remains liable for the goods during transit, up and until the goods are delivered to the buyer's address. If the contract instead specifies "F.O.B. at seller's place of business", the buyer bears the risk of loss during shipment. Sample provisions of the approach preferred by the buyer and the seller are provided below:

Seller's preference:
"Title to and risk of loss of goods shall pass to the buyer upon delivery F.O.B. at the seller's plant to an agent of the buyer including a common carrier, notwithstanding any prepayment or allowance of freight by the seller."

Buyer's preference:
"Buyer shall pay reasonable shipping costs in accordance with its shipping instructions, but the seller shall be responsible for packaging, shipping and safe delivery and shall bear all risk of damage or loss until the goods are delivered to the buyer's address."