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How does a Bill of Sale protect a car seller?

A Bill of Sale protects sellers by documenting the sale and transfer of ownership to the buyer. In many states, the sale of a vehicle is not final until the buyer has obtained a new title displaying their ownership. A Bill of Sale may establish the date when the buyer takes possession with the intent to obtain title. If the buyer gets into an accident after taking possession, the Bill of Sale protects the seller from liability by demonstrating the buyer's ownership.

A Bill of Sale also discloses issues or problems with the vehicle, such as damage or known mechanical issues. Many state laws protect consumers who purchase vehicles with undisclosed damage or defects. A buyer cannot make a claim under these laws for issues disclosed in the Bill of Sale.

Finally, a Bill of Sale documents the sales price, which helps with bookkeeping and taxes.

Are Bills of Sale required by law?

State law governs the title and registration of vehicles. Each state has a process for transferring title to a vehicle from a seller to a buyer. Before selling a vehicle, a seller should know the laws in their state. Some states, including New York, Wyoming, and Vermont, require a Bill of Sale or even a Notarized Car Bill of Sale. While not every state specifically requires a Bill of Sale, it is still "good practice for private vehicle sales. You may want to ask a lawyer if it is required in your state.

State law might have different requirements for the sale of, for example, a car or a boat. A seller might want to use a Bill of Sale specifically tailored to the vehicle they are selling:

Are there limits on Bills of Sale?

A Bill of Sale documents the exchange between the seller and the buyer. The seller provides the vehicle and the buyer provides compensation. The Bill of Sale might include disclosures about the condition of the vehicle. It can also set additional limits or requirements for the buyer, depending on whether the seller uses an absolute or conditional Bill of Sale.

An absolute Bill of Sale documents the final sale. The buyer pays the full purchase price and receives the vehicle with no restrictions or limitations, or "as is."

A conditional Bill of Sale requires the buyer to meet certain future obligations. If they fail to do so, the seller could retake possession. Examples of obligations may include:

  • Payment of the purchase price to the seller over time.
  • Assumption of an existing loan secured by the vehicle.
  • Use of a vehicle for a specific purpose.

Can you make a Bill of Sale after the sale happened?

Yes, but getting one signed by a buyer after a sale may be more difficult. The main purpose of a Bill of Sale is to document the exchange between the buyer and the seller. If either party fails to perform their end of the bargain, the Bill of Sale can serve as an enforceable contract. Even if made after the sale, a Bill of Sale provides the seller with protection.

What if a buyer refuses to sign a Bill of Sale?

A Bill of Sale does not have to be signed by both the buyer and the seller to be useful. But, without the buyer's signature, a Bill of Sale may not be used as an enforceable contract. Without the buyer's signature, a seller may still use the Bill of Sale to establish the date of the sale and price, for other purposes.

Many contracts must be written and signed to be enforceable. In most states, this applies to contracts for the sale of goods worth more than $500, which includes most vehicle sales. If the buyer has taken possession of the vehicle but has not paid the full purchase price, the seller might be able to get the vehicle back without a signed Bill of Sale. They might not, however, be able to sue the buyer to pay for the balance of the full purchase price.

Generally speaking, a seller cannot legally compel a buyer to sign a Bill of Sale. Their main course of action would be to refuse to sell unless the buyer signs.

Yes. An electronic signature, such as RocketSign®, is valid and legally binding on a Bill of Sale. Generally, there are very few limited exceptions when an electronic signature is not equally valid to a traditional one. If the Bill of Sale must be notarized, you will need to check with a local notary about the specific signature requirements.

If you have more legal questions about selling a used car, reach out to a Rocket Lawyer network attorney for affordable legal advice.

This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.

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