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The elements of a sale and purchase agreement

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A sale and purchase agreement (SPA) is a legal contract that obliges a buyer to buy and a seller to sell a product or service. SPAs are found in all types of businesses but are most often associated with real estate deals, large share deals and deals involving a large amount of goods as a way of finalising the interests of both parties before closing the deal.

As with all legal documents, drafting a good sale purchase agreement can be challenging. However, the lower the value of the goods being purchased, the easier it is to draft an agreement that is appropriate to the transaction. Nevertheless, careless errors or drafting without consideration of the legal environment could result in unpleasant surprises if the agreement ever becomes the subject of litigation.

1. Place the title of your contract at the top of the first page. Be concise and direct. “Sale and Purchase Agreement” is sufficient.

2. Start with a paragraph titled “Preamble” at the top of the page. Identify the parties to the contract by name, address, and either social security number (for individuals) or employer identification number (for companies). Designate each party as either “Buyer” or “Seller”, and use these shorthand terms everywhere in the agreement except below the signature lines. State that the parties have entered into the agreement for the sale and purchase of the “product(s) listed herein”.

3. Create Section 1 and title it “Products” (or “Product” if only one type of product is being purchased). Describe the products in detail using make, model number, or other distinctive designation. List the quantities of each type of product being purchased, and the unit prices for each. Capitalise the word “Product,” and use the capitalised version throughout the agreement as a special designation for any generalised references to the products being sold. If the products being sold are numerous, feel free to list them in an appendix, and use Section 1 to define “Products” as “the products listed in the Appendix to this agreement.”

4. Add Section 2, titled “Price and Payment,” which should list the aggregate price and the method of payment. If the products are being delivered or paid for in installments, details should be listed here.

5. Include a warranties section detailing any seller warranties as to the quality of the product, and any refund or exchange policies. Any disclaimers of legally implied warranties such as the Implied Warranty of Merchantability should be listed here in all capital letters.

6. Insert standard contractual housekeeping provisions such as governing law and dispute resolution.

7. Identify the people entitled to sign the contract. Individuals may sign in their own capacity, while a company must designate an authorised representative to sign on its behalf (a company officer will almost certainly have the authority to sign on behalf of the company). Create a signature section with dotted lines for signatures, individual names immediately underneath, and titles such as “Vice President” on the bottom line followed, by company name if the party is a company rather than an individual.

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