Main Terms of Sales Agreements
Sales Agreements fall to a large extent within the scope of freedom of contract. In other words, the parties are free to agree on terms of the agreement with the exception of certain special situations (real estate and consumer sales).
It is advisable to carefully agree in sales agreements what shall be delivered, when, where and at what price. Terms of payment should also be clearly agreed upon.
Particular attention should be paid to description of the deliverable goods or services in the agreements. The description of the deliverable goods or services has, namely, material impact on when the delivery is deemed to be defective. Also, applicable remedies for defective or delayed delivery should be agreed upon. Often the parties agree upon a contractual penalty in the event of delays. On the other hand, as regards defects, it is common to agree that the seller will either repair the defective goods or deliver a new product.
The seller in particular should pay attention to the remedies for defects or delays, and to agree on limitation the seller’s liability. Normally, it is advisable to, at a minimum, exclude liability for indirect damages.
A common term of sales agreements concerns the warranty period. Warranty is an additional commitment by the seller, which normally involves seller assuming responsibility for defects occurring during a specified warranty period. Warranty may cover, for instance, errors or functionality of a device. In most cases, the seller commits to repair or commission reparation of errors or defects reported during the warranty period without any expenses to the buyer.
It is advisable to agree upon at least the following issues in a sales agreement:
product or service to be delivered, including quality and amount
place and time of delivery
price of the product or service
terms of payment
transfer of title
possible warranty terms
remedies for delays
remedies for defects
limitations of liability
dispute resolution
applicable law
Standard terms issued by relevant industry associations or developed by companies themselves are often used in sales agreements. When using standard terms, however, it should be noted whether they are applicable as such to the relevant situation and, if necessary, agree upon deviations to the standard terms. Standard terms and use thereof is discussed in more detail in the Chapter Standard Terms [Standard Terms].