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Pankaj Tyagi
| Updated: 18 May, 2021 | Category: Legal Agreements

Sale Purchase Agreements: Definition, Scope, and Benefits

Sale Purchase Agreements

A sales and purchase agreement (SPA) is a document that prepares a legal ground for a transaction to occur between a buyer and a seller. Parties under such a contract cannot undertake a transaction by means other than mentioned under the agreement. Sale Purchase Agreement can also be regarded as the culmination of negotiations between the purchaser and the sellers. One can find sale purchase agreements in all business domains such as real estate, advertisement agreements, stock purchase, etc. It acts as a legal foundation for a given transaction and supports both parties’ interests.

Parties Involved in the Sale Purchase Agreements

In a Sale Purchase Agreements, there are two parties viz:-

Seller

An individual in an agreement who is liable to sell out the product, invention, services, goods, share, stock, machinery, equipment etc. is regarded as a seller. A seller in the agreement is the one who sells the good in exchange for money.

Buyer

A buyer in a Sale Purchase Agreement is the one who buys out the service, product, article, machinery, goods, shares, etc., against the pre-determined price set out by the sellers.

Understanding the concept of the Sale Purchase Agreements

Before a transaction come into existence, the interested parties i.e. buyer and the seller agreed to a price of the item to be sold and terms for the transaction. The sale purchase agreement is the legal foundation on which the terms and conditions for a given transaction can be set out and discussed. The Sale purchase agreements are prominently used for large purchases. 

SPA’s also enclose details regarding the interested parties, i.e., buyer and the seller. The agreement incorporates any deposit that has occurred after the mutual discussion of the parties, and any other arrangements regarding the transactions have been in calculated. The agreement also briefs on when the final transaction is going to take place.

Read our article:Drafting of Share Purchase Agreement: Underlining the Important Clauses

Some common Examples of Sale Purchase Agreements

A share purchase agreement is referred to as a legal document between a seller and a purchaser. The specific quantity of shares is enclosed in the share purchase agreement at the affirmed price. This agreement legalizes the process of share trading under the mutually agreed conditions.

Conditional Sale Agreement

Conditional Sale Agreement safeguards the seller’s repossession right regarding a transaction where a buyer purchases the product without an upfront payment. Such agreement adheres to utmost importance from a seller’s point of view as it prevents any chances of non-payment.

Sale Agency Agreement

Sale Agency Agreement usually drafted between a seller & an agent. Such an agreement enables the seller to bestow the right of sale negotiation to the agent in exchange for a mutually agreed commission.

Amendment to the sale agreement

Where the parties decided to draft an agreement to amend one or multiple clauses of the existing agreement, then it is known as an amendment to the sale agreement.

Commission Sale Agreement

Commission Sale Agreement is a legally binding document that reflects the terms regarding the work paid on commission. Such agreement helps in averting disputes that are likely to be arisen between the parties over the percentage of commission to be paid.

At What Instance Sale Purchase Agreement is Required?

Depending on the prospect of seller or buyer, there are several reasons when it is imperative to draft a sale purchase agreement for a given transaction.

Following are the circumstances under which sale purchase agreements are widely used: During the purchase of an asset, be it a property or machinery or anything that posses a specific value.

Sale Purchase Agreement

What are the Fundamental Legal Implications for Drafting a Sale Purchase Agreement?

A sale purchase agreement must adhere to the following conditions without exception:-

  • The intention of the parties must be clear and concise. There should be no ambiguity in this regard.
  • The agreement should stick to transparency, and it must be free from errors that increase the chances of misinterpretation
  • There should be transparency in regard to the implementation of the desired objectives.
  • Avoid incorporating facts that lead to wrongful judgment.
  • The document should not breach the interest of either party.
  • It should empower both parties to leverage legal proceedings in case of a dispute.

Attributes of the Sale Purchase Agreements which is Enforceable by Law

  • Briefing of both the parties
  • Objective that laid the foundation of the agreement.
  • Briefing of the terms to be incorporated in the agreement.
  • Briefing regarding the asset
  • Description regarding the dues yet to be paid on the asset to be mentioned in the agreement.
  • Description of terms agreed between the parties.
  • Obligations and duties of the concerned parties regarding the agreement.
  • Detail of rights that are supposed to be transferred.
  • Transfer of ownership
  • Contravention of terms
  • Terms relating to litigation if any against the said property.  
  • Stipulates of Purchased assets
  • Special declaration
  • Indemnity
  • Additional Covenants

Conclusion

The sale-purchase agreement is a widely used deed in practice. It legalizes[1] the process of transaction regarding any goods and effectively curbs dispute over the same. After drafting a legit agreement, the seller and the buyer can confidently proceed without worrying about fraudulent or suspicious transactions.

The agreement that doesn’t enclose the attributes above is more likely to attract litigation and disputes in the future. So be prudent and proactive while drafting such an agreement- if possible, hire an expert to serve such a purpose.

Professional know-how becomes imperative when it comes to the preparation of a sale purchase agreements. CorpBiz’s professional can help you prepare a contract that is free from ambiguous terms and provides much-needed resilience to the buyer-seller interest.

Read our article:What is Share Purchase Agreement in NBFC?

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Pankaj Tyagi

Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.

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