Terms of sale: Overview, definition, and example
What are terms of sale?
Terms of sale refer to the specific conditions under which goods or services are sold by a seller to a buyer. These conditions govern the transaction and outline the responsibilities, rights, and obligations of both parties involved. The terms of sale can include details such as the price, payment method, delivery terms, return policies, warranties, and any other conditions related to the sale. They serve as the foundational agreement between the buyer and the seller and are often included in contracts, invoices, or purchase orders.
For example, a company selling electronics might include terms of sale that specify payment must be made upfront, the buyer is responsible for shipping costs, and the product is covered by a one-year warranty.
Why are terms of sale important?
Terms of sale are important because they help establish clear expectations for both the buyer and the seller, reducing the potential for misunderstandings or disputes. By clearly defining the price, payment schedule, delivery process, and other aspects of the sale, the terms provide both parties with a mutual understanding of their responsibilities and rights. Well-defined terms of sale help ensure that transactions proceed smoothly, payments are received on time, and goods or services are delivered as expected.
For businesses, having clear terms of sale protects against financial loss, legal disputes, or misunderstandings with customers. For consumers, the terms of sale offer clarity on the expectations and responsibilities related to their purchase.
Understanding terms of sale through an example
Imagine a customer orders a laptop from an online retailer. The terms of sale specify that the laptop costs $1,000, payment is due at the time of purchase, shipping is free, and returns are accepted within 30 days as long as the product is in unused condition. The terms also state that the retailer provides a one-year warranty for any manufacturer defects. These terms give both the customer and the retailer a clear understanding of the cost, payment, delivery, return policy, and warranty coverage.
In another example, a business-to-business (B2B) transaction involves a company purchasing bulk office supplies from a supplier. The terms of sale specify that the company must pay within 30 days of receiving the invoice, that the supplier is responsible for shipping, and that the company can return defective products within 60 days for a full refund. These terms protect both parties and ensure that each understands the payment schedule and product return process.
An example of a terms of sale clause
Here’s how a terms of sale clause might appear in a contract:
“The Seller agrees to sell and the Buyer agrees to purchase the Goods at the price of $[X]. Payment is due within [Y] days of the invoice date. Delivery of the Goods will occur within [Z] business days after payment receipt. The Buyer shall be responsible for any applicable taxes or duties. The Seller provides a warranty for the Goods for [A] months from the date of delivery, covering defects in material or workmanship. Returns of Goods are accepted within [B] days if the Goods are unused and in original packaging.”
Conclusion
The terms of sale are a critical component of any transaction, helping to ensure that both the buyer and the seller are clear on their respective responsibilities and rights. By clearly outlining the price, payment method, delivery expectations, return policies, and any other relevant details, the terms of sale help minimize the risk of disputes and foster positive, transparent business relationships. For both businesses and consumers, understanding and agreeing to the terms of sale is essential for a successful and efficient transaction.
This article contains general legal information and does not contain legal advice. Cobrief 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.