It is important to know the sales contract basic terms. This article will list many common contract terms.
SUMMARY
- Make sure to be familiar with each term of the contract means. You should seek an attorney for advice if you do not understand the contract.
OFFER, ACCEPTANCE, AND CONSIDERATION
Sales contract basic terms have an offer, acceptance, and consideration. In a master agreement, it will lay out the processes of the customer making an offer through purchase orders. In terms of acceptance, it will lay out the process for accepting the purchase orders. The consideration is a legal term meaning there is a bargain for exchange. Consideration is typically not an issue if there is an exchange of money for the products.
TERM AND TERMINATION
In master agreements, the term lays out the time the agreement will last. The length is usually one year with an automatic renewal clause. The termination will state how the contracts will be terminated and what happens after termination.
CONFIDENIALITY
Confidentiality clauses will include the duty to keep business information confidential. Many companies will have mutual confidentiality clauses. The time length of confidentially can be perpetual but there are a lot of clauses that end a few years after termination of the contract.
REPRESENTATION AND WARRANTIES
Representations and warranties are promises made to the other party. There is an unlimited list of possible representations and warranties but they are used to have the other party make a promise to help ease potential issues. For example, representations and warranties may include seller owns all intellectual property, the parties are proper legal entities, and the products do not have any defects.
INDEMNIFICATION
There are two main types of indemnification clauses: 1) the main indemnification clause and 2) IP indemnification.
The main indemnification clause will typically state that the seller will take pay for any third party claims made against the buyer. Most buyers will want indemnification clauses because they do not manufacture the products and keep any issues with the product on the seller.
In the case of intellectual property indemnification, the seller will request this clause because the buyer wants to make sure they are not purchasing products that the seller does not have the right to sell. If a third party make any claims of intellectual property infringement against the buyer, they will push it onto the manufacture because they usually rely on the manufacture to make sure there is no issues with intellectual property.
LIMITATION OF LIABILITIES
Limitations of liability will limit the amount of liability in case there is any disputes. Limitations of liability can be unlimited or limited and most buyers will want to limit only to the amount of money paid to the seller. In addition, there can be limitations on the type of damages, including consequential, indirect, and incidental damages. Furthermore, there are sometimes sections that exclude limitations of liability for certain disputes.
INSURANCE
Buyers will state that the seller will carry certain types of insurance and state the amount that it will cover. In addition, the buyers will sometimes also ask for a certificate of insurance to show proof of the insurance.
BOILER PLATES
There is usually also boiler plate terms at the end of the agreement. For example, some terms in this section include stating the agreement is the entire agreement, assignments, waivers, choice of law, survival of clauses.