The terms “sales agreement” and “purchase agreement” are often used interchangeably, but their specific usage depends on the context of the agreement and the perspective of the parties involved.
While both terms refer to legal documents that outline the terms and conditions of a business purchase or sale, there can be subtle differences based on the perspective of the party drafting the agreement – specifically whether it’s the buyer or seller initiating the contract.
Sales Agreement Defined
The term “sales agreement” (or “sales contract”) is typically used when the seller is the party drafting the legal document. A sales agreement outlines the terms and conditions under which a seller is willing to sell a specific asset, business or property. Elements in the agreement often include:
- The sale price – The amount the seller agrees to accept for the business or asset.
- Conditions of the sale – Any conditions that must be met for the sale to proceed.
- Which assets are included – A detailed list of assets or the entire business being sold.
- Any liabilities – How existing liabilities or debts will be handled.
- Due diligence – The timeframe and process for the buyer to conduct due diligence.
- Closing date – The date when the sale is finalized.
Purchase Agreement Defined
Conversely, a purchase agreement is a broad term that can be used from both the buyer’s and seller’s perspectives, though it is often used when a deal is initiated by the buyer. It contains similar elements to the sales agreement and frequently becomes the final contract once negotiations are complete and both parties sign it.
Though both sales agreement and purchase agreement are used interchangeably and, in effect, are very similar, it’s important to be aware of subtle differences and keep in mind that both are legally binding documents. Work with a business law attorney whenever drafting or signing an agreement to ensure your best interests are upheld. Commercial lawyers are uniquely qualified to negotiate business purchase and sale transactions on your behalf.
If your company seeks to buy or sell a business, let the Law Offices of Alex D. Sirulnik, P.A., help you navigate the process. Contact us today to schedule a consultation.