Congratulations, your sales process is almost done! You’ve found a client and are an inch away from making a successful deal. There are just a few more steps to take — including, of course, drafting your sales contract.
The sales contract will seal your deal, formalize the sales process, and give you the best chance for the smooth and pleasant cooperation.
In this article, we’ll tell you how to prepare your sales draft before you take it to legal.
Things to do before writing a sales contract
A sales contract is a document that defines everything about your business agreement, from the essentials to the small print. Its key elements include:
- Buyer and seller names and contact details
- A description of the goods and/or services being sold
- Delivery specifications
- Details of the inspection period
- Payment details
- Contingencies, including any guarantees, warranties, and conditions for termination
Obviously, you don’t want to miss anything out, so now is the time to reveal your inner bureaucrat to the fullest!
Let’s start with a few things you need to do before you compose your sales draft.
Discuss your customer’s expectations
It doesn’t hurt to set terms orally before you go legal. Conduct a meeting to talk about your customer’s expectations and needs and how you’ll meet them. Discuss the delivery process, timeframes, the responsibilities each of you will have, and everything else related to the purchase. The aim is to address all possible questions and get input for your more formal agreement.
Define the type of sales contract you need
There are different types of sales agreements, each for a different purpose. Before you begin, you need to know the type of contract that suits you. Here are the most common:
- A general sales contract is suitable for most agreements.
- A conditional sales agreement is like a general sales contract but has extra clauses for specific situations or for when certain terms are met.
- A sale of business contract specifies the terms of the transfer of a business and includes the restriction of the seller’s or buyer’s changing powers.
- An agreement of sale is mainly used for real estate property sales.
- An international sales contract covers terms unique to international trade.
- A sales contract addendum amends the conditions of the existing contract.
The exact information you include in your contract will vary according to its type. The checklist below is for a general sales contract, which contains the core elements of all other contracts.
How to create a sales contract draft
If you’re drafting your contract yourself, you have two basic options: use CLM software like AXDRAFT or write everything on your own, usually following a model or template. The second option is cheap but time-consuming, and any mistake can result in huge financial losses. A CLM solution, on the other hand, will make the process easier and give you peace of mind.
Whichever path you choose, you still need to check that you’ve included every detail in your document. Here are the main steps to take when drafting a contract.
Step 1: Give it an accurate name
Your contract’s name gives it legal value. As simple as it sounds, check that the name stands out at the start and throughout the document. Make sure your contract name matches the type of agreement you need.
Step 2: Mention all parties involved
At the start of your agreement, include the full names of every stakeholder, counterparty, service or goods provider, and client or customer it refers to. Add “hereinafter referred to as” and the abbreviation or their role (Seller/Client/Customer/Buyer, etc.), then use these terms consistently throughout the contract. Include the email and physical address of each party.
Step 3: Describe your services or product with all rights, guarantees, and restrictions
Pay special attention to the product or service description and mention any guarantees you provide. This information forms the backbone of your contract, so don’t skimp on details. Add everything you’ve agreed on, and remember that after signing the contract, you’ll be legally bound to deliver. If you fail to mention something, this can easily create problems down the line.
If your contract includes exclusive rights, don’t forget to make this clear. These rights usually prohibit a buyer from ordering the same product or service from another company.
If you provide services, define the scope of work. Be specific about everything you are responsible for: any ambiguity here could lead to customer demands that will be expensive to meet.
Step 4: State the contract duration and make deadlines clear
Indicate deadlines and the exact duration of your agreement: for example, include the date the contract begins and ends. If you have no fixed termination date, add a description of the termination process. The contract may also have automatic renewals, which you should mention.
Step 5: Include the price, services, payment conditions, and penalties
You’ll obviously need to add the price for your services or product and any extra services, along with payment conditions. For example, is this a one-time payment, a recurring charge, or a payment in milestones or installments? Don’t forget to include the payment method, precise dates, and penalties for failing to meet your conditions.
Step 6: Describe delivery and conditions
If you are responsible for delivery, describe how and when you will do it. State the responsible party in case something goes wrong with the delivery service. If you are a software provider, describe its implementation and onboarding processes.
You might also want to specify an inspection period for checking the proper condition of goods after their delivery. This gives your customer a chance to return damaged items according to your terms.
Step 7: Include termination cases and penalties
Specify who and when can terminate the agreement. Cover your main “what if” situations and possible penalties for violating the contract. You can also add confidentiality clauses and penalties for their breach.
Once you’ve covered all the necessary information, you can send your sales contract for review and signature. Don’t forget that an electronic signature has the same power as a handwritten one, so it won’t take long to get your new agreement up and running.
A sales contract is an inevitable part of any sales deal. Properly written, it legally protects you (as the seller) and your buyer and gives you both peace of mind for a hopefully successful collaboration.
Writing a sales agreement by hand can be complicated and time-consuming. AXDRAFT’s CLM solution is a proven way to wrap up the process 80% faster and ease the pain of coping with legal issues on your own, whatever your contract’s language, length, or complexity.
Need more information? We’ve already helped thousands of users to deliver quality sales contracts and make the best of their deals, and our Contracts 101 blog covers everything you need to navigate the legal aspects of running a business.
A sales contract should include the type of agreement, its parties, their responsibilities, the cost of services or goods, deadlines, delivery details, termination conditions, and penalties. Different types of sales contracts will also include other information related to the type of deal.
You can either write it on your own and submit it for legal review, hire an attorney, or use a CLM solution such as AXDRAFT. Include the following key elements: parties identification, goods and services description, delivery specifications, inspection period, payment details, and contingencies.
First, specify the terms and conditions of the agreement. Then begin drafting it by including the contract type, parties, services, time frames, payment conditions, delivery specifications, and contingencies. You can also use CLM software to streamline this process.
Like a sales contract, a letter of agreement states the terms and conditions of a legal deal between a seller and a buyer, so the steps to write it are similar. Specify how the parties will cooperate and include the cost, time frames, delivery, terms of service or use, and penalties. Finally, you’ll need to give your draft to the legal for review.