Small Business Contract Series — What to include in a sales contract

What should a small business include in a sales contract?

This is the second article in our series exploring small business contracts. Today, we’re focusing on the contract that helps boost your bottom line: the sales contract. 

Note: this is not legal advice

Every time someone buys something from your business, they are entering a contract of sale with you. These contracts can be written or unwritten — a small transaction might not come with a piece of paper attached, while a big property purchase most definitely would. Regardless, if money changes hands for your product or service, you’ve just made a contract of sale.

Do you need a written sales contract?

The first question you should ask yourself is whether you need to get customers to sign an actual contract every time a transaction occurs. If you’re in retail, for example, you probably wouldn’t use a written sales contract when selling sneakers. But you would if you own a furniture store and want to make your guarantees and returns policies crystal clear. 

Essentially, a written sales contract is a good idea for complex transactions or high-value purchases of either products or services. It gives you and the buyer clarity and protection by laying down the terms of the transaction — and it serves as legal evidence if any disputes arise. 

Common types of businesses that use written sales contracts include:

• Real estate agencies

• Construction companies

• Marketing agencies

• Consulting firms

• Manufacturers

• Car dealerships

• Travel agencies

What’s inside a sales contract?

As you can see from the list above, sales contracts can be used for a wide range of transactions. With this in mind, the contents of the contract can vary wildly — some might include things like project scope, timelines, materials, payment schedules, and change order procedures; while others might include things like guarantees, warranties, quality standards, and returns policies. 

You’ll need to do your own research into the must-have elements of a sales contract in your particular industry or line of business, and you should run your draft contract past your lawyers before sharing with customers.

To help you get started, though, here are some key elements in common sales contracts: 

• Identifying information. So, the names and addresses of the buyer and seller, as well as the date of the agreement. 

• Description of goods or services sold. Clearly describe what the customer is buying, including quantity, brand, model, specifications, and any other relevant details.

• Descriptions of warranties or guarantees. If the product or service is covered by a warranty or guarantee, include those details too. 

• Price and payment terms. Clearly show the total price, payment methods, and any other related details (e.g. taxes, shipping costs or applicable discounts)

• Delivery and acceptance. This defines the point at which the buyer accepts the goods or services, transferring ownership and responsibility.

• Risk of loss. This spells out when the risk of damage or loss of the goods transfers from the seller to the buyer.

• Returns and cancellations. This outlines the conditions by which a buyer can return the goods or cancel the agreement.

Then, depending on the complexity of the transaction, your contract may include additional clauses covering aspects like intellectual property rights, confidentiality or indemnification. Again, if you’re at all unsure, we recommend you enlist the help of a lawyer when drawing up your sales contract.

How do you manage sales contracts?

To help your sales team work as efficiently as possible, you’ll want to make your sales contracts — and the various clauses contained within them — as accessible as possible. That’s where Docusign CLM comes in. Using templates and clause libraries, it’s quick and easy to set up a new contract, and you can easily pull in data from Salesforce to populate it with key customer information. You can also collaborate and negotiate faster, and then keep all contracts in the one place for easier management. 

Indeed, sales teams across industries use Docusign to: 

• Accelerate deal velocity, by removing administrative burden and automating critical workflows across the sales cycle

• Make smarter decisions with help from AI and analytics, which help uncover hidden opportunities

• Reduce business risks by improving visibility for all collaborators and reviewers throughout the contract generation, negotiation and execution process

Learn more about Docusign for Sales.