Sales Agreements: Here’s What You Need to Know

Key takeaways:

• Draft sales agreements using plain language and specific details about deliverables, payment amounts, payment dates, and key definitions to eliminate ambiguity and reduce the risk of disputes.

• Include a dispute resolution section in every sales agreement to establish upfront how disagreements will be handled, which can save significant time and money if problems arise later.

• Implement standardized templates and automated approval processes as your business scales to prevent bottlenecks in your sales agreement workflow, especially given that sales agreements take an average of 40 days to execute.

• Use sales agreements for any transaction involving more than simple ownership transfer, particularly when goods or services will be delivered at a future date or when liability needs to be transferred to another party.

Sales conversations happen every day, but it’s the sales agreement that transforms a handshake into a legally binding commitment. You know the frustration of deals that fall apart because nobody was clear about the deliverables, payment terms, or what happens if something goes wrong, which is why many formal agreements include riders for approval by respective attorneys to ensure all terms are vetted.

Whether you’re closing your first deal or your thousandth, a well-structured sales agreement protects both parties and eliminates the ambiguity that kills transactions. This guide walks you through everything you need to know about sales agreements—from understanding what they are and when you need one, to creating and managing them as your business scales.

What is a sales agreement?

A sales agreement is a legally binding contract between a buyer and seller that outlines the specific terms, conditions, and obligations of a transaction. This document serves as the foundation for any exchange of goods, services, or property for monetary compensation.

Sales agreements go by several names depending on the context. You might see them called sales contracts, purchase agreements, sale of goods agreements, or sales agreement forms.

Real estate transactions provide the most recognizable example of sales agreements in action. Home purchase agreements typically span multiple pages because they must address complex elements like financing terms, inspection periods, closing costs, and contingencies. For example, an agreement will typically allow the buyer to have the home inspected, usually within 10 days of the contract date, to protect both parties throughout the transaction process.

The purpose of a sales agreement

The purpose of a sales agreement is to act as a legally binding contract between two parties involved in an exchange of money for goods, services, and/or property. One party is a buyer, while the other is a seller. Both the buyer and seller may be individuals or organizations.

A sale of goods agreement, for example, may be used to sell vehicles or electronic devices. If the electronic devices come with related services such as installation, the contract would also include these services.

When do I need a sales agreement?

A sales agreement contract is a good idea any time you buy or sell something that requires more than simply transferring ownership. Imagine the confusion that could result from lack of clarity on the terms of a house or new vehicle sale. Details such as down payment, closing costs, insurance companies, titles, financing, and more need to be understood by all parties; for instance, sellers often allow buyers 30 to 60 days to secure a loan commitment.

Another situation that warrants a sales contract is any time goods, services, or property will be provided or transferred at a later date. The agreement form holds all parties responsible for ensuring the sale goes through as planned. It also provides recourse in the case that the sale falls through.

Finally, it’s wise to use a purchase agreement when you plan to transfer liability for goods, services, or property to a new party.

Benefits of using sales agreements

Beyond knowing when you need one, understanding why sales agreements matter helps you appreciate their role in successful transactions. Putting a sales agreement in place isn’t just about legal formalities; it’s about making the deal run smoother for everyone. The main benefit is clarity. It gets everyone on the same page about what’s being sold, for how much, and when it needs to be delivered. This simple step prevents a lot of headaches and back-and-forth down the road, which is critical given that organizations typically lose between five and nine percent of annual revenue due to poor contract management, according to The 2025 Legal Operations Field Guide.

It also protects both sides. For the seller, it ensures you’ll get paid. For the buyer, it guarantees you’ll get what you paid for. If something goes wrong, you’re not arguing about what was said over the phone three weeks ago; you have a document that outlines the remedies. It turns a potential dispute into a straightforward business problem to solve.

Types of sales agreements

Sales agreements vary significantly based on what’s being sold and the complexity of the transaction. The type you choose depends on your specific business needs and the nature of your exchange.

Common types of sales agreements include:

• Real estate agreements for homes, multifamily housing properties, or commercial real estate

• Vehicle sales agreements for automobiles, especially new cars

• As-is sales agreements which strictly state that no improvements, repairs, or updates will be made to an item being sold (such as real estate property or a vehicle)

• Materials sales agreements for companies making large purchases for their supply chain

• Recurring sales agreements for an ongoing supply of materials or services paid on a schedule

• Share sales agreements for buying and selling a company’s shares

• Asset sales agreements for when one business is acquiring another

Elements of a sales agreement

Essential elements form the backbone of every enforceable sales agreement. These core components protect both parties and ensure the transaction proceeds smoothly.

A comprehensive sales agreement must include:

• Buyer and seller names and contact information

• Description of goods, services, or property being purchased

• Payment amount, dates, and method

• Liability of each party in the case of loss, damage, or delivery failure

• Ownership information, such as when ownership formally transfers to the buyer

• Notices, or clarification of how the parties will communicate regarding the transaction

• Dispute resolution outlining how to resolve disagreements

• Delivery details (if applicable)

Depending on what is being sold, other elements of an agreement may include rights assignment, deposit, governing law for interstate or cross-border sales, inspection, nondisclosure agreement, severability, and warranty.

Limitations of sales agreements

While the right components make for strong agreements, it’s worth acknowledging that sales agreements aren’t perfect solutions. They provide essential protection for business transactions, but they come with practical limitations that can impact your operations.

Unauthorized contract creation poses significant liability risks. When sales representatives issue agreements without proper approval, your organization may face unexpected legal obligations or unfavorable terms that weren’t properly vetted.

Slow approval processes create their own problems, as lengthy review cycles can cause qualified prospects to lose interest or choose competitors who move faster. This friction is backed by data showing that sales agreements take an average of 40 days to execute, according to The 2025 Contracting Benchmark Report. The time-sensitive nature of these deals is why many offers specify a validity date, sometimes for as little as 24 hours, putting pressure on internal review systems. The key is finding the right balance between thorough legal protection and deal velocity.

Implementation consideration: To succeed, sales teams need an approval process that lets them maintain legal oversight while enabling rapid response to market opportunities.

Creating a sales agreement

Creating an enforceable sales agreement starts with including all essential elements outlined in the previous section. Your specific transaction type will determine which additional provisions you need to address.

Transaction-specific considerations include governing law for interstate sales, warranty terms for product sales, deposit requirements for high-value items, and intellectual property rights for service agreements.

The creation process doesn’t need to be complex. Start with a proven template that matches your transaction type, then customize it to address your specific requirements and risk tolerance.

Available resources include online contract templates, legal document services, and contract management software that can speed up and simplify both creation and approval.

Best practices for effective sales agreements

Once you have the foundation in place, the difference between a good agreement and a great one comes down to execution. A sales agreement is only as good as the words in it. To make sure yours actually works in the real world, focus on a few practical things. First, use plain language. You’re not trying to win a legal writing award; you’re trying to make a deal clear. The more straightforward the language, the less room there is for misunderstandings.

Second, be incredibly specific about the deliverables and the money. Don’t just say “payment upon completion.” Say “payment of $5,000 due within 15 days of final delivery.” Define what “final delivery” means. The more you spell out, the fewer arguments you’ll have later.

Finally, think about what happens if things go wrong. Include a section on how to handle disputes. It might feel pessimistic, but it’s just good business. Deciding on a process for resolving issues upfront can save you a ton of time and money if a problem arises.

Scaling your sales agreement process

When you’re just starting out, managing a few sales agreements in email and a shared drive is manageable. But as your business grows, that manual process quickly becomes a bottleneck. Sales reps waste time hunting for the right template, legal gets buried in repetitive reviews, and no one has a clear view of where any deal actually stands. This operational strain helps explain why the field of legal department operations (LDO) is growing, with a 2023 survey showing that over half of LDO professionals reported their organization added its first dedicated LDO profession in 2018 or later. This is where things start to break.

To scale, you have to move from manual work to a repeatable system. This starts with creating standardized templates that your sales team can generate themselves for common deals. Then, you can automate the approval process. Instead of emailing a contract to legal and hoping for the best, the system automatically routes it to the right person based on the deal’s value or terms. This doesn’t just speed things up; it adds a layer of control and reduces risk.

The goal is to empower your sales team to move faster without creating more work for legal. A good contract lifecycle management (CLM) platform acts as the central hub for this, connecting your people, processes, and data so you can close deals faster and have one central, reliable place for every agreement your company signs. If you’re ready to see how this works in practice, you can request a demo today.

Frequently asked questions about sales agreements

How do you write a simple sales agreement?

Focus on the core components: identify the buyer and seller, clearly describe the goods or services, state the price and payment terms, and specify the delivery details. For simple transactions, a straightforward template that covers these basics is often enough to get the job done and ensure everyone is on the same page.

Do I need a lawyer for a sales agreement?

It depends on the complexity and value of the deal. For a high-stakes, complex transaction, having a lawyer review the terms is a smart investment to manage risk. For more routine, low-risk sales, a well-drafted template from a reliable source can be sufficient. It really comes down to your company’s risk tolerance.

What’s the difference between a sales agreement and a purchase order?

Think of it this way: a purchase order (PO) is the buyer’s official offer to purchase goods. A sales agreement is the final, legally binding contract that both the buyer and seller have negotiated and agreed to. The sales agreement supersedes the PO and governs the transaction.

Can I modify a sales agreement after signing?

Yes, but only if both parties agree to the changes in writing. You can’t just decide to change a term on your own. This is typically done through a formal document called an “amendment,” which is signed by both parties and becomes part of the original agreement.

How long should a sales agreement be?

There’s no magic length. A sales agreement should be as long as it needs to be to clearly define the terms of the transaction and protect both parties. For a simple sale, it might be one page. For a complex software deal, it could be dozens. The focus should always be on clarity and completeness, not page count.

---

Ironclad is not a law firm, and this post does not constitute or contain legal advice. To evaluate the accuracy, sufficiency, or reliability of the ideas and guidance reflected here, or the applicability of these materials to your business, you should consult with a licensed attorney. Use of and access to any of the resources contained within Ironclad’s site do not create an attorney-client relationship between the user and Ironclad.