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When businesses transact with each other, they do not only exchange some products and services. They also exchange value, trust, commitments, and expectations that must be clearly defined and respected. A Sales Agreement turns the verbal commitments of a sale into a formal contract that outlines what is being sold, its price, delivery conditions, and the rights of the buyer and the seller. For enterprises handling multiple clients, suppliers, and distribution channels, relying on verbal deals and promises can be problematic. It can lead to various issues and even financial losses. A sales agreement helps enterprises avoid these problems. It creates legal certainty and commercial discipline, which help businesses close deals faster, maintain compliance, and reduce the chances of disputes. In this guide, we will understand what sales agreements are, how they are created, and some best practices for drafting them. What Is A Sales Agreement? A sales agreement is a legally binding contract created to formalise a sale of goods or services between a buyer and a seller. It provides the legal foundation that ensures that the sale happens smoothly according to what the parties had agreed to. The sales agreement records essential details of the transaction, such as product description, quantity, price, terms of payment, delivery schedule, and the responsibilities of both parties. It also contains the remedies for a breach of the agreement by any party.  In other words, a sales agreement is both a commercial and legal document that creates transparency, defines the expectations and strengthens the trust between the buyer and the seller.  In most cases, a sales agreement is signed before the actual sale or transfer of goods takes place. It is a commitment to sell or buy the goods or services at a later date, once certain conditions are fulfilled. The ownership or title of the goods gets transferred from the buyer to the seller only after the completion of payment, inspection, or delivery, as mentioned in the sales agreement.  For enterprises which commonly transact in large values or create long-term commitments, this level of clarity is very important. The sales agreement is one of the most important documents that they need to always get right. Key Terms And Components Of A Sales Contract A strong sales contract is useful for multiple reasons. Not only does it record a transaction, but it also ensures that both the buyer and seller understand exactly what is being exchanged and the legal protection that they have. The following are some of the key components of a strong business-to-business sales agreement. This is the first part of a sales contract which identifies the buyer and the seller and confirms who is responsible for completing each part of the transaction. It mentions their complete legal names, contact details, and their roles clearly. This section specifies what is being bought and sold and in what quantities. It also mentions the product specifications and the scope of the services being provided. This is a very important section, and the clearer it is, the lower will be the chances of any disputes arising in the future. The contract should also outline the price that has been agreed upon, the method of payment and its due date. It must also note down the penalty is for late payment. In transactions involving overseas sales, the currency and the applicable taxes must also be mentioned. This section defines how and when the goods will be delivered and when the ownership of the risk will pass from the seller to the buyer. The mode of transportation and who will bear its cost must also be mentioned. In this section the warranties that apply to the parties are mentioned. It also limits the seller’s liability for issues that are beyond their control. These provisions distribute the transaction risk among the buyer and the seller. As in all other contracts, the sales agreement should have a termination clause which gives an option to either party to exit the transaction. The exact conditions for termination and the process to be followed are mentioned in this clause. The remedies available to the other party in case the other party terminates the contract are also mentioned. This section states the laws that will govern the agreement and how any disagreements will be settled. In case of a cross-border transaction, all the laws of the different countries that apply must be mentioned. The parties must also choose the city or court where the disputes will be resolved. These terms make the sales agreements legally valid, and add clarity and certainty to them. They make every sales agreement a practical  tool that safeguards the commercial and legal interests of the enterprises. Types of Sales Agreements Sales agreements can be of different types depending on the nature of the transaction being made, the timing of payment and how the goods will be delivered. Understanding these types will help your enterprise to choose the right structure for its deals and minimise the legal risks. In this, the buyer gets the ownership of the goods as soon as the agreement is signed and payment is made. These agreements are commonly used in straightforward and and one-time transactions, since both parties complete their obligations simultaneously,  This type of sales agreement is made when the ownership of the goods and services will pass on to the buyer only after certain conditions, such as full payment or successful delivery, are met. This arrangement protects the seller in credit-based or high-value transactions. 3. Instalment Sales Agreement In arrangement, the buyer makes payments in installments, i.e., in parts over a fixed period. The ownership of the goods may get transferred at the beginning or after the final payment, according to what has been negotiated in the contract. 4. International Sales Agreement These contracts are commonly used in cross-border trade. They have to comply with international trade laws and include clauses covering customs duties, international taxation, currency risks, and overseas delivery.  Each of these types of sales agreement is suitable

Every business relationship runs on trust, but it is not the only thing that can protect the profits of the business. There should be a written agreement for guarding every partnership that the business enters. Whether it is outsourcing of the support function, hiring a consultant or engaging a logistics provider, there should be a written agreement that defines the level of service that must be provided. This is known as a Service Agreement, and it defines the ground rules that will keep the projects on track and prevent disputes from arising. In this guide, we will learn about service agreements and why they matter to a business. What Is A Service Agreement? A service agreement is a formal contract that formalises the relationship between a service provider and the client. It records the work that must be done, the quality standards to be met and the rights and duties of the client and the vendor. In other words, it ensures that everyone is aware of what is expected from them and how the success will be measured. When the terms of the agreement are documented upfront, it can help in avoiding misunderstandings between the teams and make them focus on the outcomes. By outlining the scope of work, payments to be made, duration of the contract and dispute resolution mechanism, the service agreement reduces uncertainty and makes the parties accountable for the work. In India the service agreements draw their enforceability from the Indian Contract Act 1872, which provides that such agreements are legally binding when they are made with clear terms and genuine consent from the parties involved. A valid service agreement must include all the essential elements of a contract. These are: Service agreements can cover a one-time project or an ongoing arrangement for providing recurring services, such as maintenance, consulting or technical support. With the ever-increasing reliance of the enterprises on third-party vendors, digital partners and consultants, having well-drafted and legally valid service agreements has become absolutely necessary for improving their efficiency and compliance. When is a service agreement needed? A service agreement must be created whenever one party provides service to another in exchange for a fee or any other consideration. It brings clarity to what the deliverables are, delivery timelines, and the performance standards to be maintained. Without having a service agreement, these things can be interpreted by different people in various ways, resulting in unnecessary misunderstandings being created. Enterprises create service agreements when they outsource work to third-party vendors, marketing agencies, consultants, facility managers, and maintenance partners. Another major area where service agreements are executed is technology. Large enterprises commonly use them while hiring cloud service vendors and firms that help in technology integrations. Service agreements are also signed within an organisation. For example, the internal teams may offer service-level contracts regarding the usage of shared service units. These internal agreements help all the departments to define measurable outcomes and manage accountability. Without having a service agreement, even the smallest disputes can quickly snowball into larger and costlier conflicts. Having a written contract ensures that search possibility is eliminated and everyone is aware of their roles and limits and the delivery expected from them. Types of Service Agreement There is no uniform service agreement that covers all types of engagements. The format of the service agreement and the level of detail it covers will depend on the type of work being outsourced, the duration of the engagement and the complexity of the deliverables. While each service agreement is customised, here are the main types that businesses commonly use. These are used as standard service agreements in outsourcing, where the tasks, timelines, and payment milestones are clearly defined. These are ideal for short-term projects and one-time assignments. These are executed when long-term business relationships are being developed. These are the umbrella contracts that provide the overall legal and commercial frameworks that will govern these ongoing assignments. As the work progresses, more projects and work orders are added to the MSAs to save time and maintain consistency. These are commonly used for hiring professional and advisory services. like management consulting, HR, and technology advisory work. , where maintaining confidentiality and safeguarding the intellectual property rights of the client are critical. These are executed while hiring ongoing technical or operational support, such as IT infrastructure maintenance and equipment servicing. They are most commonly found in management consulting, HR, and technology advisory work, where maintaining confidentiality and safeguarding the client’s intellectual property rights are critical. IT companies that provide SaaS tools and software development services to clients execute these service agreements. These include clauses on the uptime guarantee, data security, access rights, and privacy safeguards that will be maintained in accordance with the privacy laws of the country. Essential Clauses Every Service Agreement Should Include A well drafted service agreement strikes a balance between clarity and protection for both the client and the service provider. Every clause in a service agreement helps in setting clear expectations and reducing risks. Hence, they must be drafted very carefully to avoid ambiguity and minimise the risks. The following are some clauses that must be a part of every service agreement: 1. Scope of Work This clause defines what services will be provided along with their expected timelines, quality standards to be maintained, and the exact deliverables. Any work that is done outside this scope of work must be approved in writing by the client to avoid exceeding the brief. 2. Payment Terms All the information related to the project payment must be mentioned in this clause. Details of how the payment will be made, milestones, late payment penalties, etc. are some of the points to be included. 3. Confidentiality and Intellectual Property Rights This section outlines the third-party vendor’s obligation to protect the client’s sensitive business information. It is a binding clause that the vendor must always adhere to. 4. Liability and Indemnity This limits the amount of financial exposure of the parties in the event of a loss.