Sales contracts: drafting a good one for your small business

If you are a small business owner that sells products then you need a good Sales Contract. The Sales Contract will lay out the price, terms and conditions for the sales of goods, equipment and a host of other products. The actual Sales Contract itself can take the form of fine print on the side of an order form or an invoice, or you can tailor it for a particular sale. Additionally, a good sales contract can even be used instead of a purchase order.

From your small business’ point of view, you always want to start with your own form. Then, having your form preprinted helps it look standard and non-negotiable. As the master of your sales contract, you can make it more favorable to you as the seller of the product.

Here are some important terms to address in your sales contract:


Make sure that your sales contract correctly states the price. Often filling in a blank line on the form does this. The Sales Contract should also spell out any discounts, installation charges, and delivery charges.

Price adjustments

Take into account how you may increase the price, in case you are going into a long term deal, or how you may decrease it if you are offering someone a discount.


Try to ensure that the purchaser is responsible for paying the sales tax

Payment and credit terms

Make sure to specify when payment is due. If you do not require immediate payment, consider offering a small discount to the purchaser if he makes payment within 10 days and consider a finance charge if the buyer makes his payments late.


Decide what type of warranties you want to give. Ideally, you may want to limit your warranties, but a competitive marketplace may require you to grant extensive warranties. Indeed, you may gain an advantage over competitors if you offer a longer warranty than the current industry standard. Typical warranties state that for a designated period of time the goods sold will be free from defects in workmanship and will conform to designated specifications.


State clearly in your sales contract that no other warranties exist. Include specific language to disclaim all implied or express warranties including merchantability and fitness for a particular purpose. You should consult the Uniform Commercial Code to ensure that you have disclaimed the warranties properly. Usually this means using bold-faced type and making them stand out.

Liability limitations

Use the sales contract to attempt to limit your liability under the contract. A typical clause will state that the seller’s maximum amount of liability equals the purchase price. Make sure, also, to include a sentence that says you are not responsible for consequential, punitive, and speculative damages, including lost profits.[1]

[1] Richard D. Harroch, Small Business Kit for Dummies, (Wiley 2nd Edition)(2004).