Sample Format of Sale Purchase Agreement (SPA)

Narendra Kumar

04 Sep, 2020

A sales and purchase agreement (SPA) is a legal indenture/contract/agreement between two parties wherein one party is a Seller/vendor that obligates a seller to sell a product or service and another party is a Purchaser/ buyer that obligates a buyer to buy a product or service on an agreed amount. It is found in all types of businesses like real estate, stock purchase, advertisement agreement, share transfer agreement deals as a way of finalizing the interests of both parties before closing the deal.

What are the Parties in Sale Purchase Agreement?

In a SPA there are two parties namely:

1. Seller:

A person in an agreement who is obligated to sell the product, service, invention, article, goods, undertaking, equipment, machinery, share, stock etc. is called a seller. A seller is a person in the agreement who sells the good in exchange for money.

2. Buyer:

A buyer in an agreement is a person who buys or purchase the product, service, invention, article, goods, undertaking, equipment, machinery, share, stock etc. by giving an amount of money to the seller.

When is Sale Purchase Agreement Prepared?

Depending on the prospect of buyer or seller there is a number of reasons when it is necessary to give a legal effect to the transaction held between the parties in form of sale purchase agreement.

Following are the types of SPA:-

1. Asset Purchase Agreement
2. Agreement of Purchase and sale of Business
3. Agreement of Purchase and sale of Shares
4. Conditional Sale Agreement
5. Sale agency agreement
6. Stock Purchase Agreement
7. Sales Agency Agreement
8. Amendment to the sale agreement
9. Commission sale agreement

What is an agreement of Purchase and sale of Business?

When a person agrees to sell a part of his business or the whole of his business to another person than to bind the party legally an agreement is drawn called Purchase and sale of Business Agreement.

What is Agreement of Purchase and sale of Shares?

Where a person sales the shares which he owns in a Company to another person then the buyer and seller enter into an agreement called Purchase and sale of Shares Agreement.

Conditional Sale Agreement

A contract where a buyer takes possession of an item, goods, product, equipment or any machinery, etc on a condition that the title and right of repossession remain with the seller until the buyer pays the full purchase price (usually in installment stretched over months or years as the case may be).

Sale Agency Agreement

It is a contract between a seller and the person called an Agent where the seller gives the right to negotiate the sale of a principal’s goods or services, usually in exchange for a commission or fee computed as a percentage of sales generated.

Amendment to the sale agreement

Where the parties enter into an agreement to amend one or more clause of the first or original agreement then it is called amendment to the sale agreement.

Commission Sale Agreement

An agreement between two or more parties for work paid on commission is called Commission Sale Agreement. There is a prior determination of the percentage of commission to be paid.

What are the Legal Requirement of Agreement?

The legal implications of drafting an agreement are as follows:-

1. Avoid the double and doubtful meaning of the intentions of the parties.
2. Avoid ambiguity and difficulties in interpretation of the documents.
3. Clarity in the implementation of the objectives desired in the documents.
4. Avoid misinterpretation of facts leading to wrongful judgment.
5. Legally binding on both the parties.
6. Any party can sue and can be sued.

Elements of a valid legal agreement which is enforceable by law

1. Introduction of the parties
2. Intention to enter into a legal agreement
3. Definitions of the term used in the Agreement
4. Description of the Asset
5. Description of the encumbrances and all the dues made on the assets
6. Consideration agreed between the parties
7. Duties and rights of the parties in respect of the agreement
8. Rights which are to be transferred
9. Transfer of ownership
10. Breach of terms
11. Disclosure of litigation if any in the name of the said property
12. The condition of Purchased Assets
13. Conditions, if any
14. Special declaration
15. Indemnity:
16. Additional Covenants

The Agreement of Purchase and Sale is the utmost important deed in the practice. It is the foundation for determining to what the Buyer is entitled and what the seller is intended to transfer.  When an Agreement is drafted poorly or unwell a Buyer may lose rights and may generate the reason for disputes. To avoid such situation it is necessary to draft the sale and purchase agreement with care.