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