Purchase Agreement Template

A purchase agreement is a more heavy-weight document when compared to a conventional sales agreement. It serves several purposes in governing the rules of buying and selling, especially in the case of large financial transactions. 

The purchase agreement states the commitments and obligations of both parties to the transaction and secures both parties against the risk of loss. Federal and state laws govern the enforceability of the terms and conditions in the purchase agreement regardless of county, city, or state where the contract is signed. 

Understanding Party Obligations in the Purchase Agreement 

The “obligations” of the parties to the purchase agreement are the commitments they make in good faith. These obligations are different from the specifics of the transaction and what is being purchased. For instance, a real estate purchase agreement will have different items surrounding the buyer and seller obligations compared to a corporate deal between companies. 

In real estate deals the seller’s agent writes the purchase agreement and takes a commission for the service. In share purchase agreements the buyer’s attorneys create the first draft, and in my go back and forth between legal teams until they settle on a final agreement. In buy-sell agreements, contract lawyers will handle drafting the documents. 

Items to Include in the Purchase Agreement

Let’s walk you through the terms of this agreement and the headings to include. For the purposes of this post, we’ll outline the items involved in a contract for small business dealings and real estate transactions. That said, a purchase agreement for any deal should always include items covering payment and delivery terms, liabilities and warranties, and provisions for dispute resolution.

Identify the Parties and Items

Get the basic details out of the way first and list the effective date of the contract, the full names of the buyer and seller, and the details of the real estate or item involved in the transaction, including its physical location.

Financial Aspects of the Deal

The purchase agreement shows the date of the purchase, the total purchase price for the deal, and its closing date. It’s common for real estate deals and large trade deals to be subject to the buyer finding finance, and the contract will make provision for the time it takes the buyer to raise the capital from a lender. You’ll also want to include earnest money deposit commitments, who is responsible for paying the attorneys’ fees, assessments, outstanding property taxes, accounts for escrow, etc. 

The Legal Agreements, Clauses, and Provisions

This section of the agreement features a legal description of provisions like waiver terms, encumbrances, covenants, and liens. You’ll need your attorney to go over this section with a fine-toothed comb and look at adding or reviewing a clause for governing law, a clause for dispute resolution, an “entire agreement” clause, and a clause for severability of the contract.

Addendum

Add clauses to modify the provisions in the contract. Use this section to add provisions for intellectual property protections and confidentiality clauses to protect the personal information of the homeowner or buyer or sensitive details around the deal.

Applicable Signatures and Dates

All parties to the purchase agreement sign it and initial each page of the agreement. It’s dated and often mentions the jurisdiction where the contract was signed.

Is a Purchase Agreement a Legally Binding Contract?

The contract’s subject matter and the terms of the purchase agreement must comply with contract law, and these terms can vary from state to state. Once the parties sign and witness the agreement, it becomes a legally binding contract valid from that same business day forward.

Depending on the nature of the purchase agreement and the value of goods or property involved in the purchase, you may want to have a notary public witness the closing. If that’s the case, take a valid form of identification to the signing. After signing the purchase agreement, the notary public will sign it and usually stamp the legal document.

What Disputes Arise from a Poorly Drafted Purchase Agreement?

Poorly worded contracts don’t include concise language clearly defining the contract terms and the obligations of both parties to the agreement. Deals fail when the parties misunderstand the contract terms and obligations involved with the deal.

The purchase agreement protects the parties from the risk of loss if one of the parties doesn’t live up to their end of the contract. When the buyer or seller doesn’t meet the obligations outlined in the purchase agreement, they breach the contract terms.

It’s critical for the party experiencing the breach of contract to find an experienced contract law attorney for arbitration and legal advice. The attorney can identify the specific items of the contract where the other party is in breach and the legal action available to the counterparty.

Alternatives to a Purchase Agreement

You wouldn’t draft a purchase agreement if you were buying a TV from Target. That said, there are similar documents covering the terms and conditions of these types of smaller transactions. 

Bill of Sale: A sales contract used as proof of purchase in retail transactions with small values, like buying a TV.

Assignment and Assumption Agreement: Transfers financial liability to another party.

Installment Sale Agreement: Used to finance small and mid-sized purchases like TVs and cars.

Download a Customizable Purchase Agreement Template from FreshDox.com

Lay the foundations for a successful deal and download our purchase agreement template. Customize the template with your corporate branding and personlize the agreement to the specifics of any deal. Our templates meet industry standards for professional documents suitable for any business deal, legal proceeding, or educational requirement. 

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