Sales & Purchase Agreement (SPA): Definition, Example and Related Terms
What is an Sales & Purchase Agreement (SPA) ?
A Sales & Purchase Agreement (SPA) is a binding legal contract between two parties, the buyer and seller, which outlines the terms and conditions connected to the sale of goods, services, or proprty. This document is critical in both real estate deals and business transactions involving bulk purchases of goods. They are not to be confused to a Share Purchase Agreement (also referred to as SPA).
- SPAs are typically used in real estate transactions & commercial transactions involving large quantities of goods.
- Here are some examples of common considerations in Sales & Purchase Agreements
Parties Involved Identification of the buyer and seller Description Detailed and precise identification of the goods, property or services being sold. Purchase Price The amount to be paid for the goods, property or services Payment Terms The method, schedule, and form in which payments are to be made. Delivery Terms Conditions related to the delivery of goods or property, including timing and location Transfer of Title and Risk When the ownership is officially transferred and how risk is allocated between parties until that point Inspections and Acceptance Any provisions for the buyer to inspect and accept the goods or property Representation and Warranties Assertions about the goods, services, or property's quality, functionality, or condition Contingencies Conditions that must be fulfilled before the contract is binding or before a party is obligated to complete the transaction Covenants Promises to do or refrain from doing certain activities related to the sale. Good examples of seller side covenantsare compliance with laws or notification of material change covenants. Another popular one is access to financial information where the seller could covenant to provide the buyer with reasonable access to financial records. A buyer side covenant might related to acquiring financing for the transaction or confidentiality. An example of a mutual covenant might be effort to close where both parties agree to use their reasonable best efforts to take all actions necessary to consummate the transaction. Indemnification Agreements to compensate for loss or damage arising from specific circumstances Confidentiality Obligations regarding the non-disclosure of confidential information Breach and Remedies Actions to be taken in case of a contract violation Dispute Resolution Agreed-upon methods for resolving disputes, such as arbitration or litigation Termination Conditions under which the SPA can be terminated prior to completion of the sale Notices Procedures for how formal communications should be delivered Governing Law & Jurisdiction The legal framework governing the agreement and the location for resolving disputes Entire Agreement A statement that this agreement supersedes all prior negotiations, understandings, and agreements Amendments The process required to change any part of the agreement Force Majeure Provisions for unforeseen events that prevent parties from fulfilling their obligations