How to Craft a Legally Binding Purchase and Sale Agreement

Learn how to write a purchase and sale agreement with essential tips, legal considerations, and digital tools for a seamless process.


Understanding how to write a purchase and sale agreement is crucial for anyone involved in buying or selling an asset, whether it’s real estate, business equipment, or high-value goods. This document not only outlines the terms of the transaction but also ensures that both parties are legally protected. Here are the main points you need to know right away:

  • Identify Parties: Full names and contact details of buyer and seller.
  • Transaction Date: When the agreement takes effect.
  • Asset Details: Clear description and any specific identifiers.
  • Purchase Price and Terms: Amount and how it will be paid.
  • Signatures: Both parties must sign for it to be binding.

A purchase and sale agreement is a legally binding contract that outlines the responsibilities of both the buyer and the seller. Think of it as a safeguard, ensuring that both parties agree to and understand the terms of the deal. Without one, you’re leaving yourself open to potential disputes and misunderstandings.

Key Components of a Purchase and Sale Agreement - how to write a purchase and sale agreement infographic hierarchy

Essential Components of a Purchase and Sale Agreement

When you’re putting together a purchase and sale agreement, it’s crucial to include several key elements to make sure everything is clear and legally binding. Here’s a breakdown of what you need:

Names and Addresses

First, identify who’s involved. This means including the full legal names and addresses of both the buyer and the seller. If the parties are businesses, use the official company names and their headquarters addresses.

Example: “John Doe, residing at 123 Main Street, Springfield, and XYZ Corp., located at 456 Business Ave, Springfield.”

Transaction Date

Next, specify the date of the transaction. This is the date when the agreement becomes effective. It can be different from the signing date, so make sure to clarify this in the document.

Example: “This agreement is effective as of November 1, 2023.”

Asset Details

Describe what’s being bought or sold in exact detail. If it’s a property, include the address and a legal description. For goods, list specifications like model numbers and quantities.

Example: “The property located at 789 Elm Street, Springfield, legally described as Lot 12, Block 3, Elmwood Subdivision.”

Purchase Price

State the purchase price clearly. This is the agreed amount the buyer will pay to the seller. Make sure to mention if this amount is pre-tax and who is responsible for any taxes.

Example: “The purchase price for the property is $250,000, excluding applicable taxes.”

Payment Terms

Detail how and when the payment will be made. This can include methods like cash, credit, or financing and any payment schedules.

Example: “The buyer will pay an earnest money deposit of $10,000 within five days of signing, with the remaining balance due at closing.”


Both parties must sign the agreement for it to be legally binding. This is like the final handshake that seals the deal.

Example: “Seller: __ (Signature) Buyer: __ (Signature) Date: ___”

Inclusions and Exclusions

List any inclusions (items that come with the sale) and exclusions (items that don’t). This can prevent misunderstandings later on.

Example: “Included: Refrigerator, dishwasher, stove. Excluded: Washer and dryer.”

Summary Table

Here’s a quick reference table summarizing the essential components:

Names and AddressesJohn Doe, 123 Main St, Springfield; XYZ Corp., 456 Business Ave, Springfield
Transaction DateEffective as of November 1, 2023
Asset DetailsProperty at 789 Elm St, Springfield, Lot 12, Block 3, Elmwood Subdivision
Purchase Price$250,000, excluding taxes
Payment Terms$10,000 deposit, balance due at closing
SignaturesSeller: __ Buyer: __ Date: ___
Inclusions/ExclusionsIncluded: Refrigerator, dishwasher, stove. Excluded: Washer and dryer

By including these elements, you ensure that your purchase and sale agreement is clear, comprehensive, and legally binding. This will protect both the buyer and the seller, making the transaction smoother and more transparent.

How to Write a Purchase and Sale Agreement

Key Sections to Include in Your Agreement

Crafting a purchase and sale agreement can seem daunting, but breaking it down into key sections helps. Here’s a step-by-step guide:

1. Identity of Parties

Start by clearly identifying the buyer and seller. Use full legal names and include contact information such as addresses, phone numbers, and email addresses. This ensures both parties are easily identifiable and reachable.

2. Description of Asset

Provide a detailed description of the asset being sold. For real estate, include the property address, legal description, and any unique identifiers. For goods, list model numbers, serial numbers, and a brief description. This avoids any ambiguity about what is being bought and sold.

3. Purchase Price

State the agreed-upon purchase price. Be clear about whether this price includes taxes, and specify who is responsible for paying them. For example, “The purchase price of $250,000, excluding taxes, which the buyer will pay.”

4. Payment Terms

Detail how and when payments will be made. Include information about deposits, financing, and the balance due at closing. For example:

  • Deposit: “A $10,000 deposit is due within five days of signing.”
  • Financing: “The buyer will obtain a conventional loan for the remaining balance.”
  • Balance Due: “The balance of $240,000 will be paid at closing.”

5. Inclusions and Exclusions

List any items included or excluded from the sale. This might include appliances, fixtures, or furniture. For example, “Included: Refrigerator, stove. Excluded: Washer, dryer.” This avoids misunderstandings about what stays and what goes.

Common Contingencies and How to Handle Them

Contingencies are conditions that must be met for the sale to proceed. Here are common ones and how to handle them:

1. Inspection Contingency

This allows the buyer to have the property inspected to identify any issues. If significant problems are found, the buyer can renegotiate or cancel the agreement. For example:

“This offer is contingent upon the buyer obtaining a satisfactory property inspection within 10 days.”

2. Financing Contingency

This ensures the buyer can secure financing. If the buyer cannot get a loan, they can withdraw from the agreement without penalty. For instance:

“This offer is contingent upon the buyer obtaining mortgage approval within 30 days.”

3. Legal Documentation

Ensure all necessary legal documents are in order. This includes title searches, zoning clearances, and any required permits. Clearly state the responsibility for obtaining these documents. For example:

“Seller will provide a clear title within 15 days of signing.”

By including these sections and handling contingencies properly, you create a clear, precise, and legally binding purchase and sale agreement. This protects both parties and ensures a smooth transaction process.

Legal Considerations and Compliance

Disclosures and Warranties

When drafting a purchase and sale agreement, it’s crucial to comply with state laws, federal regulations, and local ordinances. These laws can significantly impact the terms of your agreement.

State Laws: Each state has specific requirements for disclosures and warranties. For instance, some states mandate disclosure of lead paint in homes built before 1978. Always check your state’s regulations to ensure compliance.

Federal Regulations: Federal laws also play a role. For example, the Residential Lead-Based Paint Hazard Reduction Act requires sellers to disclose any known lead-based paint hazards in homes.

Local Ordinances: Local rules can be just as important. Some cities have unique requirements for property disclosures, such as zoning laws or historic district regulations.

Disclosures: Disclosures help the buyer understand what they are purchasing. Common disclosures include:

  • Hazards: Disclose risks like flooding, tornadoes, or toxic materials such as asbestos and lead paint. This builds trust and prevents future disputes.
  • Homeowners Association (HOA): If the property is under an HOA, disclose this information. Include details like HOA bylaws, insurance requirements, and dues.
  • Water Damage: Mention any history of water damage. For example, if a basement floods every spring, this should be disclosed even if the purchase is in the fall.

Seller’s Warranties: Warranties assure the buyer of the property’s condition. They can be:

  • Express Warranties: Specific promises about the property’s condition.
  • Implied Warranties: Automatically applied by law, ensuring the property meets minimum quality standards.

Resolving Disputes: Clauses You Should Know

Disputes can arise even with a well-drafted agreement. Including clear dispute resolution clauses can save time and money.

Arbitration: This involves a neutral third party who makes a binding decision. It’s often quicker and less expensive than court litigation.

Mediation: Here, a mediator helps both parties reach a mutually agreeable solution. It’s less formal and allows for more flexible solutions.

Litigation: If arbitration or mediation fails, litigation is the last resort. It involves going to court, which can be time-consuming and costly.

Here’s a sample clause for arbitration:

“Any dispute arising from this Agreement shall be resolved through binding arbitration in accordance with the rules of the American Arbitration Association.”

By understanding and including these legal considerations, disclosures, warranties, and dispute resolution clauses, you can craft a legally binding purchase and sale agreement that protects all parties involved. This ensures compliance with all relevant laws and provides a clear path for resolving any issues that may arise.

dispute resolution - how to write a purchase and sale agreement

Next, we will explore how digital tools can streamline the drafting and management of your agreements, making the process more efficient and secure.

Utilizing Digital Tools for Drafting and Managing Agreements

Using the right tools can make drafting and managing agreements much simpler and more efficient. Let’s look at how digital tools like DocuSign, contract management software, and digital security can help you create and oversee your purchase and sale agreements.


DocuSign is a popular tool for electronic signatures. It allows you to sign documents from anywhere in the world, making it perfect for remote transactions. With DocuSign, you can:

  • Send your purchase agreement for eSignature.
  • Automate the distribution of final copies to both buyer and seller.
  • Store the document digitally with robust security measures.

Using DocuSign ensures that your agreements are legally binding and secure, saving you time and reducing the hassle of manual signatures.

Contract Management Software

Contract management software (CMS) like Ironclad’s CLM can revolutionize the way you handle contracts. Here’s how:

  • Efficiency: Automate your contract workflows to create agreements faster. Templates and pre-set workflows mean less manual work and fewer errors.
  • Compliance: Ensure that all contracts meet legal requirements and internal policies. CMS helps you stay compliant by tracking changes and maintaining a clear audit trail.
  • Tracking: Keep track of your obligations and key deadlines with automated reminders. Never miss a deadline or important milestone again.

For example, Ironclad’s CLM offers a central repository where you can access and track all your purchase and sale agreements without hassle.

Digital Security

Digital tools also enhance the security of your agreements. Here’s why digital security is crucial:

  • Encryption: Protect sensitive information with encryption, ensuring that only authorized parties can access the document.
  • Audit Trails: Maintain an audit trail to track who accessed and modified the agreement. This transparency helps prevent disputes.
  • Compliance: Digital security measures help you comply with data protection laws, safeguarding your business and your clients.

By leveraging these digital tools, you can streamline the drafting and management of your purchase and sale agreements, making the process more efficient and secure.

Next, we will delve into the benefits of using contract lifecycle management software, focusing on how it can enhance your contracting process.


Crafting a legally binding purchase and sale agreement can be complex, but it’s crucial for protecting your interests. Throughout this article, we’ve discussed the essential components, common contingencies, legal considerations, and the benefits of using digital tools.

How Moton Legal Group Can Assist

Understanding how to write a purchase and sale agreement is vital for any business transaction. A well-crafted agreement ensures clarity, minimizes risks, and provides a clear path for resolving disputes.

Importance of Professional Advice:
While you can draft a purchase and sale agreement on your own, professional advice is invaluable. Legal experts ensure your agreement is comprehensive, legally sound, and tailored to your specific needs. This reduces the likelihood of future disputes and legal challenges.

Moton Legal Group:
At Moton Legal Group, we specialize in contract law and are committed to empowering our clients with the knowledge and tools they need. Our team understands the intricacies of business transactions and can guide you through each step of the process.

Expertise in Contract Law:
Our attorneys have experience in drafting and reviewing purchase and sale agreements. We stay updated on the latest legal developments to ensure your agreements are compliant and robust.

Client Empowerment:
We believe in empowering our clients. We provide clear, straightforward advice and ensure you understand every aspect of your agreement. This transparency helps you make informed decisions and feel confident in your transactions.

Education Focus:
Education is at the heart of what we do. We offer resources and guidance to help you understand the legal landscape, ensuring you’re well-prepared for any business transaction.

Secure Your Business Future:
Don’t leave your business transactions to chance. Contact Moton Legal Group today to learn how we can assist you in drafting a purchase and sale agreement that stands the test of time and sets the foundation for your continued success.

By partnering with Moton Legal Group, you can navigate the complexities of business transactions with confidence and ease.

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