What Is A Purchase Agreement?
A purchase agreement is a legally binding contract that outlines the terms and conditions of a sale, typically real estate.
A purchase agreement is a binding contract between a buyer and a seller, used to sell high-value items when a buyer or seller wants assurance that every party involved in the sale will go through with the agreed-upon terms.
The agreement captures the outcome of negotiations between a buyer and a seller and establishes the terms and conditions of the sale, including price, limitations, and legal disputes. It also records detailed information concerning the progress made so far in the sale. For instance, a Purchase agreement may state whether the buyer has made advanced payments on the purchase or fulfilled other conditions.
Typically, a purchase agreement captures the following essential elements:
- Seller: who owns the asset and wants to sell it
- Buyer: who wants to purchase the asset
- Asset: detailed description of what is up for sale
- Price: how much the selling is asking and how much the buyer is offering
- Payment: how the buyer will pay the seller
It is often used in real estate transactions during the sale of a property and formalizes the purchase details. However, it is not limited to that sector alone. It is also used when a business acquires another business, or generally when the exchange of a considerable sum of money or large quantity of items is involved.
Purchase Agreement Example
A regular customer of a computer business wants to acquire 500 new computers on credit. The purchase is two times greater than their regular purchase order. The computer business agrees to make the sale only if the customer provides a 60% advance fee on the purchase within three business days. The agreement is written, and both parties sign. The customer makes the advance payment within three business days, and the computer business fulfills the order.« Back to Glossary Index