Sales Agreement Review & Risk Analysis
Understand what your sales agreement really says before you sign.
See What You're Missing in Your Sales AgreementA sales agreement governs the sale of goods from a seller to a buyer, covering price, delivery, payment terms, warranties, and risk allocation. Whether you are buying raw materials for manufacturing, finished products for resale, or assets from another business, the sales agreement determines your rights and remedies if the goods are defective, late, or never delivered.
Sales agreements are governed by the Uniform Commercial Code (UCC) in the United States, which provides default rules when the contract is silent. But UCC defaults do not always favor the buyer. Understanding when risk of loss transfers, what warranty protections exist, and how disputes about conforming goods are resolved can save significant money and prevent supply chain disruptions. This is informational, not legal advice.
Common Red Flags in Sales Agreements
Risk of Loss Transfers Before Delivery
If the agreement transfers risk of loss to the buyer upon shipment rather than delivery, you bear the financial risk while the goods are in transit. Damage, loss, or theft during shipping becomes your problem even though you have not received the goods.
Warranty Disclaimers That Eliminate Protection
Sellers may disclaim the implied warranties of merchantability and fitness for a particular purpose. Without these warranties, if the goods do not work as expected, your recourse is limited to whatever express warranties the seller chose to provide.
Inadequate Inspection and Rejection Rights
The agreement should give you a reasonable period to inspect goods and reject non-conforming deliveries. If acceptance is deemed automatic upon delivery without an inspection window, defective goods become your problem.
Force Majeure Clause Favoring the Seller
If the force majeure clause excuses the seller from delivery obligations for an extended period without giving you the right to cancel, you could be waiting indefinitely for goods you need now without the ability to source from alternatives.
Limitation of Remedies to Replacement Only
Some sales agreements limit your remedies to replacement of defective goods, excluding consequential damages. If defective goods cause production shutdowns, customer losses, or safety issues, replacement alone does not make you whole.
What KlausClause Checks For
When you upload your sales agreement, KlausClause automatically analyzes:
- ✓Risk of loss transfer point and whether it aligns with actual delivery
- ✓Warranty provisions including whether implied warranties are disclaimed
- ✓Inspection and rejection rights with adequate time for quality verification
- ✓Force majeure terms and whether they allow buyer cancellation after a threshold period
- ✓Remedy limitations and whether consequential damages are excluded
Sales Agreement Review Checklist
Before signing any sales agreement, verify each of these items:
- Verify the delivery terms (FOB origin vs FOB destination) and risk of loss transfer
- Check warranty provisions for both express and implied warranty coverage
- Review the inspection period and rejection procedure for non-conforming goods
- Confirm payment terms, schedule, and any early payment discounts
- Look for force majeure provisions and your right to cancel after a waiting period
- Check remedy limitations and whether consequential damages are excluded
- Review return and refund policies for defective goods
- Verify quantity tolerance provisions (over-shipment and under-shipment rights)
- Check title transfer provisions and any retained security interests
- Confirm the dispute resolution process and applicable law
Related Contract Clauses
Learn more about specific clauses commonly found in sales agreements:
Frequently Asked Questions
What is a sales agreement?
A sales agreement is a contract between a seller and buyer for the sale of goods. It specifies the products, quantity, price, delivery terms, payment schedule, warranties, inspection rights, and remedies for breach. In the US, sales of goods are governed by the UCC.
When does risk of loss transfer in a sales agreement?
Risk of loss can transfer at different points depending on the agreement terms: at the seller's location (FOB origin), at the buyer's location (FOB destination), or at a specified shipment point. The transfer point determines who bears financial risk during transit.
What should I look for in a sales agreement?
Focus on delivery terms and risk of loss transfer, warranty provisions (express and implied), inspection and rejection rights, payment terms and security interests, force majeure provisions, and limitations on remedies and consequential damages.
Related Contract Types
Further Reading
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