Chapter 13: MEMORANDUM OF SALE

CHAPTER 13

Memorandum of Sale

FOR MANY SALES OF GOODS , a short memorandum of the agreement may be more than satisfactory. It may be a sufficient record for an order placed by telephone or facsimile for a one-time sale and immediate delivery of goods—a transaction that is completed before the parties would even have time to consider and negotiate a full sales agreement. It may also be adapted for use as a record of each purchase made pursuant to an underlying agreement between the parties establishing a long-term relationship. A memorandum can be drafted quickly and the goods can be sent immediately. Most parties use a letter or invoice format for the memorandum.

Use of Form

If you decide to use a memorandum of sale, be certain to cover all essential points of the sale: goods, delivery, price, and payment terms. It is also important that you recognize that the memorandum is merely a sketch of your relationship with the other party and that it does not define that relationship fully. For example, the memorandum does not provide mechanisms for the resolution of disputes that might arise, nor does it state any specific warranties, governing law, rights of inspection, or obligations to mitigate damages. Therefore, before using a memorandum of sale, you should consider whether the following apply. ■ You already have an ongoing relationship with the other party in which such factors are already established and a satisfactory level of trust has been reached. ■ You have sufficient reasons to trust the other party because you have made a background check or have received a solid referral. ■ Your transaction is small and your risk of loss is minimal. ■ You are willing and able to take the risk of loss, perhaps because there will be long-term benefits if you can establish the relationship. ■ You are willing to negotiate or modify the memorandum rather than seek enforcement through legal action. ■ You are making the memorandum to make a quick sales transaction at minimal cost.

■ You are not concerned with which laws will govern and whether the memorandum will be enforceable because you will not seek legal remedies in connection with the agreement.

Sample Contract: Memorandum of Sale

[seller’s letterhead] [date] COMMENT: Both parties should date the memorandum when they sign it. The latest date will be the effective date of the agreement. The effective date may be important if any terms of the agreement require a calculation from that date. For example, the parties may agree to delivery within thirty days of its effective date. [buyer’s company name] [buyer’s address] COMMENT: Your contract is binding against the parties identified in it. Be certain that they are designated by their legal names, company names, and addresses. A party who needs to give notice to the other should use the address specified in the contract. We confirm your order received on [date] for the following goods: COMMENT: It is wise to confirm in writing any order received. This confirmation will indicate that you have already come to terms. The confirmation is in effect an acceptance and creates a binding contract. [List the goods, including quantity, type, model numbers, color, and other identifying characteristics. If the types of goods differ in price, include the price per item and the price for the total quantity ordered.] COMMENT: The clause that describes the type, quantity, and quality of the goods is essential to the agreement. Without this clause, your agreement will usually be unenforceable because the quantity and type of goods cannot be implied—the goods must be chosen by the contracting parties. The terms of this order are as follows:

Date of delivery: On or before [date] Price: Total [currency and amount, e.g., US$12,000.00] [specify trade terms e.g., F.O.B.] Special packing arrangements: [specify] Payment: Deposit paid at time of order [currency and amount, e.g., US$6,000.00] Net on receipt of [goods/invoice] [currency and amount, e.g., US$6,000.00] Return policy: If the goods are not to your satisfaction, you may return them to us within 10 working days of receiving them for a full refund of deposit. Your signature below will create a binding contract between us. Sincerely yours, [Name of Seller’s Company] by: [signature] [name and title of person signing] [Company Address] Accepted: [Name of Buyer’s Company] by: [signature] [name and title of person signing] Dated: [date]