At first glance there doesn’t seem to be much difference between a sales contract or bill of sale. Both are used between a buyer and seller in a transaction for the sale of goods. Also, both documents often have many of the same terms and conditions. However, the essential purpose of the documents and the timing of when each is used differs in important respects.
A sales contract is a contract contemplating the future sale of goods between a buyer and seller. Although the goods might be exchanged immediately after the parties sign the sales contract, the important point to remember is that it is used prior to any goods being exchanged. Therefore, the contract spells out the terms on which the buyer agrees to purchase the goods and the seller agrees to sell them.
If the buyer was going to purchase an industrial-grade freezer, the sales contract would spell out the details about the specific type of freezer, the price, the delivery location, and the buyer’s right to inspect the freezer when it arrives and reject it if it’s found to be nonconforming to the terms of the agreement.
Whereas a sales contract is used prior to the exchange of goods, a bill of sale is used during or after the exchange of goods to transfer ownership of the goods from the seller to the buyer. It focuses more on identifying the exact goods the buyer is receiving and promising that the seller has true and valid title to the goods and the right to transfer the title to the buyer. The seller can also choose to make certain warranties about the goods and how they will perform. Alternatively, the seller can choose to disclaim all warranties and sell the goods “as-is.”
So going back to our example—when the seller delivers the industrial-grade freezer to the buyer, the seller will execute a bill of sale to transfer ownership to the buyer. In this way, the bill of sale acts as a kind of receipt so that the buyer can prove ownership of the freezer should there ever be a question.
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