Entrepreneur's Journal: Putting together a solid sales contract

Clear Terms: Be as detailed as possible when describing such things as:

• Products: Serial numbers and any customizations or changes.
• Quantities: Are certain numbers of quantities being delivered over time?
• Delivery dates and location: Is it at the place of business or somewhere else? Also, if the products are damaged or lost in transit, who is responsible?
• Means of delivery: FedEx or UPS? Who will pay?
• Inspection: How long does the customer have to inspect the goods?
• Warranty: If there is one, provide details on what it covers. Although, this can be an area of extensive negotiations.
• Sales taxes: Have the customer pay for this.

Next, indicate the payment terms, such as the due date and any discounts or penalties (for early or late payments). In some cases, the payments may be in installments (this likely will be for services).

Liability Limitations: No doubt, this can be a contentious area for negotiations. But, as much as possible, try to limit your liability to the extent of the price of the contract. This means disclaiming consequential and punitive damages.

Disputes: Usually, arbitration or mediation is much cheaper than going to court (and it probably will be faster). You should also state the city where the dispute will be handled and if the losing party will pay for the attorneys fees.

Changes: If there are changes to the contract, there should be an official process, such as a signed notice.

Resources: A good book to check out is the Legal Guide for Starting & Running a Small Business.

And yes, it's important to seek legal counsel when drafting a sales contract.

Tom Taulli provides a variety of financial services to business owners, such as business plans, cash flow management, and taxes. You can reach him at taulli.com.