Published: June 14, 2022
Updated: August 17, 2026
Quick Summary
A simple sales contract should clearly cover what is being sold, the price, payment terms, timeline, and each party’s responsibilities. It should also use the right pricing structure and explain what happens if payment is late, the work changes, or either party fails to follow the agreement.
Looking to draw up a simple sales contract?
We’ve put together a guide for creating easy, efficient sales contracts that close. This guide is based on our own experience with creating and reviewing thousands of simple sales contracts, as well as feedback from our customers who have used our contract templates.
In it, we’ll review the different types of sales contracts, explain the clauses to include, and walk you through the steps for creating one.
What is a sales contract?
A sales contract is a legal agreement between a buyer and seller that outlines what is being sold, the price, payment terms, and each party’s responsibilities. A good sales contract establishes the offering while setting prices and specifying the terms of the agreement.
When Do You Need a Written Sales Contract?
Under Section 2-201 of the Uniform Commercial Code, a contract for the sale of goods priced at $500 or more is generally not enforceable unless there is a written record showing that an agreement was made and signed by the party against whom it is being enforced. The rule applies to goods rather than services, and some exceptions may apply.
In practical terms, you should put the agreement in writing and have it signed when selling goods worth $500 or more. Without that record, enforcing the agreement may be difficult if a dispute arises.
A written contract is also useful when payment will be made in installments, delivery will happen over time, the work is customized, or the agreement includes warranties, renewals, confidentiality, or cancellation terms.
Types of sales contracts
The right contract type depends on how predictable the scope, cost, and quantity are. This table compares the five common options and shows which party generally carries more of the risk if costs increase.
|
# |
Contract type |
When to use it |
Who bears more cost risk? |
Typical industries |
|
1 |
Fixed price |
When the scope, deliverables, and total cost can be agreed before work begins |
The seller, because they must usually absorb unexpected costs |
Construction, manufacturing, consulting, and professional services |
|
2 |
Cost-reimbursement |
When the full cost of the work cannot be accurately estimated in advance |
The buyer, because they reimburse the seller for approved expenses |
Government contracting, research, engineering, and complex projects |
|
3 |
Cost-plus |
When the buyer agrees to cover allowable costs and pay the seller an additional fee or percentage |
The buyer, because the final price depends on the seller’s actual costs |
Construction, engineering, defense, and large service projects |
|
4 |
Time and materials |
When the scope or project duration may change as the work progresses |
The buyer, because they pay for the time and materials actually used |
Software development, consulting, maintenance, and repair services |
|
5 |
Unit price |
When the price per unit is known but the final quantity may change |
The risk is shared: the seller carries the cost risk per unit, while the buyer carries the quantity risk |
Manufacturing, wholesale supply, utilities, and construction |
Fixed price sales contract
In a fixed price sales contract, the buyer agrees to pay a set sum for goods or services regardless of how much time or money it takes to produce them.
The contract specifies what work is to be done and how much it costs. The contract is usually signed before any work begins on the project.
Fixed price contracts are common in many industries where there are fixed costs associated with producing a product, such as manufacturing or construction.
Cost-reimbursement
In a cost-reimbursement contract, the customer agrees to repay the seller for the allowable expenses involved in completing the work, in addition to any agreed fee. This type of contract is useful when the total cost cannot be accurately estimated before the work begins.
For example, a company may use a cost-reimbursement contract for a project where the supplier’s final expenses cannot be accurately predicted in advance.
Cost-plus
A cost-plus contract is an agreement between a customer and a business in which the client agrees to pay all allowable expenses plus an additional fee for completing a set of work. The cost-plus contract can be used in almost any business, but it is especially useful for companies that provide services.
A cost-plus contract is often used when the total cost of the work is difficult to estimate before the project begins.
Time and Materials
A time and materials contract is one in which the customer pays an agreed hourly or daily rate for the time spent on the work, along with the cost of the materials used.
Time and materials contracts may be appropriate for small or large jobs, but they are generally used for large jobs that have an uncertain scope and/or duration.
For example, if you're bidding on a construction project, such as building a house, you might bid on it using a time and materials contract. In such cases, sourcing supplies through building materials ecommerce platforms can streamline the procurement process, ensuring timely delivery of materials. You might also use this type of contract when working on the production of a book or film.
As with most contracts, it's important to understand what each party is responsible for before signing any agreement. With this type of contract, it's important to explain everything that constitutes "time" and what constitutes "materials."
Unit Price
A unit price contract is an agreement between a buyer and a seller, where the purchaser agrees to pay a set fee per every unit provided.
Whether it's software, a product, or a service—when a customer agrees to pay a set fee per every unit provided, the contract is called a Unit Price.
Unit prices are common in many industries, especially within manufacturing, where they are often used as an alternative to fixed-price contracts.
The main difference between unit price and fixed-price contracts is that the buyer pays for each unit delivered instead of paying for the entire product or service upfront. This allows both parties to protect themselves against uncertainty about how many units will be required or purchased by the buyer.
Essential Clauses to Include in a Sales Contract
A sales contract should cover more than the sale and price. It should explain how late payments, confidential information, and breaches will be handled. The clauses you need will depend on the transaction, but these are the main ones to consider.
Payment Terms
Payment terms explain how much the customer must pay, when payment is due, and how it should be made. This section may include:
- The total price
- Any deposit required
- Payment dates or milestones
- Accepted payment methods
- Taxes or additional fees
- Late payment fees
- Refund or cancellation terms
Clear payment terms help prevent delays, disputes, and unexpected charges.
Confidentiality
A confidentiality clause explains what information must be kept private. This may include customer data, pricing, internal processes, business plans, product information, or login details.
The clause should state what counts as confidential information, how it may be used, and who is allowed to access it. You may also need to explain whether the information must remain private after the contract ends.
Breach of Contract and Remedies
A breach of contract happens when either party fails to do what the agreement requires. For example, the customer may fail to make payment, or the seller may fail to deliver the agreed product or service.
This clause should explain what happens next. Depending on the agreement, the affected party may be allowed to:
- Ask for the problem to be corrected
- Pause further work or payment
- End the contract
- Request a refund or replacement
- Recover unpaid amounts
You can also include a set period for the party responsible to correct the problem before the contract is terminated.
Limitation of Liability
A limitation of liability clause sets limits on what either party may have to pay if something goes wrong. For example, you may agree that the total amount one party can claim will not exceed the value of the contract. The clause may also exclude certain losses, such as lost profits.
This clause can have serious legal and financial consequences, so avoid copying one from another contract without checking whether it fits your agreement.
Dispute Resolution
A dispute resolution clause explains how disagreements will be handled. It may require both parties to try to resolve the issue through direct discussion first. If that does not work, the contract may provide for mediation, arbitration, or court proceedings.
The section may also state which country or state’s laws apply and where any legal action must take place. Setting out this process in advance gives both parties a clear next step if a dispute arises.
As your contract process grows, contract management software can help you manage revisions, approvals, and signed agreements in one place.
How to Create a Simple Sales Contract in 7 Steps
Follow these seven steps to create a clear sales contract both parties can review and sign.
1. Not including every relevant detail
A good sales contract is detailed. It should include all pertinent information about the transaction, such as what is being sold, who it’s being sold by, when payment is due and how much money should change hands.
You may also want to include things like warranties or guarantees so that your customer knows exactly what they are getting into before they buy anything from you. Leaving out any of these types of details could mean problems later on if something goes wrong with their order or if they decide they don’t like what they've purchased once it is received.
2. Not explaining what happens if something goes wrong
You may have heard the phrase "buyer beware." But if you neglect to explain what happens if something does go wrong, it can create problems in the long run.
By outlining exactly what happens, you will have less chance of customer complaints and will be able to deal with any complaints more quickly and efficiently with less risk of a public debacle.
What are the do’s of a Simple Sales Contract?
Here's a quick checklist of the seven things that you should do when creating a simple sales contract:
1. Determine Customer Needs
Determine what your customer needs before you begin your sales process.
The better you know what the customer wants, the more likely it is that you can sell them on the benefits of your product or service.
2. Agree on a Solution
Once you know what you need, then you can look at the different types of contracts available and choose the one that best fits your needs.
Make sure this agreement is in writing, so both parties are clear on what they're agreeing to do.
3. Indicate the Scope of Work
Include in your sales contract a description of what is being sold, who is buying it and who is selling it.
The scope of work should be as detailed as possible so there are no misunderstandings about what is being purchased.
4. Set the Timeline
This is one of the most important parts of any contract because it determines how much time you have to get everything done.
If you don't set a timeline, then there's no way of knowing when things need to be completed!
5. Establish Pricing & Payment Requirements
There's no point in having a contract if you don't know how much money you will be paid.
Make sure that there's an official section where all of your pricing details are laid out clearly so there's no confusion later on down the line.
6. Create Service Terms
Service terms are a great way to protect yourself from unexpected surprises. If you're providing a service, a terms section can protect your business from unexpected costs.
Here are a few examples of what to include in your service terms:
-
Description of the service being provided
-
Terms for canceling the contract (e.g., 14 days notice before the next scheduled appointment)
-
The amount of down payment required and how it will be applied towards future bills (e.g., one-fourth of total charges)
-
How much each additional item will cost
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How much is due if you cancel or reschedule an appointment and how much notice is required
7. Send the Sales Contract for Review & Signature
Once you’ve created the sales contract, send it to your client for review. Make sure both parties understand and agree to the terms before signing.
If either side has concerns, schedule time to review the contract together and make any necessary changes. Once the terms are final, use electronic signature software to collect signatures and complete the agreement.
Example of a Simple Sales Contract
For an example of a simple sales contract in action, be sure to check out Proposify's sales contract template library.
Conclusion
If you're looking for an easy way to create a simple sales contract, Proposify is the solution.
Our software creates interactive, easy-to-understand contracts that are more than just a sheet of paper—they’re a valuable tool in sealing the deal.
For more guidance on managing reviews, revisions, and approvals, read our guide to the contract negotiation workflow.
Get started with Proposify today!
Frequently Asked Questions
1. What are the 3 C’s of a Contract?
The 3 C’s are commonly described as capacity, consent, and consideration. Capacity means each party is legally able to enter the contract. Consent means they freely agree to its terms. Consideration is the value exchanged, such as a product or service in return for payment.
2. What are the 4 C’s of a Contract?
The 4 C’s of a contract are capacity, consent, consideration, and clarity. Capacity means each party can legally enter the agreement, while consent means they freely accept its terms. Consideration is the value exchanged, and clarity ensures the contract clearly explains each party’s rights and responsibilities. The 4 C’s are a practical checklist rather than the formal legal test for an enforceable contract.
3. What are the 5 C’s of a Contract?
The 5 C’s of a contract are capacity, consent, consideration, clarity, and compliance. Capacity means the parties can legally enter the agreement, consent shows they freely accept the terms, and consideration is the value exchanged.
Clarity makes each party’s obligations easy to understand, while compliance ensures the agreement follows applicable laws. This is a practical contract checklist rather than the formal legal test for enforceability.
4. How Do You Write a Simple Sales Contract?
Start by identifying the buyer and seller, then describe what is being sold, the price, payment terms, delivery timeline, and each party’s responsibilities. You should also include relevant clauses covering confidentiality, breach of contract, liability, and dispute resolution before both parties review and sign the agreement.
5. Does a Sales Contract Need to Be Notarized?
Most sales contracts do not need to be notarized to be valid. The buyer’s and seller’s signatures are usually enough. However, notarization may be required for certain transactions or under specific state laws, so check the rules that apply to your agreement.
6. What’s the Difference Between a Sales Contract and a Sales Agreement?
The terms are often used interchangeably. Both describe an arrangement between a buyer and seller, including what is being sold, the price, and each party’s responsibilities. However, “sales contract” often emphasizes that the agreement creates legally enforceable obligations.
7. What Happens if a Sales Contract Is Breached?
If either party fails to meet the contract terms, the other may be entitled to a remedy. Depending on the agreement and applicable law, this could include correcting the issue, ending the contract, recovering unpaid amounts, or receiving compensation for losses.
8. Can a Sales Contract Be Changed After Both Parties Sign?
Yes. Both parties can agree to change a signed sales contract. The changes should be documented in a written amendment or addendum and signed by both parties. You should also follow any modification process stated in the original contract. For example, if it requires all changes to be made in a signed writing, an informal verbal agreement may not be enough.
