Is a bill of sale legally binding?
A bill of sale is a contract for the purchase of something between a buyer and a seller. Like other contracts, a bill of sale also makes a record of the agreement between two parties. It represents an outline in writing the transfer of ownership of a good or goods from one party to the other.
A bill of sale is legally binding if the agreement between the parties is made consciously and the contract follows the guidelines of the state where the transaction occurs. The failure to comply with the state's guidelines can render the contract void.
How does a bill of sale work?
A bill of sale is a legal document that can either be complex or simple depending on the type of transaction. The receipt of a retail purchase is also a bill of sale that details the specific goods whose ownership has been transferred to the buyer and the specific price that was agreed by both parties for the transfer.
Similarly, the holder of a futures contract received a delivery instrument which also served as a bill of sale. When the futures contract expires, it can be exchanged for the underlying asset.
The bill of sale of transactions that involve substantial sums of money must be completed properly and issued to the buyer at the time of sale. A bill of sale completes the transaction even if the property is still in the seller's possession. It certifies that the buyer has obtained a right or title to the property regardless of whether or not it’s in their possession.
As the bill of sale attests to a buyer’s purchase of something from the seller, it serves as a proof of buyer’s ownership rights in jurisdictions where ownership does not depend on physical possession of goods or property.
Most jurisdictions require a bill of sale to include the contact information of transacting parties, a description of the goods or property sold, price of items exchanged, payment schedule(s), parties' signatures, and any conditions attached to the transfer of ownership.
The description of the items sold separates the purchase into classes that are taxable by the Internal Revenue Service (IRS).
A bill of sale is commonly used to record transfer of automobiles, aircrafts, and ships. Transactions involving other types of property are typically recorded using other types of written instruments, such as invoices, deeds, and receipts. Over 16 states require a bill of sale for the purchase of a car. Some states also require a car bill of sale to be notarized.
A bill of sale primarily takes two forms, namely an absolute form and a conditional dorm. The former serves as a proof of transfers, assignments, and other assurances of personal property without representing any form of security in the title. The latter represents the assignment or transfer of property to a buyer by way of some form of security for the payment of money.
Both are enforceable by law. An absolute bill of sale makes a sale absolute without any reservations on the buyer or the seller. This type of contract certifies that the seller has completely conveyed the property to the buyer in exchange for full payment of the property.
A condition bill, however, features some conditions on the ownership of the buyer. For example, when a home is purchased using a mortgage, the mortgage is given the ownership of the property on the condition that the mortgagor will regain full ownership of the property upon paying off the debt.
The legality of a bill of sale is often questioned as it is more similar to a receipt than a contract. For a bill of sale to be legally enforceable, it must include enough details about the transaction.
Susan Noel is an experienced content writer. She is associated with many renowned business & Law blogs as a guest author where she shares her valuable articles on corporate law with the audience.
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