A bill of sale is a business document that is used during the transfer of ownership of items from a buyer to a seller. This document acts as a receipt for the purchase and includes vital information about the transaction such as details about the buyer and the seller, information about the product such as the make, model, year, agreed price, etc. when the transaction is over, the buyer issue the bill of sale to the buyer. This means the buyer gets full rights for the item/goods.
Both parties must retain a copy of the bill of sale as proof of payment or proof of purchase. A bill of sale ideally used for transactions whereby the seller pays the full amount of the item at the time of purchase. Additionally, both parties must agree to buy or sell the item ‘as-is’ (in its present condition.
Other names used for the bill of sale include proof of sale, as-is bill of payment, proof of purchase, sales slip, proof of payment, and sales receipt.
Importance of the Bill of Sale
A bill of sale protects both parties in case of issues that may arise in the future. Since most purchases involve cash, you may not be able to prove payments were made without any documents; the bill of sale serves this purpose. For example, in some states like California, it’s recommended to use a bill of sale when purchasing items worth more than $500. Without a bill of sale, you will have no document to prove a transaction occurred in case any legal dispute arises.
A bill of sale is also vital in identifying the history of an item. For example, if you purchase an item such as an iPhone from Craigslist or any other online platform, you may not know whether the item was stolen or you’ve bought it from the rightful owner. In such cases, you may land in trouble with law enforcers; a bill of sale will be valuable in tracking the crime and exonerating yours from any blame.
Additionally, a bill of sale helps protect the seller from any liability in case the product turns out to be faulty after the transaction. In this case, the seller discloses the condition of the item at the time of purchase, and the buyer purchases the product ‘as-is’ (in its present condition).
The bill of sale also serves as a receipt for the transaction and can be used to prove the item was transferred to the seller and that taxes were paid.
Besides, if the item you’ve purchased is insurable, the bill of sale will act as a legal document proving that you’re the legal owner of the item to be insured. I.e., it’ll act as a proof of ownership.
Free Bill of Sale Forms
When to Use a Bill of Sale
A bill of sale is used in transactions that involve items of significant value. The requirement also varies from state to state; thus, it’s wise to consult your business lawyer before purchasing any valuable item. For example, you should use a bill of sale when buying a car, gun, electronics, aircraft, appliance, furniture, expensive jewelry, exercise equipment, tools, watercraft, and motorcycles.
In most states, you’ll also require a bill of sale when purchasing animals such as horses, dogs, and cats. You’ll need a bill of sale when purchasing most items valued over $100 and bearing a serial number.
On the other hand, you’ll not need a bill of sale when purchasing low-value items such as clothing. A bill of sale is also not used in the case of services. For example, you’ll not need a bill of sale for business consulting, or when offering graphic design services in such a case, you’ll require a general contractor. It’s also essential to know you can’t use a bill of sale when selling or buying a residential property.
Finally, you must know some items require a specific bill of sale. For example, if you’re purchasing a boat, you’ll need to use a boat bill of sale. The same applies when you’re buying a vehicle; you’ll need a vehicle bill of sale. The specific bill of sale has special provisions where you’ll fill out the model, serial number, make, etc.
A Basic Bill of Sale
Each bill of sale must contain the following basic information:
- Information about the buyer and seller
- Agreed price
- A description of the item
- Amount paid
- Date of purchase
- Signatures of the buyer and seller and witnesses if any
- as –is’ clause
A Standard Bill of Sale Should Include:
Date of sale: This is the date when the transaction is being made and not the initial day when the buyer and seller met.
Information about the buyer and seller: This will include the names, ID card number, addresses, and driver’s license number.
Payment details: In the bill of sale, you must state if the payment was made in full or in installments. If payments are made in installments, the buyer should sign a promissory note.
A description of the item: You should also describe the item being sold. For example, for a vehicle, you can include essential details such as the make, color, model, size, condition, year, etc.
Warranty: You should also indicate if the item comes with a guarantee or ‘as-is.’
Witness: In some states, the bill of sale will need to be notarized by a public notary. If so, you must have at least two witnesses, their names, signatures, and ID card numbers.
The Meaning of ‘as-is’ Clause
The ‘as-is clause means that the buyer doesn’t get any warranty for the item, whether verbal or written; thus, they have purchased the item in its current state, and the seller will not be responsible for any liability after the final transaction.
Difference Between a Bill of sale & a sale Agreement
When purchasing any valuable item, you’ll need both the bill of sale and a sales contract. The sales agreement is the initial document that is signed before the transaction takes place. It spells out the terms and conditions of the transaction. Essential details that feature on a sale agreement include the date of the transfer, any warranties, method of payment, etc. On the other hand, a bill of sale is issued after the transaction has been finalized. In simple terms, the bill of sale concludes the transfer of ownership by handing over the ownership rights to the buyer.
When signing a bill of sale, it’s essential to read and understand the information in the document. The specific bill of sale must also be in line with the requirements in your state. For example, in some states, this document has to be notarized. If you don’t conform to the legal requirements in your state, the bill of sale may be declared invalid.
The bill of sale acts legal evidence that a transaction took place between a seller and a buyer, and ownership rights for the item/property were transferred to the buyer. This is a legal document that can be used as a valid proof in any legal dispute arising from the transaction.
Tips for Seller and Buyer
When finalizing any transaction that involves a bill of sale, the seller must ensure that the buyer has made full payment for the particular item. It’s also essential for the seller to issue a promissory note if the buyer pays by installments. Additionally, they must counter check the bill of sale to ensure it has no errors. The buyer, on the other side, must verify the details in the bill of sale, the item description, and its condition before signing. After signing the bill of sale, each party must retain a copy of the document for records. The buyer is also required to submit a copy of the bill of sale in cases where they are needed by the state to register the item; for example, in transactions involving the purchase of guns, watercraft, vehicles, etc.