A purchase agreement is the binding contract that defines the terms of a sale between buyer and seller — what is being bought, for how much, when, and what happens if either side fails to perform. Unlike a bill of sale (which acknowledges transfer at closing), the purchase agreement is the contract that obligates the parties to consummate the transaction. It is the single most important document in any significant purchase: vehicles, equipment, business assets, intellectual property, and (in different form) real estate.
This page provides a free general-purpose purchase agreement template in PDF and Microsoft Word format. The template is suitable for vehicles, equipment, business assets, intellectual property, and other personal property transactions. Real estate purchases require state-specific real estate purchase contracts (separate template).
When to Use a Purchase Agreement
- Vehicle sales above $5,000. Especially used vehicles between private parties.
- Equipment and machinery. Industrial equipment, construction equipment, restaurant equipment.
- Business asset purchases. Buying or selling a business’s assets, customer lists, intellectual property.
- Inventory or wholesale. Bulk goods transactions.
- Intellectual property. Patents, trademarks, copyrights, domain names.
- Boats, RVs, aircraft. Vessels of significant value.
- Livestock and agricultural. Cattle, horses, crops.
Essential Provisions
- Parties and recitals. Identification of buyer, seller, and the transaction’s purpose.
- Description of property. Specific identification — make, model, serial numbers, condition, exclusions.
- Purchase price. Total price, allocation if multiple assets, deposit, payment schedule.
- Closing. When and where closing occurs, conditions to closing.
- Due diligence period. Buyer’s right to inspect and walk away.
- Representations and warranties. Seller’s statements about the property; buyer’s capacity.
- Covenants. What each party will do between signing and closing.
- Conditions precedent. What must happen before closing is required (financing, regulatory consents).
- Default and remedies. What happens if either party breaches.
- Indemnification. Who indemnifies whom for what.
- Risk of loss. Who bears the risk if the property is damaged before closing.
- Governing law and venue. Which state’s law applies and where disputes are resolved.
Frequently Asked Questions
What is a purchase agreement?
A purchase agreement is a binding contract between buyer and seller for the sale of goods, real estate, business assets, or services. It sets out the price, the property being transferred, the conditions of closing, representations and warranties, and the remedies if either party defaults.
What is the difference between a purchase agreement and a bill of sale?
A purchase agreement is the CONTRACT — it sets the terms before closing. A bill of sale is the TRANSFER DOCUMENT — it acknowledges the transfer of ownership at closing. They serve different roles: the agreement obligates the parties, the bill of sale completes the transfer.
Do I need a purchase agreement for small transactions?
For low-value transactions (under $500), a bill of sale or invoice is usually sufficient. For anything significant — vehicles, business assets, real estate, expensive equipment, intellectual property — a purchase agreement protects both parties.
What is «due diligence» in a purchase agreement?
Due diligence is the buyer’s investigation period to verify the condition and value of what they are buying — title search for real estate, financial records review for businesses, inspection for equipment. The agreement typically grants a defined due diligence period during which the buyer can walk away.
What are representations and warranties?
Representations are factual statements the seller makes about the property (e.g., «I own this free and clear»). Warranties are promises about future conditions (e.g., «the equipment will function for 90 days»). Misrepresentations or warranty breaches give the buyer remedies.
What is the difference between conditions precedent and conditions subsequent?
Conditions precedent must be satisfied BEFORE closing (e.g., buyer’s financing approval, regulatory consent). Conditions subsequent can excuse performance AFTER closing (e.g., material adverse change). Most purchase agreements use conditions precedent.
What happens if the buyer backs out?
Depends on the agreement. The seller may retain the earnest money deposit as liquidated damages, sue for specific performance (rare), or sue for actual damages. The agreement should specify the remedy.
Should I have a lawyer review the agreement?
For any transaction over $25,000, yes. Real estate purchases always benefit from attorney review. Business asset purchases require both buyer’s and seller’s counsel. The cost of attorney review is trivial compared to the cost of a defective agreement.
Download the Free Purchase Agreement
The template above is a starting point — not a substitute for legal counsel. State laws change, court interpretations evolve, and individual circumstances vary in ways a generic form cannot anticipate. We update this template at least annually, but verify the current state-specific requirements before relying on it for any significant transaction. Consult an attorney for stakes above $25,000 or any disputed matter.
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