A Brief Introduction About the Equipment Bill of Sale?
A bill of sale is a document that is used when a person wishes to transfer ownership in a particular asset to another person. This document is used to prove the sale and subsequent purchase of the goods. A bill of sale can only be used for goods that are movable and tangible. It cannot be used for any immovable property. Hence this document is used for selling or exchanging goods such as equipment, cars, or furniture.
An equipment bill of sale (also called a bill of sale for equipment) is used for the sale of certain types of equipment. The equipment may be of various kinds, and accordingly, the document will be named farm equipment bill of sale or heavy equipment bill of sale as the case may be.
When one purchases furniture or groceries from a shop and receives a receipt for the same, such receipt will also amount to a bill of sale. An equipment bill of sale serves as a record that certain equipment was sold to a specific buyer at a special price. This makes it easy for both parties to have proof that the said transaction has been completed.
When a person rents a piece of special commercial equipment with the option of purchasing it within the lease term, he can create a commercial equipment lease-purchase agreement.
Who Takes the Equipment Bill of Sale? – People Involved
This document is entered into between the party who is selling the equipment (known as the seller) and the party who is purchasing the equipment from the seller (known as the buyer). The seller generally drafts the document.
Purpose of the Equipment Bill of Sale – Why Do You Need It?
The purpose of an equipment bill of sale is to lay down in writing the terms under which the equipment is being sold to the buyer. It is very crucial to have these details in writing, as it can prove the authenticity of the entire transaction. If the equipment is sold only through a verbal agreement, the buyer will not have any rights if there is any defect in the equipment or any other such problem arises. This is the reason why it is vital to document the details of the transaction lucidly. This makes it easy to enforce the bill of sale if there is a violation of the warranties provided by either party.
The bill of sale can also be used to show exactly which model of the equipment is being sold, and hence the seller cannot cheat the buyer by delivering an older model or certain equipment that is not in working condition.
Contents of the Equipment Bill of Sale – Inclusions
An equipment bill of sale is a fundamental document, and it is easy to draft one. The document must include the names of the buyer and seller of the equipment. The date on which such a sale has taken place must be mentioned. The purchase price of the equipment must be laid down clearly, as this can serve as evidence in case of any confusion in the future.
The document must also have a detailed description of the equipment that is being sold. This includes the model number, the year in which it was manufactured, and the make of the equipment. This makes it easy to identify the concerned equipment. The seller must include a clause that states that the equipment is free from all claims and liabilities. He must give a guarantee that he is selling the equipment without any encumbrances attached to it. There must be no debts attached to the equipment in question.
The document shall also include representations and warranties of both parties. The seller must warrant that the equipment is in good working condition, and there are no hidden damages to the best of his knowledge.
How to Draft the Equipment Bill of Sale?
Below are the steps to follow while drafting such a bill of sale:
- The seller of the equipment must draft the bill of sale.
- The parties must decide the various essential details among themselves, such as the price for which the equipment is being sold and other necessary details that are inherent to the transaction.
- All these decided terms must be laid down in the agreement to ensure that there is clarity among the parties about the various aspects of the transaction. The seller must include a good description of the equipment, including the make and model of it.
- After the seller has drafted the bill of sale, the buyer must go through its contents and make sure that it covers all the essential particulars. This is important to make sure that the document is fair.
- Care must be taken to ensure that the parties comply with the requirements of the state in which they reside. In some states, only the buyer is required to sign the bill of sale, both parties have to sign, and in some other states, the bill is required to be notarized. This is essential as it will determine the validity of the bill of sale.
- The scope of negotiation in the sale of equipment will be limited to the purchase price of the said equipment. The parties must ensure that the seller gets a fair price for the same.
- In the negotiations, the buyer must also take care to ensure that there are no liabilities attached to the equipment and that it is free from all encumbrances. This is extremely important from the buyer’s point of view.
Benefits and Drawbacks of the Equipment Bill of Sale
The following are the benefits and drawbacks of having an equipment bill of sale:
- One of the major benefits of having this document in place is that it will serve as proof of the terms under which the equipment was sold to the buyer.
- The bill of sale is useful to transfer ownership of an asset quickly without too many formalities.
- The document is straightforward to draft and hence can be written by anyone.
- Without this document in place, it can be difficult to prove all the important details of the transaction, and this can lead to a dispute between the parties in case of any disagreement.
What Happens in Case of Violation?
There can be various remedies available when one of the parties breaches the terms of the agreement. If a party who has signed the bill of sale refuses to perform his part of the agreement, the other party can sue him for breach of contract. He will be liable for damages.
The bill of sale should have a clause that talks about the remedies that will be available if the buyer does not complete the payment for the equipment or if the seller sells a defective product or refuses to deliver the equipment. If there are remedies mentioned in the bill of the sale itself, it becomes easier for both parties to enforce their rights. Otherwise, both parties always have the option of instituting a suit in the courts of law to enforce the contract.
The seller will have the right to sue the buyer if he does not complete the payment as has been agreed by the parties. In case the seller refuses to deliver the equipment after the buyer has made the payment, the buyer can institute a suit for the specific performance of the contract, or he can sue the seller for damages.
In conclusion, this document can be helpful when one party wishes to sell his equipment to another party and wants to have a document detailing the various particulars of the transaction. A bill of sale has a dual purpose – it serves as an agreement for sale and also evidences the transfer of ownership of the asset. It is beneficial to evidence the entire transaction, and each party can prove that he has performed his end of the contract.
As mentioned above, in case of a breach of the terms that have been agreed to, each party has the right to protect his interests, which might not always be available in case of an oral agreement(1). Hence it is always recommended to create this document to protect your rights from being infringed upon.