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What should be included in a contract of sale of movable property

We conclude a purchase contract almost every day. However, if it is not a routine matter, e.g. when selling a car or other more valuable items, then it is advisable to conclude the purchase contract in writing and clearly agree all the terms and conditions in advance.

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Written form of the purchase contract

In general, when concluding a contract of sale, it must be clear who the parties are. They also agree on the content of the contract, i.e. the selling party makes a certain offer or expression of intent to sell a certain thing and the buying party expresses his or her willingness to buy the thing. A contract of sale for movable goods does not necessarily require a written form. Indeed, in the vast majority of cases, it is not even in writing. For example, we do not sign a contract with the seller when we buy at a convenience store, but the contract of sale is validly concluded orally. However, if the purchase is for more important things, such as a car, it is already advisable to have a written contract. It is always recommended to draw up a contract of sale also if the parties agree on specific arrangements, such as deferred payment of the purchase price, contractual penalties, etc. If the parties agree to conclude the purchase contract at a later date, they should first sign a future contract. However, the text of the purchase agreement itself should also be attached to the agreement so that both parties know all the terms of the sale in advance.

Essentials of the contract

First of all, the contract of sale should clearly describe the thing to be sold. A more detailed description of the item, including any existing defects, can prevent later guesswork. In car sales in bazaars, we can see the practice where the contract describes the car in such a way that a defect can be present in virtually any part. The seller justifies this on the grounds that the car is not new, that this protects himself and the buyer. We certainly do not recommend signing such a contract, as this would essentially exclude the buyer from being able to claim a discount in the event of a later discovered defect.

The contract of sale should also contain the purchase price, or at least the method of determining it. If the price will not be paid with the signing of the contract, it is advisable to set a precise due date. Failure to do so may result in an obligation to pay penalties or a contractual fine. If a party is to pay a penalty in the event of a breach of its obligation, the contract must expressly provide for a penalty. It may also be the case that the thing sold is rented by its owner to another person. Here it must be taken into account that renting and lending the item does not prevent its sale. The new owner will assume the position of a lessor and will be bound by the rental agreement in the same way.

Do you need help with drawing up a purchase contract?

Whether you are negotiating a regular contract or want to negotiate some exceptional provisions, we will be happy to help you with everything. We will conduct a thorough analysis, suggest appropriate wording and propose a way forward. All this within 48 hours of ordering the services.

Tip: Do you want to lend a car to a friend, or do you need a vehicle for a weekend or longer? At first glance, a trivial situation, right? But a car rental contract carries risks that can cost you a lot of money and nerves. In a separate article, we will reveal the most common mistakes that our clients forget about when signing the contract.

Reservation of ownership

For greater protection of the seller in the event that the buyer does not pay the full purchase price when signing the contract, it is recommended to negotiate a so-called reservation of title in the contract. What is it? When this is agreed, the buyer only becomes the owner when the purchase price is paid in full. The buyer would thus not be able to transfer the item to another person until the purchase price has been paid in full. If, on the other hand, the buyer fails to pay, the item will remain the seller’s.

Tip: Being an owner does not only mean having rights, but very often also certain obligations. It is far from being the case that we can do whatever we want with our stuff, especially if it is a nuisance to others. We have described what ownership entails, how it comes into being and how it binds us in our separate article.

Withdrawal from the purchase contract

If one of the parties violates the agreed terms of the purchase contract in a fundamental way, the other party may insist on its termination. The solution to such a situation is to withdraw from the purchase contract; termination of the contract will not be possible in this case. It is advisable that the contract itself defines the grounds and situations in which it is possible to withdraw from the contract. If it does not contain them, it is necessary to rely on the reasons set out in the new Civil Code. Typical reasons on the buyer’s side are material defects in the purchased item or the seller’s delay in handing over the purchased item. The seller, on the other hand, will be able to withdraw from the contract if the purchase price is not paid. The purchase contract can also be terminated by agreement of both parties. Here, it would also be necessary to agree on the method of returning the price paid and handing the item back to the seller.

Example from legal practice:

Martin sold his older car. Although he was acquainted with the buyer, he negotiated a reservation of title in the contract because he was to receive the purchase price in five instalments. However, the buyer did not pay the third instalment, even though Martin repeatedly reminded him. He therefore rescinded the contract and demanded the return of the car as well as compensation for wear and tear caused by the buyer. In view of the agreed retention of title, the car was still Martin’s, so he did not have to deal with the vehicle transfer office.

It is therefore advisable to include a clause in the contract of sale to deal with various situations that might arise. We do not recommend using a model contract of sale that is available for free download on the internet, as a model contract can never match your specific requirements. The template may also be out of date or even invalid. In this case, the parties would have to return their performance or enter into a new contract.

Tip: Withdrawal is one way to end a contract if the other party materially breaches it. Although you don’t need the other party’s consent, you should know that the law only allows it in certain cases. In our separate article, you will learn not only which situations these are, but also how to withdraw from the contract and what you need to take into account.

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Author of the article

JUDr. Ondřej Preuss, Ph.D.

Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.

Education
  • Law, Ph.D, Pf UK in Prague
  • Law, L’université Nancy-II, Nancy
  • Law, Master’s degree (Mgr.), Pf UK in Prague
  • International Territorial Studies (Bc.), FSV UK in Prague

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