Sales and Purchase Agreement (SPA)

What Is a Sales and Purchase Agreement (SPA)?

A sales and purchase agreement (SPA) is a binding legal contract between two parties that obligates a transaction between a buyer and a seller. SPAs are typically used for real estate transactions, but they are found in all areas of business. The agreement finalizes the terms and conditions of the sale, and it is the culmination of negotiations between the buyer and the seller.

Key Takeaways

• A sales and purchase agreement (SPA) is a binding legal contract that obligates a buyer to buy and a seller to sell a product or service.

• SPAs are often used in real estate deals or when two parties are transacting a large item or a large quantity of items.

• The need for an SPA forms the basis for negotiations between the buyer and the seller.

Understanding an SPA

Before a transaction can occur, the buyer and the seller negotiate the price of the item to be sold and the conditions for the transaction. The SPA is a framework for the negotiation process. The SPA is often used in cases of a large purchase, such as a piece of real estate, or frequent purchases over a period. SPAs also contain detailed information concerning the buyer and the seller. The agreement records any deposits that have been made as negotiations advance and notes parts of the agreement that have already been met. The agreement also records when the final sale is to occur.

SPAs also contain detailed information concerning the buyer and the seller. The agreement records any deposits that have been made as negotiations advance and notes parts of the agreement that have already been met. The agreement also records when the final sale is to occur.