A purchase agreement is a legally binding contract that sets out the terms under which a buyer purchases goods, assets, or property from a seller. It records what is being sold, the price, and the rights and obligations of each party.

Quick answer: a purchase agreement is the document that makes a sale enforceable. It turns a verbal "yes" into defined, binding terms both sides can rely on.

What Does a Purchase Agreement Include?

• The parties: who is buying and who is selling.
• The subject: a clear description of the goods, assets, or property.
• The price and payment terms: how much and how it is paid.
• Delivery or closing: when and how ownership transfers.
• Representations and warranties: promises each side makes about the deal.
• Conditions and remedies: what must happen before closing and what occurs if something goes wrong.

Common Types of Purchase Agreements

• Sales and purchase agreement for goods: the everyday contract for buying products.
• Asset purchase agreement: used when buying specific assets of a business.
• Real estate purchase and sale agreement: used for property transactions.
• Share purchase agreement: used when buying ownership shares in a company. See what is a share purchase agreement.

Purchase Agreement vs. Purchase Order

A purchase order is a buyer's request to order goods at a stated price. A purchase agreement is a fuller contract covering terms, warranties, and remedies. They are related but not identical, and a purchase order can itself become binding in certain conditions. We cover this in is a purchase order a contract?

Where Purchase Agreements Fit in Procurement

In procurement, the purchase agreement is the contract stage of the buying cycle, after sourcing and negotiation. Managing these agreements at scale, with their renewal dates and pricing terms, is far easier when they are treated as connected data rather than static files. For the bigger picture, see our guide to procurement and to types of contracts.

Frequently Asked Questions

Is a purchase agreement legally binding?

Yes. Once signed by both parties and supported by the essential elements of a contract, a purchase agreement is enforceable.

What is the difference between a purchase agreement and a purchase contract?

The terms are largely interchangeable. Both describe a binding agreement that sets out the terms of a sale, though purchase agreement is the more common phrasing.

Who prepares the purchase agreement?

Either party can draft it, but the seller or the party with more bargaining power often provides the first version. Both sides should review the terms before signing.

‍