Purchase contract

What it means

A purchase contract is the most common commercial contract: the seller undertakes to deliver a thing and transfer ownership to the buyer, and the buyer undertakes to take it and pay the price. Between businesses it is governed by the Commercial Code, with consumers by the Civil Code.

The essential terms are the identification of the goods and the price or how it is determined. Everything else, such as place and time of delivery, passing of risk or payment terms, is filled in by law where the parties are silent, and international trade often refers to Incoterms.

For movables, ownership usually passes on handover; for real estate only on entry in the land register. The parties may agree retention of title, under which the buyer becomes owner only on paying the full price.

How it works in practice

For repeat deliveries we recommend a framework agreement with orders instead of separate purchase contracts, and general terms and conditions for sales to consumers. Well-designed payment terms and sanctions, such as a contractual penalty, prevent disputes.

For VAT the purchase contract underpins the supply of goods, and the tax point follows the actual delivery, not the signing date. Under retention of title the supply is judged by handover, not by payment.

Between businesses the seller’s liability for defects is governed by the contract and the Commercial Code, and the buyer must notify defects in time. For consumers the statutory liability for defects and complaint rules apply and cannot be restricted by contract.

What to watch out for

An oral purchase contract between businesses is valid, but in a dispute it is hard to prove what was agreed. For larger deals we therefore recommend written form with a precise description of goods, price, deadlines and liability, and for real estate written form is mandatory.

Late notice of defects between businesses can mean losing the claims, and claims become time-barred sooner than companies think. On a material breach the buyer may withdraw from the contract, but must do so in time and in writing.