At first glance, a bill of sale may seem like a simple piece of paper that records a transaction between two parties. But in reality, it’s so much more.
The document acts as evidence that the sale and purchase of high-value property—like motor vehicles, real estate, and even livestock—took place. It tracks details of the transaction, the buyer, the seller, and the property while being a legally binding acknowledgment that protects valuable purchases.
In some US states, a bill of sale is mandatory to prove ownership. But even in states where it isn’t a legal requirement, understanding the various types of bills of sale, including the protection they offer buyers and sellers, is crucial.
So, what exactly does the document include? And what are the dangers of not using a bill of sale for high-value purchases? Let’s take a closer look.
What Information Should a Bill of Sale Have?
A bill of sale is similar to a receipt but differs in the information included.
Generally, the document includes basic details of the buyer and seller, including their contact information, the description of the item sold, the date, the price, and the signatures of both parties. In some cases, the document may also be signed by a third-party witness, or stamped by a notary.
Depending on the product sold, more specific information may also be added.
For instance, a car and motorcycle bill of sale may have to include the vehicle’s registration number and odometer reading. In contrast, a livestock bill of sale could be drafted to include information about vaccinations and prior veterinarian checks.
Furthermore, the information presented can also depend on whether the document drafted is an absolute bill of sale or a conditional bill of sale. Here’s how the two differ:
- An absolute bill of sale is created when you pay the full purchase price and receive a product with no restrictions or limitations. Generally, it includes payment details and information about the condition of the property.
- A bill of sale can also be conditional, which means ownership is only transferred when you meet certain requirements. In this case, the document will include details about the obligations that must be met for the sale to be formalized.
Why the Bill of Sale is Crucial
A bill of sale is usually drafted by the seller, however, it’s recommended that the buyer also have a copy of the final version. This is crucial for both parties for a few reasons.
For Buyers
When you purchase a valuable item, a bill of sale acts as proof of ownership. As mentioned earlier, the document is mandatory to prove that you officially own a property in some states.
But even when it isn’t a legal requirement, the bill of sale can come in handy if you have to register the purchase with the authorities or apply for insurance coverage.
The second benefit also protects your investment. With a bill of sale, you can ensure you’ll never receive a faulty product. Once a seller signs the document, you have proof that the goods you purchased aren’t counterfeit or stolen. You can seek legal action in case you believe you’ve been cheated.
For Sellers
The document has various benefits for the seller. When you sell a valuable item, signing a bill of sale officially rids you of all liability for that product. If, for instance, the property gets damaged after the sale, the responsibility of getting it fixed officially falls on the shoulders of the buyer.
The bill of sale also acts as legal protection should the buyer dispute the purchase at a later date. It is also used for tax and insurance purposes.
Dangers of Not Having a Bill of Sale
When it comes to high-value purchases, it’s a given that the buyer and seller need additional protection. But what can go wrong if you don’t sign one?
Consider this scenario:
You recently sold a car with no discernable issues. A week later, the buyer crashes the car and demands a refund for selling them a faulty product.
Since a bill of sale discloses all issues or problems with the vehicle at the time of the sale, it acts as legal evidence that the damage occurred after the sale.
Furthermore, there’s no guarantee that the property you sell won’t be used for illegal purposes. Without a bill of sale, this activity can be traced back to you and it will be more difficult to prove to the authorities that you no longer own that property.
This is especially dangerous when selling a firearm or a used car.
Similarly, there are risks involved for the buyer as well.
If, for instance, you buy a property that has a lien attached to it and don’t sign a bill of sale, you could technically be held responsible for further payments. Or, a seller could suddenly say that you owe them additional money for the transaction. This will be hard to legally disprove without a bill of sale. Buyers may also face difficulties getting warranty repairs or replacements without sufficient proof of purchase.
So, if you’re buying or selling a high-value item, document the transaction with a bill of sale. Protect yourself and sign this crucial piece of paper.
