Purchase agreement
A contract in which the seller undertakes to deliver goods and the buyer undertakes to pay the price. Core of B2B procurement, with distinct pitfalls in title transfer and risk.
What is a purchase agreement?
A purchase agreement governs the acquisition of a specific asset: goods, shares, real estate, IP. Unlike a services agreement, it concerns delivery of a thing, not performance.
Essential elements
- Object — what is purchased, precisely specified
- Price — amount, currency, payment terms
- Delivery — time and place (Incoterms for international)
- Title transfer — when does the buyer become owner
- Risk transfer — when does buyer bear risk of loss/damage
- Warranties — non-infringement, conformity, latent defects
- Limitations of liability
Example
B2B purchase of industrial machinery €450,000: delivery 12 weeks post-order, title transfers on full payment (retention of title), risk transfers on delivery at buyer's site (DAP), warranty 24 months on parts and 12 months on labor.
When it matters
- Capital investment goods (CapEx)
- Raw materials / components (recurrent)
- Software licenses (product, not service)
- M&A (share purchase, asset deals)
- Real estate
Common pitfalls
- No retention of title — in buyer insolvency before payment, no right to reclaim.
- Unclear risk transfer — damage in transit = whose problem?
- Incoterms misapplied — EXW versus DAP is a €10,000+ difference.
- Warranty = statutory minimum — often weaker than market norm.
- Conformity unspecified — vague "meets expectations".
How GuardPilot flags this
GuardPilot extracts Incoterms, warranties, retention of title, and payment terms from every purchase agreement and flags deviations from your procurement standard. See Contract Review.
Related terms: Indemnity clause · Penalty clause · Master service agreement