A bill of sale is a legal document that records the transfer of ownership of an asset to a second party in exchange for money.
When it comes to buying or selling valuable items, such as vehicles or animals, a bill of sale is commonly used. This document ensures that both the buyer and the seller are protected in case any disputes arise in the future.
When Should You Use a Bill of Sale?
A bill of sale is particularly important when it comes to purchasing or selling items of high value. In fact, most states require a bill of sale as proof of purchase for vehicles or branded animals like horses. However, for items of lesser value like clothing, the decision to draft a bill of sale is entirely up to personal preference.
If you are the buyer and prefer having a bill of sale, you can bring one with you, even if the seller typically provides it.
Parts of a Bill of Sale
A generic bill of sale includes the following information:
- Date of purchase
- Name and address of seller and buyer
- Amount paid for the transfer of ownership
- Description of the assets being transferred
- Guarantee that the item is free from all claims and offsets
- Representations or warranties
- Signatures of seller, buyer, and a notary public
It is important to ensure that even a simple bill of sale complies with your state's requirements, as they may vary. Some states may require only the buyer's signature, while others require both the buyer and seller to sign the document. Additionally, certain states may require the form to be notarized.
Quitclaim Bill of Sale
A quitclaim bill of sale is similar to a quitclaim deed, transferring ownership of property from one party to another. This type of bill of sale is used when the seller cannot guarantee ownership or the right to transfer the property, or when the seller does not want to warrant title. It is important to note that quitclaim bill of sale should not be used for real estate transactions due to their complexities.
Vehicle Bill of Sale
Not all states require a vehicle bill of sale. Some states, like Illinois and Tennessee, do not require an auto bill of sale. The requirements for a bill of sale may vary depending on the state. Some states allow you to draft your own bill of sale as long as it complies with legal requirements, while others require the use of a specific bill of sale provided by the Department of Motor Vehicles (DMV). Having a completed bill of sale may be necessary for the vehicle title transfer process.
A vehicle bill of sale typically includes:
- Vehicle type (e.g., car, motorcycle, boat)
- Make, model, and year of the vehicle
- Odometer reading
- Hull number
- Engine serial number
- Vehicle registration number
- Vehicle identification number
Even if your state does not require a bill of sale for a vehicle, it is still a good idea to have one on file for your personal records.
'As Is' vs. Warranty
When drafting a bill of sale, it is important to specify whether the property is being sold "as is" or with a warranty. Selling a property "as is" means that the seller does not guarantee the condition of the property or its freedom from defects. This protects the seller from any responsibility for repairs or issues that arise after the transaction.
On the other hand, if the bill of sale includes a limited warranty provision, the seller must clearly state what damages are covered and the extent of coverage during the specified warranty period. It is important for both parties to be aware of the terms and conditions of the bill of sale before finalizing the agreement.
When drafting a bill of sale, it is crucial to ensure that it complies with your state's legal requirements. While there are examples available online, it may be wise to have an attorney review your bill of sale to guarantee compliance.
Remember, a bill of sale is a valuable document that protects both the buyer and the seller, so it is always recommended to have one in place for any significant transactions.
