Since business practices has evolved immensely throughout time, the surrounding aspects such as legal and guidelines also changed significantly. Thus, came the development of specific laws, practices, strategies and obligation required by both ends of any transaction (seller and buyer).
In this report, we will first demonstrate the aspect of terms of sale, then move to presenting recognition of sale. Then the subject of installment sales will be elaborated along with its sub-categories such as consideration, installment plan and default. After that, the requirements for the transfer of titles will be discussed along with the obligation of the buyer & seller, if any. Lastly, the paper will explain the time period in which the documents must be kept and their types.
A comprehensive conclusion will then be derived from the understanding, along with findings and highlights of the paper.
Terms of sale
Terms of sale describe the costs, risks, obligations and rights of both the seller and buyer concerning the delivery of goods that make up the export transaction. Terms of sale explains the obligations related to goods and services provided by one party to another (Terms of Sale, 2016).
Terms of sale in international trade has shown the rights and obligations of buyers and sellers as applicable in the transportation of goods. Thirteen major terms of sale have been standardized by the International Chamber Of Commerce (ICC) for world-wide use (Terms of sale, n.d.).
In any sales agreement, it is essential to have a mutual understanding of the delivery terms as misunderstanding over their meaning may outcome in a lost sale or a loss on a sale. The terms in international business transactions frequently sound alike to those used in local business, but they often have very different meanings. Therefore, the exporters should understand and distinguish the terms before preparing invoice or a quotation.
In global market, the most commonly terms of sales practiced are international commercial terms or Incoterms (Terms of Sale, 2016).
Recognition of sale
Installment sales is an agreement between buyers and sellers that enables to complete the purchase of any item over a period of time. Upon signing the agreement, the buyer takes ownership of the sold item but does not acquire title to the item until the completion of the periodic installment payments. In addition to the normal terms and conditions of an installment sales contract, the seller can also add additional sections to represent the agreement between the buyer and the seller (Huntington, n.d.).
The sales agreement states the term “consideration” as the amount of the purchase value. For the promise to pay consideration for the items listed in the agreement, the buyer may possess the item. The seller can ask for interest payments on the installment plan by the buyer. State law determines the rate of interest charged to a buyer for an installment sales agreement (Huntington, n.d.).
The installment plan governs the period for each installment and the accrual of interest charges during each installment period if any. This division in the sales agreement also specifies late charges amount and the grace period prior to any late charges is calculated (Huntington, n.d.).
The seller preserve the rights of the goods sold until the buyer clears the total amount of the purchased item plus the interest.
This segment includes constitute for defaulters and the seller’s right to reclaim the items/goods. In case of default, the seller may possess and sell the items/goods to recover the remaining amount of the purchase (Huntington, n.d.).
Requirements for the transfer of title
Business Definition of Transfer of Title
In terms of business perspective, transfer of title defined as the ownership of a thing passed from one person to another. International trade listed statements concerning with international sale contract such as (Transfer of ownership, n.d.):
• “Seller and buyer agree on passing the title for the contract of goods to the buyer when the shipment of goods are dispatched from seller’s custody”, or
• “Seller and buyer agree on passing the title for the contact of goods to the buyer when the goods are delivered on agreed time frame”, or
• “Seller and buyer agree that the seller will keep the ownership of goods until the full payment for the goods are received.
Law and Legal Definition of Transfer of Ownership
Transfer of title means that the ownership of property/item transferred from one hand to another. This includes buying a property, assumption of mortgage debt, property/item possession exchange or any other land trust device (Transfer of Ownership Law and Legal Definition, n.d.).
Steps that must be complied while transferring title of any good or property:
1. Both buyer and seller must agree on transfer terms.
2. Secured funds must be available to purchase goods/property.
3. Appoint a company in order to complete the required search of title.
4. Take the completed title documents to the concerned authority for registration of goods/property.
The requirements of transferring the title from one person to another or from one entity to another defers, depending on the item, property or business activity.
For example, the requirements for transferring the ownership of a product such as a laptop or TV can simply obtained by a bill/invoice. Or as complex as transferring the vehicle ownership by registering the vehicle papers through designated authorities.
Required documents may also defer in terms of buyer or seller. The seller needs to present specific documents and the buyers needs to obtain specific documents.
For example if a buyer wants to purchase a brand new vehicle or pre-owned vehicle then they must provide all the right documents. The following documents are mandatory for the transfer and essential to initiate the proceedings (Ownership transferring process, n.d.):
• Copy of passport
• Copy of driving license
• Vehicle registration card
• Insurance policy in the new owner’s name
• Original license plates
• Technical inspection certificate
• Non objection letter from your bank (If there is an outstanding loan on the vehicle)
Whoever when selling a property number of documents are needed. The seller must gather the following documents (What documents are required, n.d.):
• Proof of identity.
• Property title deeds.
• Fittings and contents form.
• Property information form
• Copies of documents referenced in the property information form.
• Leasehold / shared freehold documents.
• Management Information Pack.
• Energy Performance Certificate (EPC).
Time-period for keeping documenting
The time-period to keep documents differs based on their types. Some documents need to be kept for a year or two, while other documents need to be kept throughout the life of the business. Retaining documents are very important, however the question raises on the proper length of time to store documents?
Documents related to the establishment of the business must be hold for as long as the business is in operation. For legal documents, such as licenses, patents, registration forms and tax forms also needs to be hold for as long as the business exist.
Some documents should be hold for seven years. Such as bank statements, purchase orders and some other contracts.
Following list of different types of documents and suggested retention time length (Masin, 2012):
Communication with Customers and Vendors
-Copy of Deposit Slips
-Employee Personnel Records (after termination)
-Expired Insurance Policies
-Petty Cash Vouchers
-Savings Bond Registration Records of Employees
-Accident Reports, Claims
-Accounts Payable Ledgers and Schedules
-Accounts Receivable Ledgers and Schedules
-Bank Statements and Reconciliations
-Invoices to Customers
-Payroll Records and Summaries, including payment to pensioners
-Life Insurance Documents
-Mortgages, Bills of Sale
-Retirement and Pension Records
-Trademark and Patent Registrations