What is a Bill of Sale?

If you are making a purchase, then you may be handed a bill of sale to sign. Likewise, if you are selling a personal item, you may be asked to provide a bill of sale. But what exactly is a bill of sale and when do you legally need it? 

What does a bill of sale mean?

A bill of sale is a literal document or “bill” which records a “sale”. You may receive a bill of sale from a furniture company after you make a big purchase of couches or from a car dealership after you buy a new car. The bill of sale basically serves as a receipt. 

How does a bill of sale work?

A bill of sale serves as a legal document which records the sale or transfer of property, such as a car or house, in exchange for money. The bill of sale is drafted by the seller with all the information regarding the sale and copies are given to both parties. 

When do you need a bill of sale?

You need a bill of sale in any situation where the law requires proof of purchase. This typically includes selling property and keeping a receipt for accounting purposes, buying or selling a car, or any situation where the state law requires proof of purchase. 

In most circumstances, you only need a bill of sale for properties such as cars, planes, motorcycles, and boats, or personal property like furniture or animals. Your state may require a bill of sale for branded animals, not just house pets, as well as for vehicles or a trailer. If you choose to sell something smaller that you own, like a small table or hand tool, you can choose whether you want to create a bill of sale. 

There are situations where you don’t necessarily need a bill of sale, but where you exchange property nonetheless. 

  • Real estate transactions require a quitclaim deed which serves as your document of transfer. 
  • Business consulting or other services like graphic design provide a service, not an asset, in exchange for money, so any payment received can be written down in the form of a general receipt. 
  • Small sales for personal property, like selling a chair or table for $50 to a neighbor, do not require a bill of sale. 

Why do I need a bill of sale?

A bill of sale provides proof that you have sold (or purchased) an item of value. This might serve to prove ownership in the future, something you keep as part of your estate planning, or to use for taxes. In this case, what does a bill of sale mean? Should the buyer or seller have a disagreement in the future, this document can also help to protect against any conflict.

For example, if a disagreement goes to court over the quality of a sold car, the warranty included in the bill of sale may help one party prove that they informed the buyer of the condition of the car and did not make any guarantees on its performance. 

Components of a Bill of Sale

Generally speaking each part of a bill of sale document acts like a contract and records the business sale and transfer of property in exchange for payment. A legal bill of sale will include:

  1. The date the purchase is made.
  2. The name and address of the person selling the item and of the person who buys the item.
  3. The amount of money paid for the item to be transferred from the buyer to the original owner.
  4. A description of the items being sold.
  5. A guarantee that the item has no other legal claims against it, such as a lien or debt.
  6. A warranty, if applicable
  7. The signatures of the buyer, the seller, and a notary public who oversees the legal signing of the document.

As Is vs. Warranty

A potentially large portion of your bill of sale will include language for the “as is” condition of the item(s) being sold, or a warranty. Each of these provides different levels of protection to the seller for the item being purchased.

If you sell something and list it ‘as is’ in the bill of sale, that means the item is being sold entirely in its current state, with no guarantees by you as the seller of any particular condition. The buyer takes ownership of the item knowing that there may be defects. By including this language in the bill of sale, as the seller you are legally protected against situations where the property breaks down after purchase. For instance, if the buyer comes back and claims in court that the car had defects that you had not previously indicated, but you have sold the car “as is”, then you are not legally responsible for any repairs. 

On the other hand, a warranty gives the buyer some level of protection against future problems or defects. The warranty spells out exactly what types of damage (and any applicable labor) are covered by the warranty, and for how long. A warranty is commonly part of a bill of sale for a vehicle, especially for sales from a car dealership. 

A bill of sale may even include language which states, “If the seller withholds information from the buyer, or misrepresents the condition or value of the item, it may render the bill of sale void.” This type of language protects against situations where, as stated, the seller did not admit all known defects. In this case the buyer can return the item and get their money back. 

Before entering into any sale or transaction, all parties need to know the exact terms, if there is a warranty and what the warranty includes. There should also be time allotted for each side to review and ask questions about the bill of sale before signing it. If an item included in the bill of sale is not agreed upon, or does not match the item in question, then it can easily be amended before it is signed. 

Vehicle Bill of Sale

If you are selling a car, the certificate of title is the document that represents legal ownership of the vehicle. Every state has specific requirements for this document and the title is part of the official proof of ownership for every car on the market. When you buy a car, you can apply with your DMV to get your name on the title. In order to do this, you need a bill of sale signed by the seller and yourself as the buyer. 

How to get a bill of sale?

If you are the buyer, the seller will usually give you a bill of sale. If you are buying from a company, such as a car dealership, likely they will automatically give this to you at the time of sale. However, if you are buying from an individual, you may need to ask that they prepare one. 

As the seller, you can draft a bill of sale yourself or find templates online to use. For example, if you are selling a vehicle, your DMV may have bill of sale forms readily available. A tax collector or assessor may also have them ready for you to use. 

Also read:What is a Special Warranty Deed?

When you purchase a home, ownership of that property transfers to you through what is legally called a deed. This is a piece of paper...

How Can I Write a Bill of Sale?

If you are drafting a bill of sale on your own, you need to ensure you meet state requirements. These requirements vary, so it is important to check with your state to confirm who has to sign the document and whether it has to be notarized. Be sure to include the basic information listed above, like the buyer and seller, the date, and any previous owners. 

It is also important to include any information relevant to the description of what is being sold. For a trailer, boat, or airplane, that might include the make and model and identification number of the vehicle. It may also include special conditions, faults, special marks, size, design, and color. For a car, this description may also extend to the VIN and license plate number. 

Not all sales are made with an up front payment. With a car, for example, the buyer may be paying in installments. If so, the payment schedule should be noted in the payment information section where you list the amount of the item, the method of payment used, and any agreements regarding pending payments, interest, or late fees. 

All information in the bill of sale needs to be completely legible and there should be copies given to both the buyer and seller. 

Sample Bill of Sale

As mentioned, different states have varying requirements. The sample below is for a vehicle bill of sale for the state of Oregon:

Vehicle Description

Plate NumberYear
NameVehicle Identification Number
Title Number
I transfer all rights, title and interest in the above described vehicle to:
Name of Buyer
Signature of Buyer
Date of ReleaseAddress of Buyer
Printed Name of Seller
Signature of Seller
Date of ReleaseAddress of Seller

If you decide to draft a bill of sale yourself, you may consider having an attorney look it over for a more expensive sale, or for property involving a warranty. 

Conclusions

A bill of sale is a legal document that represents a receipt for a transaction. Some types of sales require a bill of sale and others do not. If you are entering into a sale but are unsure whether you need one, consider consulting with an attorney.

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