How Binding is a Bill of Sale Agreement

January 27, 2012

In simple terms, a bill of sale agreement is nothing more than a contract for the purchase of a vehicle between a buyer and a seller. In fact, many people refer to the document as a 'bill of sale contract'. In most cases, the contract is legally binding between buyer and seller as long as the bill of sale follows guidelines required in the state where the sale or transfer takes place.

Normal Requirements for a Car Bill of Sale

In most cases, when a person buys a vehicle from another individual, a bill of sale is a very straightforward document. There are many templates and examples of a bill of sale that can be used by two parties involved in the sale and purchase of a vehicle. However, they all have a few things in common.

Some states require a bill of sale be notarized (there are currently only five), while most states do not. Regardless if a notary is required or not, the following information must be contained in the bill of sale:

  • Name and address of buyer and seller
  • Description of the vehicle
  • Odometer reading of the vehicle
  • Date of transaction
  • VIN Number of vehicle

The Fine Print

While a simple bill of sale with the above required information will satisfy requirements for the Department of Motor Vehicles in your state (check to be sure as requirements can change), there are other terms that are usually included in the bill of sale that are binding to one or both parties.

For example, a bill of sale may contain language that specifies a vehicle has a limited warranty, or in some cases, no warranty at all. This is usually the case when a vehicle is sold privately from one person to another. The buyer agrees the vehicle is purchased 'As Is' and 'Where Is' in most cases. This simply means the buyer is not entitled to a refund if the vehicle fails to run properly or otherwise fails to serve any specific purpose.

Other terms that may be contained in a bill of sale are an installment agreement or how a default in payments will be handled. Like all other contracts, you may want to have a lawyer review a bill of sale contract if you don't understand the language included in the document.

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