Sale contract: what you should know before you buy or sell

What is a sale contract?

A sale contract is a legally binding agreement between a buyer and a seller on the transfer of an object, an asset or a right in return for payment. The contract sets out the terms of the transaction: what is being sold, at what price, and on what conditions.

In Denmark, sales are primarily governed by the Sale of Goods Act, which applies to the purchase of movables (physical objects). Special rules apply to the purchase of real property, and for the purchase of businesses or shares a combination of sale-of-goods principles and company law applies.

When do you need a sale contract?

A written sale contract is relevant for:

• Buying and selling used cars: the most common private-law purchase of value in Denmark
• Trade in business equipment: machinery, fixtures, IT equipment
• Transfer of businesses: full or partial transfer of a business
• Purchase of goods between businesses: larger B2B transactions
• Sale of valuables: art, jewellery, antiques

For smaller everyday purchases a written contract is rarely necessary, but for transactions of significant value it is indispensable.

What should a sale contract contain?

1. The parties' details

• Full names and addresses of buyer and seller
• Civil registration number (private individuals) or CVR number (businesses)
• Contact details

2. Description of what is sold

A precise and detailed description of the object is decisive:

• For a car sale: make, model, year, chassis number, registration number, mileage, colour
• For a sale of equipment: make, model number, serial number, condition
• For a business transfer: assets, liabilities, goodwill, employees, contracts

The more specific the description, the lower the risk of disputes.

3. Purchase price and payment terms

• Price: the agreed purchase sum, including or excluding VAT
• Time of payment: when the amount must be paid
• Method of payment: bank transfer, cash, instalments
• Instalment arrangement: any instalments with due dates
• Escrow account: for larger transactions the amount can be deposited with a third party

4. Time of transfer

State precisely when ownership passes to the buyer. Before this point the seller as a rule bears the risk for the object; afterwards the risk passes to the buyer.

5. Condition and defects

• "As seen": the seller disclaims liability for certain faults (limited effect in consumer sales)
• Warranties: any warranties from the seller about the condition of the object
• Right to complain: deadlines for complaining about defects

6. Reservations and conditions

Common reservations in sale contracts:

• Financing condition: the transaction is conditional on the buyer obtaining financing
• Approval condition: the transaction is conditional on public permits
• Due diligence condition: in a business purchase the transaction is conditional on a satisfactory review

The sale contract for a car sale

A car sale between private individuals is the most common situation where a sale contract is necessary. Here are the particular points to be aware of:

Key information

• Chassis number (VIN): the unique identification number
• Mileage: the seller warrants its accuracy
• Inspection status: the date of the latest inspection and the next inspection date
• Debt in the car: is there a charge or a reservation of title registered?
• Insurance: remember that the car's third-party liability insurance must be in place at takeover

Check before you sign

1. The Car Register (Bilbogen): check in Bilbogen (via tinglysning.dk) whether there is a registered charge or reservation of title on the car
2. Inspection history: check the car's inspection reports in Synsbasen or the Motor Register
3. Service history: documentation of maintenance
4. Test drive: always test drive the car before buying

Reservation of title

If the seller bought the car on instalments with a reservation of title, the car cannot be freely sold until the debt is paid off. If you buy a car that still has a reservation of title, you risk the creditor being able to take the car. Therefore always check Bilbogen before buying.

The sale contract for a business transfer

When buying a business, the sale contract (often called a transfer agreement or, in English, a Share Purchase Agreement or Asset Purchase Agreement) is far more complex.

Asset transfer vs. share transfer

• Asset transfer: the buyer selects specific assets (equipment, customer agreements, trademarks) and takes them over
• Share transfer: the buyer takes over the company's shares and thereby the whole company, including all assets and liabilities

Important clauses

• Warranty schedule: the seller's assurances about the state of the business
• Non-compete clause: the seller undertakes not to start a competing business
• Employee matters: the transfer of employees under the Business Transfer Act
• Tax matters: the allocation of the transfer sum across asset types

The Sale of Goods Act and your rights

Consumer purchases

When a private individual buys from a business, the consumer protection rules of the Sale of Goods Act apply:

• A 2-year right to complain: you can complain about defects for up to 2 years from delivery
• The burden of proof: in the first year after delivery, a defect is presumed to have been present at delivery unless proven otherwise
• Repair or replacement: the seller must as a rule remedy the defect
• A proportionate reduction: for minor defects
• Cancellation: for material defects

Purchases between private individuals

When both parties are private, the Sale of Goods Act still applies, but the rules are less protective:

• A shorter complaint deadline
• No reversed burden of proof
• "As seen" clauses have broader effect

The typical pitfalls

1. Missing documentation

Especially with a car sale, it is crucial to document the car's condition with photos, the inspection report and the service history. Without documentation, you are in a weak position in any dispute.

2. Oral promises

"The seller said the engine had been reconditioned", but does it say so in the contract? Oral assurances are hard to prove. Make sure all promises and warranties are in writing.

3. Failing to check for encumbrances

Especially when buying a car: always check whether there is a registered charge or reservation of title. You do this in Bilbogen via tinglysning.dk.

4. An unclear payment plan

For instalment transactions, the contract must precisely state the amounts, due dates and consequences of late payment. Unclear payment terms are a frequent source of conflict.

Frequently asked questions

Is an oral sale agreement valid?

Yes, an oral sale agreement is legally binding in Denmark. But it is hard to prove, and in a disagreement you are left without documentation. Always use a written contract for transactions of value.

Can I withdraw from a purchase?

For consumer purchases online or by other distance selling, you have a 14-day right of withdrawal. For purchases in a physical shop or between private individuals, there is no statutory right of withdrawal unless it is agreed in the contract.

What is the difference between a sale contract and a purchase agreement?

In everyday speech the terms are often used interchangeably. Legally there is no real difference; both are a binding agreement on the transfer of an object in return for payment.

Does a sale contract need to be signed by witnesses?

No, there is no requirement for witnesses to a sale contract in Denmark. But witnesses can strengthen the contract's evidential value, especially in transactions of high value.

What do I do if the seller does not deliver?

If the seller does not deliver what was agreed, you as the buyer have the right to demand performance (delivery of what was agreed), damages for your loss, or cancellation of the contract. Contact the seller in writing with a deadline for delivery before you cancel.

Conclusion

A clear, written sale contract protects both buyer and seller. It sets out what is being traded, at what price and on what terms, and it gives you documentation if a disagreement later arises. For transactions of value, and especially for car sales and business transfers, a thorough contract is cheap insurance against expensive disputes.

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The content of this article is for guidance only and does not constitute legal advice. Consult a lawyer for advice on your specific situation.