Types of Sales and Purchase Agreements and How AI Simplifies Negotiations
Sales and Purchase Agreements (SPAs) occur across industries where buyers and sellers negotiate on price and terms. These SPAs contain detailed information like advance deposit requirements, final sale conditions, and the deal closure timeline. While SPAs appear in various forms—which we’ll examine further below—these contracts have all benefited from recent technological advances in artificial intelligence (AI). Innovative AI tools have made SPA negotiations a seamless, automated process that can be completed in minutes, rather than days.
Types of Sales and Purchase Agreements
Corporate legal departments utilize SPAs for many business arrangements. Listed below are several of the most common use cases for SPAs:
- Business Acquisitions: Business acquisition agreements precisely describe the entity being bought and sold. Some businesses sell only tangible assets; others may include intellectual property.
- Standard Purchase Orders: These agreements apply to one-time purchases for expensive office supplies (typically $500+) and can help businesses curtail rogue spending. Standard purchase orders can prove that a company purchased necessary equipment at fair market value from the best supplier.
- Planned Supply Chain Orders: Companies employ SPAs when regularly ordering large quantities of materials from a supplier. The contract helps inform financial planning by enabling buyers to forecast future purchase prices.
- Blanket Sales and Purchase Orders: Businesses cannot always predict when they will need a product—or the quantity they require. Blanket orders allow companies to lock down pricing terms with a given vendor, reducing the need expend precious time and energy negotiating new terms for future orders.
- Contract Sales and Purchase Orders: Legally-binding, long-term agreements set the terms, pricing, and conditions for all sales between a company and a vendor. While the contract becomes the legal framework for automating future purchases, there is generally no expiration date or specific purchases included in the contract.
Sales and Purchase Agreements enable businesses to determine price and terms, allocate risk, and even structure future transaction logistics. However, breaches in SPAs are not uncommon. For instance, breaches may occur when vendors sell reserved goods to another party, fail to deliver promised goods on-time, or deliver the wrong type of goods. Because breaches occur, it is essential that the contract’s terms and language precisely reflect the organization’s playbook.
How AI Simplifies SPA Review and Negotiation
The construction, review, and negotiation of Sales and Purchase Agreements, while essential, can require exhaustive effort. Depending on the contract’s complexity, attorneys can spend weeks in contract review and negotiation. However, recent technological innovations that harness the power of machine learning can dramatically reduce hours spent reviewing and negotiating these kinds of agreements.
With the help of powerful AI tools, attorneys can shift their attention from rote document review to focus on more strategic and higher-value tasks. While software can never replace a legal professional’s expertise and judgment, AI can consistently and reliably accomplish playbook-compliant markup and redlining while making inline revision suggestions for the attorney’s review.
Here’s how AI accelerates the Sales and Purchase Agreement review and negotiation process:
- First-Pass Review: Legal or procurement staff submits contracts via email for initial review. AI “learns” corporate standards from your playbook and a repository of past agreements and transaction histories. Contracts are examined, redlined, and returned in minutes, rather than days.
- Revision: If you need to update new terms into a Sales and Purchase Agreement, AI software can scan the document and find the appropriate places to insert new language. Additionally, an AI contract negotiation platform will flag vague or ambiguous language and make recommendations based on best practices. Lawyers can complete a final review if necessary.
- Complex Negotiation: Some AI solutions employ an AI Digital Playbook, as well as vast clause libraries, to automate the contract negotiation process. Based on your playbook and prior successful negotiations, the software compiles best practice standards to negotiate “win-win” deals within your organization’s acceptable boundaries.
- Risk Mitigation: AI can assess contract risk and highlight clauses that do not align with acceptable standards. Once outlier language is identified, AI can suggest edits to bring the language into compliance with playbook guidelines. AI software can also assess specific prices and terms to determine benchmark “fairness,” allowing companies and vendors to be sure they are getting the best possible deal.
AI technology enables corporate legal departments to complete a thorough review and negotiation of Sales and Purchase Agreements at a fraction of the time and expense required by a manual review. In 2021, the contract negotiation process streamlined by AI is redefining expectations and creating new efficiencies across the legal industry.
Gary Sangha | Founder & CEO
Gary Sangha is the Founder and CEO LexCheck. He's a serial entrepreneur and an academic. Gary previously founded Intelligize, a legal technology company that was acquired by LexisNexis. He's affiliated with the University of Pennsylvania and Stanford University and started his career as an attorney at Shearman & Sterling and White & Case.