A bill of sale is a document that transfers ownership of goods or property from one person to another. It serves as legal evidence stating that full consideration has been provided in a transaction and that the seller has transferred the rights to the assets stated in the bill of sale to the buyer. It is used in a wide variety of transactions: people selling their goods/exchanging their goods, give their goods or properties as gifts (donation), or mortgage them to get a loan.
Bill of sale can only be used:
- To transfer ownership of goods or properties that people already own;
- To transfer ownership or moveable tangible goods; and
- By individuals and unincorporated businesses.
In England and Wales, a bill of sale is regulated by two Victorian pieces of legislation: the Bills of Sale Act 1878 and the Bill of Sale Act (1878) Amendment Act 1882. This area of the law was subject to review by the Law Commission, which published a proposal for change last 2017.
Bill of Sale: How a Bill of Sale Works
Depending on the type of transaction, a bill of sale can be quite complex or quite simple. Since details of the specific goods that have been sold to the buyer and the specific price that was agreed to and paid for are being clearly stated, a typical retail receipt can be considered a bill of sale. For example, the holder of the futures contract is usually given a delivery instrument, which serves as a bill of sale, in that it can be exchanged for the underlying asset or property when the futures contract expires.
When conducting transactions for assets is worth a good amount of money, such as an automobile, it is important to ensure the bill of sale is completed properly and obtained at the time of sale.
General types of the bill of sale
- Absolute Bill of Sale
An absolute bill of sale does not represent any form of security, but rather, are simply documents evidencing transfers, assignments, and other assurances of personal chattels. These are substantially no more than mere contracts of sale of goods or assets covered by the common law of contract.
- Conditional Bill of Sale
A conditional bill of sale represents any assignment or transfer of personal chattels to a person by way of security for the payment of money. This form of a bill of sale creates security in favor of the grantee of the bill whereby the grantee is given personal right of seizure giving a right to a security interest of a possessory nature.
Bills of Sale: A Brief Overview
The term ‘bill of sale’ originally referred to any writing by which an absolute disposition of personal property for value was evidenced or effected. Because the bill of sale is technically independent of any legislation under the United States Common Law, they were vulnerable to fraud and deceit before advancements in contract law and digital record-keeping systems.
The evolution of various bills of sale laws within the United States was to curb the use of the bill of sale as a means of defrauding unsuspecting victims. The first of such being the Bills of Sale Act 1854 which was re-enacted by the Bills of Sale Act 1878 which was almost on all fours within the 1854 act. Further developments led to the enactment of the Bills of Sale Act 1882.
Generic Bill of Sale Inclusions
A generic bill of sale includes the following information:
- Amount paid for the transfer of ownership
- Date of purchase
- Name and address of buyer and seller
- Description of the assets or goods being transferred
- Warranties or representations
- Guarantee that the item is free from all claims and offsets
- Signatures of the buyer, of the seller, and a notary public
Drafting a bill of sale isn’t difficult and can come in handy when you need proof you’ve sold an item of value. One thing to remember when drafting one is to make sure it complies with your state requirements, which will vary by state.
Vehicle Bill of Sale
In the US, a vehicle bill of sale is not required in all states. Illinois and Tennessee don’t require an auto bill of sale, but some do require that you use a bill of sale from your state’s DMV (Department of Motor Vehicles). Other states will only let you draft your own as long as it complies with your state’s legal requirements.
Keep in mind that a bill of sale does not prove ownership – only a title transfer does that. It only serves as a record that a sales transaction took place between two parties.
A vehicle bill of sale also includes:
- Engine serial number
- Vehicle identification number
- Vehicle registration number
- Vehicle type (i.e., motorcycle bill of sale, car bill of sale, boat bill of sale)
- Make, model, and year of vehicle
- Hull number
- Odometer reading
Regardless if your state requires you to obtain a bill of sale, it’s a good idea to have one ready for your personal records.