What characterizes an advanced payment in a sales contract?

In a sales contract, an advanced payment is characterized by the requirement that payment is made before the goods are shipped. This arrangement is typically seen in various trade practices, where the buyer agrees to pay the seller upfront, which secures the transaction and provides the seller with assurance of payment. This can be beneficial for sellers, particularly in international trade or when dealing with new customers, as it minimizes the risk of non-payment.

In this scenario, the notion of paying in advance often helps facilitate smoother transaction processes and can also foster trust, especially if there is a contractual agreement that outlines the terms of the sale. This practice contrasts with other payment methods that involve payment post-delivery or contingent upon the condition of goods, which carry different layers of risk and financial management strategies.