Introduction
A sale is a type of contract in which the seller transfers ownership to the buyer. An agreement to sell is a contractual arrangement. Where the transfer of ownership takes place at a future date or upon fulfillment of certain conditions. Understanding the differences between these concepts is essential for businesses and individuals who buy, sell, or contract for real estate.
Table of Contents
- Overview Of The Sale
- About the Agreement to Sell
- Sale and Agreement to Sell: Difference
- Difference Between Contract of Sale and Contract of Sale
Under the Indian Sale of Goods Act 1930, Section 4 (3) deals with the contract of sale and the agreement to sell. Here it is clarified that an agreement to sell also comes under sale. A ‘Contract of Sale’ is a type of contract where one party (the seller) agrees to transfer ownership of goods to another party (the buyer) for money.
A contract of sale may be an agreement to sell or an arrangement to sell. In a contract of sale, when there is an actual sale of goods, it is called a sale. But if there is an intention to sell the goods at a certain future time or if certain conditions are satisfied, it is called a contract to sell.
Overview Of The Sale
A sale occurs when two or more parties sign an executed contract. Once all parties have fulfilled their obligations, it will be fully implemented. After that, ownership will immediately transfer to the buyer(s). Additionally, the seller must have the property or plot to complete the sale.
There are two types of sales. absolute and contingent. An absolute sale occurs when the goods are transferred without any dues. A conditional sale, however, involves small recurring payments for transfer. In a sale, the buyer typically assumes the risk of loss or damage to the property for a certain amount.
About the Agreement to Sell
A contract of sale is an executed contract. A sale is an act in an executory contract. In a contract of sale, sellers and buyers agree to transfer the property at a specified future date rather than immediately. Until this transfer takes place, the indemnity accrues to the seller.
The agreement to sell precedes the sale deed. If the buyer cannot meet the given conditions, the seller can resell the property as ownership has not yet been transferred. This may vary depending on the specific terms of the contract.
Sale and Agreement to Sell: Difference
The main difference between a sale and a contract of sale lies in the transfer of ownership. In a sale, the seller immediately transfers property ownership to the buyer. But in an agreement to sell, both parties agree to transfer ownership after fulfilling certain conditions specified in the agreement.
Until these conditions are met, the seller remains the owner of the goods. The buyer has a contractual right to take possession later. Essentially, a sale is a completed transaction, whereas an agreement to sell is a promise to sell in the future.
| Parameter | Sale | Agreement to Sell |
| Meaning | Transfer of ownership from seller to buyer in exchange for money | Transfer of ownership from seller to buyer at a later date |
| Nature | Immediate transfer of ownership | Promise to transfer ownership later after fulfilling certain conditions |
| Type of Contract | Simple contract | Conditional contract |
| Title | The title is transferred to the buyer with the execution | The title is not transferred until the agreed-upon future date |
| Transfer of Risk | Risk is typically transferred to the buyer immediately after payment | The risk of loss or damage remains with the seller until the agreement conditions are fulfilled |
| Right to Sell | Once the contract is executed, the seller has no right to sell the property | The seller can sell the property to another party if the buyer is unable to meet the agreement conditions |
| Tax | Liable for sale tax | May vary as per the jurisdiction, and the terms of the agreement |
| Consequences of damage to the goods | Buyers bear the cost of damages after the transfer of ownership | The seller may be responsible for any loss or damages since the ownership is not transferred yet |
| Relation | It involves a direct transfer of ownership from the seller(s) to the buyer(s). | An agreement to sell consists of a promise to transfer ownership later |
| Subsequent Responsibility | The seller may be responsible for any loss or damages since the ownership has not transferred yet | loss is borne by the seller |
Difference Between Contract Of Sale And Agreement To Sell
In business transactions and legal terminology, the concepts of the contract of sale and agreement to sell are crucial to understanding. Although they are related, they differ in some fundamental respects.
A contract of sale is a legally binding contract between a buyer and a seller. Where the seller transfers ownership of the property to the buyer for monetary consideration. This is governed by the Sale of Goods Act or similar legislation in various jurisdictions.
Conclusion
According to the Indian Sale of Goods Act 1930, Section 4 (3) deals with the contract of sale and the agreement to sell. However, it is essential to understand each and every property you are investing in or buying. For more information, visit openplot.
Also read: GERA Residential: Maha RERA Canceled the Sale Agreement