Meaning and Difference Between Sale and Agreement to Sell


Posted On : July 22, 2022
Meaning and Difference Between Sale and Agreement to Sell
Do you know what is sale and agreement to sale? According to you, is the sale deed and sale agreement same. If the previous circle of terms flabbergasted you, this is where you can get all your answers. Find out the meaning and difference between sale and agreement to sell.
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Agreement and contract are common terms used synonymously in day-to-day life. But the fact is people commonly do not know the real difference in legal terms. This confusion results in additional doubts with the related phrases and phenomena. Sale and agreement to sell is one such classic example. While buying a property, is it an agreement to sell or is it a contract of sale? Know the difference between sale and agreement to sell applicable to business transactions.

 

What is Sale and Agreement to Sale?

Before jumping to the said terms, it is better to go step by step. Given below are some legal definitions which are a must to understand the difference between sale and agreement to sell:

Agreement

As per section 2(e) of Contract Act states “every promise or set of promises forming a consideration for each other” is an agreement. Simply put, when two people agree for something in exchange of a consideration (or money), it becomes an agreement. It is not necessarily a contract since it could be betting as well which is not permissible by law. Reach out to Kolkata lawyers for contracts and agreements for in-depth understanding.

Contract

As per section 2(h) of the Indian Contract Act, 1872, “an agreement enforceable by law is a contract”. In other words, when two parties agree to certain terms in exchange of consideration which is in consonance with the existing laws, it becomes a contract. Eg, A agrees to pay B Rs 1000 in return for some goods and such a promise is mutually agreed, goods promised are legally permitted, it is a contract in the eyes of law. Valid contract is the one which complies with conditions enunciated under Sections 10 to 30 of the Indian contract which include free consent, no undue influence, no misrepresentation, etc.

Sale

Section 54 of Transfer of property provides that “sale is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised.” In other words, when the ownership of a property is handed over to another person in exchange of a certain price (whether fully or partially paid), the phenomenon is known as sale.  

Agreement to Sell

Section 4 (3) of Sale of Goods Act, 1930 directly explains this context with the words as “Where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale, but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell.” It is a promise among parties regarding a future transaction.

 

Difference Between Contract of Sale and Agreement to Sell

People usually assume the difference between agreement and contract to be nothing and that the terms are synonymous. Now that it is clear that both have different meanings in the eyes of law, it is pertinent that the difference between contract of sale and agreement to sell is there.

We can say that a contract of sale is a broader term where two parties agree to exchange goods in return for a consideration. When the exchange takes place immediately, it is termed as sale. However, when it is supposed to take place in the future, it is known as an agreement to sell. For disputes over business transactions in Kolkata, lawyer in Kolkata may be able to help legally. The difference between sale and agreement to sell in tabular form will help understand the context in an easier way.

 

Major Difference Between Sale and Agreement to Sell

Particulars of Difference

Sale

Agreement to Sell

Meaning

A contract of sale is the exchange of goods for consideration which takes place immediately. Transfer of possession and ownership is instant.

An agreement to sell is the exchange of goods for a consideration in future at a specific time or after fulfilment of specific conditions.

Conditions

May be absolute or conditional

Scheduled over a particular time or conditions

Transfer

Immediate - Executed Contract

In future - Executory Contract

Statutory Law

A contract of sale is a subject of various statutes including:

  • Indian Contract Act, 1872
  • Sale of Goods Act, 1930
  • Transfer of Property Act, 1882

An agreement to sell is mainly a subject of the Sale of Goods Act, 1930.

 

 

Nature of Rights

Gives buyer a right against the whole world (Right in rem)

Gives right to buyer and seller against each other (Right in personam)

Title

Title transfers with the execution

Title remains with the seller until sale is executed

Risk

Transferred to the buyer

Remains with the seller

Subsequent responsibility

Any subsequent loss to the property is buyer’s responsibility

After an agreement to sell, any subsequent loss is still borne by the seller

Tax

Depending upon nature and cost of  the property, tax is charged at the time of sale

No tax is charged for an agreement to sell

Subjected Property

Existing property - The property sold hereby has to be under the title of seller. Sale of a future property is not valid

It can be a property/ goods already owned (existing property), or may be a future property as well

Relation

Execution is when an agreement to sell becomes a sale

Agreement to sell is the basis of sale deed

Illustrations

When A goes to the grocery store, pay the money in return for a few Kgs of gram/ beans, etc.

Example of agreement to sell - When B agrees to sell A 5 Kg of gram/ beans every month.

 

Difference Between Agreement to Sell and Sale Deed

  • A written agreement to sell includes all terms and conditions agreed upon by the buyer and seller for a future exchange of goods and consideration. However, a sale deed contains the terms and conditions of a sale being executed. For such matters, civil lawyer in Kolkata can assist the legal matters arising in Kolkata.
  • An agreement of sale contains a future date or the set of conditions on which a future sale may take place. While a deed of contract of sale contains the date on which such sale is being executed and it does not contain any future conditions except in regard with partial payment.
  • In case of an agreement of sale, future transfer of title of goods is clearly mentioned. While in case of a sale deed, immediate transfer of ownership and title is clarified in the terms.
  • An agreement to sell is the base for future contract of sale/ sale deed. When an agreement to sell becomes a sale it is executed on the said terms only.
  • Registration of an agreement to sell is not mandatory. It may be an oral agreement as well. However, registration of a sale deed is mandatory as per applicable laws.
Written By:
Ridhi Khurana

Ridhi Khurana

Gurgaon

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