Difference between Sale and Agreement to Sell

What is The Sales of Goods Act?

The Sales of Goods Act defines a contract where the seller is selling particular goods to the buyer for a price. It defines the different types of goods and explains who a buyer and seller are. It also covers the delivery of goods, damage, and violations to the sale. It is a mercantile law that came into existence when India was ruled by the British. It is also the act that focuses on the sale of goods where there is a transfer of title or ownership of goods from one party to the other.
 

What is 'Sale'?

As per The Sale of Goods Act,1930 a sale is a contract whereby the seller agrees to transfer or transfers the property in goods to the buyer for a price. Such an event makes the sale fixed and binding on both parties involved. There may be some conditions that may be binding on one party for the sale to happen.

A contract of sale may be by word, in writing or recorded which can be partially written and partly oral or can be implied by any sort of conduct from the parties. Section 5 is also concerned with the process of forming a contract of sale.

Essentials of Contract of Sale

There are some essentials to the contract of sale which are enumerated below:

1. There have to be at least two parties to the contract of sale

2. There must be a contract of sale of goods

3. There must be a price.

4. It can be an absolute or conditional form of contract

5. It must be compliant with all the essentials for a valid contract.

Some examples of Sale are as follows:

• A sold his Gucci shoes to B for Rs 1,00,000.

• X sold his land to Y for Rs 50,00,000.

• C sold her bag to D for Rs 5,000 after getting an upfront payment of Rs 3,000 as the rest amount is paid every month by D.

What is an Agreement to Sell?

An agreement to sell is the transfer of goods that is to take place in the future or the transfer is depending on some conditions which need to be fulfilled. An agreement becomes a sale when the fulfillment of the conditions is done or the given time elapses.

An agreement to sell essentially enumerates the terms and conditions of the offer made by the seller to the buyer. These terms and conditions establish the price, time, and methods of payment for the sale to occur. The conditions established may be the act of doing or not doing something when some event in the future happens or may not happen.

It is important to note that the terms and conditions must be established must be a mutual understanding by both the parties who must be obeyed with all the laws and regulations when making such a sale deed. An agreement to sell is a way of confirming the sale of goods that is yet to take place sometime in the future.

Some examples of an agreement to sell are as below:

• A agrees to sell his painting to B for a price of Rs 30,000 after he buys the paint and finishes the painting.

• X agrees to sell his car to Y for Rs 10,00,000 only if Y sells his watch to X.

• C agrees to sell 10 boxes of cupcakes to D for Rs 13,000 after buying her ingredients and making the cupcakes.

Difference between Sale and Agreement to Sell

1. A sale takes place immediately whereas the agreement to sell is something that requires fulfillment of terms and conditions which take place in the future.

2. During a sale there is an actual transfer of goods between the seller and a buyer. In an agreement to sell there the transfer of goods happens in the future. Hence, we can say that a sale is an executed contract whereas an agreement to sell is yet to be executed or an executory contract.

3. The nature of a sale is absolute. However, the nature of an agreement to sell is usually conditional.

4. When a sale is established, the responsibility for the consequences of the loss or damage to the goods is on the buyer. However, such responsibility is of the seller during an agreement to sell.

5. The sale deed during a sale is of the existing goods which are in possession of the seller. Whereas in an agreement to sell, it totally depends on the conditions mentioned which may change with time. Hence, it depends on the happenings of some future event.

6. The price of the goods is fixed and certain during a sale as the transfer of goods happens right then and there. However, during an agreement to sell the prices may change subject to changes in circumstances and conditions mentioned in the terms and conditions of the agreement.

7. After a sale, the buyer can claim damages and can also claim proprietary remedy which is a remedy that is sought after when the defendant usually does not have the property anymore and a trace is claimed to make the recovery. In an Agreement to sell, the buyer has the right to only claim for damages.

8. The transfer of risk is carried out immediately during a sale as the transfer of ownership happens immediately. There is no transfer of risk until or unless there is a transfer of goods in an agreement to sell.

9. After a sale the right to sell lies with the buyer whereas the right to sell remains with the seller in an agreement to sell as the transfer of goods and ownership still does not take place.

10. A sale is liable for taxes that can be levied upon such transfer of goods. An agreement to sell is not liable for the payment of any taxes unless a sale happens.

11. A sale gives rise to a right in rem which means a legal action directed towards a property and recovery of a specific object. An agreement to sell on the other hand gives rise to rights in personam which is a legal action directed against a person.

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Why Do you Need a Lawyer for Sale or Agreement to Sell?

It is important to hire a lawyer when you need to enter into an agreement, whether it pertains to a Sale or Agreement to Sell, as a civil lawyer has the expertise and the knowledge of the essential clauses that must be included in your contract, depending upon the facts and circumstances of your particular case. It is recommended to hire a lawyer to draft your contracts as if these important clauses are missing or drafted incorrectly, it could prove to be detrimental to your case.

Advocate Chikirsha Mohanty

Greater Kailash - 1, Delhi
5 years

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