Sale And Agreement To Sell

Sale is termed to be transfer of ownership

Sale:

As we know, Sale is termed to be transfer of ownership in exchange for a price paid or promised or part paid or part promised. When under a contract of sale, the property within the goods is transferred from a seller to buyer is called a sale.  “A contract for sale of immovable property is a contract that a sale of such property shall take place on terms settled between the parties. It doesn’t, of itself create, any interest in or charge on such property”. When a transfer of the property in goods is transferred at a future time or such transfer is contingent upon fulfillment of certain conditions thereof, the contract is referred to as Agreement to Sell. 

 Most of the time many get confused or do not have a clear idea about the difference between sale and agreement of sale. In this article we are going to study in detail about sale and agreement of sale.

The essential elements of sale can be drafted as:

  • Competency of parties to sale- In sale there are two parties: seller who transfers the property and the buyer to whom the property is transferred.  The seller must have a right to transfer the property and the buyer should be a person who is not disqualified by law. 
  • Consideration –. Price is an essential element in all transactions of sale, and in absence of consideration transfer is not a sale. Price is fixed by the parties before a transfer takes place. It is to be an ascertained sum in a contract of sale. 
  • Subject matter- The subject matter of transfer should be immovable property. It can be tangible (e.g. Land, building) or intangible i.e., a mortgage debt, right of way, etc.  

Modes of sale:  

There are 2 modes of sale; first is by Registration of Sale deed and second is by delivery of possession. Where the sale deed requires registration title does not pass until it is registered. Where actual physical possession is not possible due to nature and kind of property, anything done by the seller which proves change in possession from seller to buyer is deemed to be delivery of possession.

Agreement to sell: 

An agreement to sell is essentially a document which constitutes the terms and conditions of sale of property by the vendor to the buyer. It is an important document in a sale transaction. The parties must understand all the terms and conditions of the agreement and have to obey those conditions until the whole process of sale is completed. Sale deed is made once the agreement of sale is drafted.  Sale deed is that document prepared at the time of full payment made by the buyer and when the actual transfer of property takes place. 

An agreement to sale becomes a sale once all the conditions are fulfilled. For instance, X agrees to sell a plot of land to B, for Rs.50, 000 only if he pays half the amount in advance. 

Difference between Sale and Agreement to sell:  

Basis of differentiationSale Agreement
Meaning Where the property is immediately transferred from seller to buyer, it is called, “sale”Where the transfer of property in goods is to take place in future, from seller to buyer is called “Agreement to sell.”
Example X sold land to B against payment of 10,000X agrees to sell land to B, on a condition that he has to give half amount of the consideration in advance. 
Rights It creates rights in Rem i.e., rights which are good against the whole world.It creates right in persona i.e., rights which can be enforced against the seller only. 
Risk Assumption Here, once the sale is done and the possession of that property is passed to the buyer, the risk is assumed by the buyer. The risk is assumed by the seller, even if the goods are in possession of the buyer. 
Nature of transfer In the contract for sale, the property transfers from seller to buyer immediately.In agreement to sale, the property transfer is transferred to a later stage and is not immediate. 
Types of goodsSale can be only of specific and existing goods and property.Agreement to sell occurs in case of contingent and future goods. It can also take place in case of unascertained goods. 

According to TP, Act, an agreement to sale with possession or without possession, isn’t conveyance. Section 54 of the transfer of property act enacts that a sale of immovable property can only be made by a registered instrument. 

Judiciary has taken a conflicting position pertaining to the status of unregistered agreement of sale. The question before it for consideration was as to whether an unregistered agreement to sell, acquired by delivery of possession or executed in favor of a person in possession, i.e. an agreement that imagine part performance, of an agreement to sell as conceived by Section 53A of Transfer of Property Act 1882, are often received conspicuous as proof of the agreement and on whether a suit for specific performance would lie on the idea  of such an unregistered agreement to sell. 

In the case of Gurbachan Singh V. Raghubir Singh, the Hon’ble court held that agreement to sell, acquired by delivery of possession is inadmissible in conscience  if it’s not registered but in  Birham Pal & Ors. V. Niranjan Singh & Ors., the Court held that on the basis of section 49 of the Registration Act, such an agreement can form the basis of a suit for specific performance. 

Conclusion: 

Sale and Agreement to sell are often confused as one and the same thing, as seen above they both are different concepts of the same topic. We can sum it down as two sides of the same coin. 

Reference

P.M.Bakshi. (2016). the transfer of property act. hyderabad: asia law house .

singh, a. (2009). The transfer of property act. new delhi: universal law publishing co.