Difference Between Sale And Agreement To Sell

Written by: Siddharth Sharma

 

“Sale” and “Agreement to sell”, we generally study both these confusing terms under the heads of Contract Law, to be precise, under Sales of Goods Act, 1930.

In section 4(3) of the Sales of goods act both these terms find mention. It states as:

 (3) Where under a contract of sale the property in the goods in 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.

 

The other subsections are elaborative in nature, which are reads as:

(1) A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. There may be a contract of sale between one part-owner and another.

(2) A contract of sale may be absolute or conditional

(4) An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred.

 

Difference Between Both the Terms

1.       When the seller sells goods to the customer for a price, and the transfer of goods takes place on the same time, then it is known as Sale. Whereas when the seller agrees to sell the goods to the buyer at a future specified date or after the necessary conditions are fulfilled then it is known as Agreement to sell, Section 4(3).

2.       In case of sale, the buyer becomes the owner immediately whereas, in case of an agreement to sell, the seller remains the owner until that agreement is not converted into a sale.

3.       The nature of sale is absolute while an agreement to sell is conditional.

4.       The Sale is the example of executed contract whereas agreement to sell is executory contract.

I.                     Executed contract: A contract, the terms of which are already performed.

II.                   Executory contract: when the terms of the contract are yet to be perform in future, it is called executory contract.

5.       Since sale is an executed contract, which means, it can be done of existing goods only, but in agreement of sale, the goods can be either existing or future also.

6.       Risk and rewards are also transferred with the goods to the buyer in Sale. On the other hand, risk and rewards are not transferred as the goods are still in possession of the seller, Section 26.

It simply means; If the goods are lost or damaged subsequently, then in the case of sale it is the liability of the buyer, but this is not the case when it comes on agreement of sell.

7.       Tax is imposed at the time of sale, not at the time of agreement to sell.

8.       Sale gives right in rem i.e. against the whole world whereas in agreement to sell it gives right in personal i.e. between the parties only.

9.       in case of sale, if the buyer refuses to pay the money then the unpaid seller may have the right to recover money, whereas in case of an agreement to sell, if the buyer refuses to accept and pay then the seller can only sue him for damages for non-acceptance, but not for the prices.

 

Comparison Table

Let’s understand it with the help of a chart:

 

Basis of Comparison	Sale	Agreement to sell
Meaning:	When the seller sells goods to the customer for a price, and the transfer of goods takes place on the same time, then it is known as Sale.	When the seller agrees to sell the goods to the buyer at a future specified date or after the necessary conditions are fulfilled then it is known as Agreement to sell.
Nature:	Absolute.	Conditional.
Transfer of ownership:	On the immediate basis.	On later specified date or time.
Transfer of risk and rewards:	Risk and rewards are transferred from seller to the buyer.	Risk and reward remains with the seller only.
Type of Contract:	Executed.	Executory.
Goods:	Can be done only for existing goods.	Can be done for future goods also.
Right to sell:	Remains with buyer.	Remains with seller.
Consequences of subsequent loss or damage to the goods:	Responsibility of buyer.	Responsibility of seller.
Right of unpaid seller:	Right to sue for the price.	Right to sue for damages.

  

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