A ‘Contract of Sale’ is a type of contract whereby one party (seller) either transfers the ownership of goods or agrees to transfer it for money to the other party (buyer). A contract of sale can be a sale or an agreement to sell. In a contract of sale, when there is an actual sale of goods, it is known as Sale whereas if there is an intention to sell the goods, it is called an Agreement to sell. There is a little bit of confusion, regarding these two terms. Here we have presented, the differences between Sale and Agreement to sell in business law, for clear understanding.
Content: Sale Vs Agreement to sell
|Basis for Comparison||Sale||Agreement to sell|
|Meaning||When in a contract of sale, the exchange of goods for money consideration takes place immediately, it is known as Sale.||When in a contract of sale the parties to contract agree to exchange the goods for a price at a future specified date is known as an Agreement to Sell.|
|Type of Contract||Executed Contract||Executory Contract|
|Transfer of risk||Yes||No|
|Title||In sale, the title of goods transfers to the buyer with the transfer of goods.||In an agreement to sell, the title of goods remains with the seller as there is no transfer of goods.|
|Right to sell||Buyer||Seller|
|Consequences of subsequent loss or damage to the goods||Responsibility of buyer||Responsibility of seller|
|Tax||VAT is charged at the time of sale.||No tax is levied.|
|Suit for breach of contract by the seller||The buyer can claim damages from the seller and proprietary remedy from the party to whom the goods are sold.||Here the buyer has the right to claim damages only.|
|Right of unpaid seller||Right to sue for the price.||Right to sue for damages.|
Definition of Sale
A sale is a type of contract in which the seller transfers the ownership of goods to the buyer for a money consideration. Here the relationship amidst the seller and buyer is of creditor and debtor. It is the result of an agreement to sell when the conditions are fulfilled and the specified time is over. The following are the essential conditions regarding Sale:
- There must be at least two parties; one is the buyer, and other is the seller.
- The subject matter of the sale is the goods.
- Payment should be made in the country’s legal currency.
- The goods should pass from seller to buyer.
- All the necessary conditions of a valid contract should be present like free consent, consideration, a lawful object, capacity of parties, etc.
If the goods are being sold and the property is transferred to the buyer, but the seller is not paid. Then, the seller can go to the court and file a suit against the buyer for the damages and the price too. On the other hand, if the goods are not delivered to the buyer then he can also sue the seller for damages.
Definition of Agreement to Sell
An agreement to sell is also a contract of sale of goods, in which the seller agrees to transfer goods to the buyer for a price at a later date or after the fulfilment of a condition.
When there is a willingness of the both the parties to constitute a sale i.e. the buyer agrees to buy, and the seller is ready to sell the goods for monetary value. In an agreement to sell the performance of the contract is done at a future date, i.e. when the time elapses or when the necessary conditions are satisfied. After the contract is executed, it becomes a valid sale. All the necessary conditions required at the time of sale should exist in the case of an agreement to sell too.
If the seller rescinds the contract, then the buyer can claim damages for the breach of contract. On the other hand, the unpaid seller can also sue the buyer for damages.
Key Differences Between Sale and Agreement to Sell
The following are the major differences between sale and agreement to sell:
- When the vendor sells goods to the customer for a price, and the transfer of goods from the vendor to the customer takes place at 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.
- The nature of sale is absolute while an agreement to sell is conditional.
- A contract of sale is an example of Executed Contract whereas the Agreement to Sell is an example of Executory Contract.
- Risk and rewards are transferred with the transfer of 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.
- If the goods are lost or damaged subsequently, then in the case of sale it is the liability of the buyer, but if we talk about an agreement to sell, it is the liability of the seller.
- Tax is imposed at the time of sale, not at the time of agreement to sell.
- In the case of a sale, the right to sell the goods is in the hands of the buyer. Conversely, in agreement to sell, the seller has the right to sell the goods.
Under Indian Sale of Goods Act 1930, section 4 (3) deals with the contract of sale and agreement to sell, where it has been clarified that the agreement to sell also come under sale. However, there is a distinction between these two terms which we discussed above.