Everything You Need to Know About the Difference Between Sale and Agreement to Sell

Whether you’re creating your dream home or investing in a commercial space, buying property is no small affair. Since it requires a fair bit of capital, it is important to ensure that any real estate transactions you enter go smoothly. To ensure that you buy or sell property without any hassle, you must stay abreast with the associated legal compliances and proceedings. One of the main aspects of transferring property is the contractual nature of the transaction. While it is easy to conflate contracts like a sale and an agreement to sell, there is a difference between the two. Here is a handy guide to delineate how an agreement to sell differs from a sale.

What is a Sale?

Before getting into the nitty-gritty of what is the difference between sale and agreement to sale, it is important to understand what the two terms entail. The legal statute that largely governs the buying and selling of real estate is the Transfer of Property Act of 1882. According to Section 54 of the Act, a sale has been defined as a transfer of ownership executed for a price. The price can be fully paid, promised, or partly paid and partly promised. In plain language, a sale occurs when the ownership of a property is transferred from the seller to the buyer in exchange for a certain sum.

What is an Agreement to Sell?

Next, to fully comprehend the difference between sale and agreement to sale, we need to look at the Sale of Goods Act of 1930. Section 4 (3) of the act explains the context of the difference between sale and agreement to sell. It states that when a transfer of ownership occurs between a seller and a buyer under a contract, it is known as a sale. However, when the transfer of property is dated for the future or subject to a contingency, the contract is known as an agreement to sell. So, it is safe to say that while a sale is immediate, an agreement to sell is a promise regarding a future transaction.

What is the Difference Between Sale and an Agreement to Sell?

It is common for people to assume that there is no difference between a sale and an agreement to sell. However, the definitions provided above made it clear that the two terms denote different legal proceedings. On the face of it, it is safe to say that an agreement to sell is a broader term wherein a seller and buyer agree to transfer of property in exchange for a sum at a future date. However, when this transfer takes place immediately, it is deemed as a sale. To help you understand the finer differences between sale and agreement to sell, here is a handy guide:

Meaning: As mentioned, a sale is a contract wherein the exchange of goods or transfer of property occurs immediately in exchange for a consideration. On the other hand, an agreement to sell is a future promise to transfer property from the seller to the buyer.

Transfer: In a sale, the transfer of property and ownership is immediate since it functions as an executed contract. On the other hand, an agreement to sell is an executory contract and its time of performance is set for a future date.

Legal Jurisdiction: A sale is subject to a range of statutes such as the Indian Contract Act of 1872, the Transfer of Property Act of 1882, and the Sale of Goods Act of 1930. However, an agreement to sell is primarily subject to only the Sale of Goods Act of 1930.

Rights: A sale gives the buyer a right in rem (against the entire world) whereas an agreement to sell only gives the buyer and seller rights in person (right against each other).

Title: The title of the property is transferred from the seller to the buyer once a sale is executed. However, even though an agreement to sell is in place, the title of the property resides with the seller till the execution of the sale.

Risk and Responsibility: When a sale has been executed, any loss or damage to the property is the buyer’s responsibility. Similarly, all risk associated with the property is also transferred to the buyer. On the other hand, after an agreement to sell, any loss or damage to the property is still the seller’s responsibility. The risk associated with the property also remains with the seller.

Tax: When a sale occurs, tax is charged at the time of sale depending on the nature and price of the property. No tax is levied on an agreement to sell. 

Relation: When an agreement to sell is executed, it becomes a sale. On the other hand, an agreement to sell is the basis for a sale deed.

Now that you’re more aware of the difference between sale and agreement to sale, make sure that you follow all legal compliances while entering real estate transactions. To smoothen the process, it is best to choose property developed by reliable builders like ASG Developers. With premium residential and commercial properties all over Mumbai and Thane, ASG Developers allows you to invest in spaces that make for a better life.

FAQs

The primary difference between a sale and an agreement to sale is that a sale is an immediate transfer of ownership whereas an agreement to sale is the promise to transfer ownership at a future date if certain payment terms or other conditions are fulfilled.

An agreement to sell and a sale cover different legal aspects of the transfer of a property. While an agreement to sell binds two people in a contract and bestows legal rights against each other, a sale fully transfers the ownership of property from the seller to the buyer and gives the latter rights against the world at large.

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