Difference between Sale and Agreement to Sell

Contract:

It is an agreement made between two or more parties which the law will enforce.

According to [Sec 2(h)] of Indian Contract Act 1872 defines

“A contract is an agreement enforceable by law”.

According to Salmond

“A contract is an agreement creating and defining obligation between the parties.”

Difference between Sale and Agreement to Sell

1. Transfer of property

Sale : The property of goods passes from the seller to the buyer immediately. So the seller is no more owner of the goods sold.

In an Agreement to Sell : The transfer of property of the goods is to take place at a future time or subject to certain conditions to be fulfilled.

2. Type of goods

Sale : A sale can only be in case of existing and specific goods only.

In an Agreement to Sell : An agreement to sell is mostly in case of future and contingent goods ( associated or dependent ). Although it may refer to uncertain existing goods.

3. Risk of loss

Sale : In a sale if the goods are destroyed , the loss falls on the buyer even though the goods are in the posssession of the seller.

In an Agreement to Sell : In an Agreement to Sell if the goods are destroyed the loss falls on the seller even though the goods are in the posssession of the buyer.

4. Consequences of the breach

Sale : In a sale the buyer fails to pay the price of goods (or) if there is a breach of contract by the buyer the seller can sue for the price even though the goods are still in his possession.

In an Agreement to Sell : If there is a breach of contract by the buyer the seller can only sue for the damages and not for the price.

5. Right to re-sell

Sale : In a sale the seller cannot re-sell the goods.

In an Agreement to Sell : The buyer who takes the goods for consideration and without notice of the prior agreement gets him a good title. The original buyer can only sue the seller for damages.

6. General and particular property

Sale : The sale of contract plus conveyance and creates ‘Jus in rem’ i.e., gives right to the buyer to enjoy the goods as against the word and large including the seller.

In an Agreement to Sell : An agreement to sell is merely a contract pure and simple and creates ‘Jus in personam’ i.e., gives a right to the buyer against the seller to sue for the damages.

7. Insolvency of buyer

Sale : In a sale if the buyer becomes insolvent before he pays for goods, the seller in the absence of the lien over the goods, must return them to the official receiver or assignee. He can only claim the reteable dividend for the price of the goods.

In an Agreement to Sell : In an Agreement to Sell , If the buyer becomes insolvent and has not yet paid the price the seller is not bound to part with the goods until he is paid for.

8. Insolvency of the seller

Sale : In a sale the seller becomes insolvent, the buyer being the owner is entitled to recover the goods from the official receiver of the assignee.

In an Agreement to Sell : If the buyer who has paid the price, finds that the seller has become insolvent he can only claim a reteable dividend and not the goods because property in them has not yet passed to him.

A "sale" is (colloquially) a completed transaction where the only remaining duties of the buyer may be timely rejection after inspection, and the only remaining duty of seller is to honor any express or implied warranty. This assumes the full price was paid during the sale and the goods were delivered, otherwise, the sale is not technically complete.

An "agreement to sell" is a contract that envisions (or defines) a future sale, thus all conditions precedent and other terms (delivery, payment, etc), continue to be "executory", that is, are yet to be fully carried out. A breach of this contract could result in a court order of specific performance, or for damages caused by the loss of the opportunity to buy or sell.

Difference between Sale and Agreement to Sell:Sale is an executed contract while agreement to sell is an executory contract. In sale property transfers immediately at the time of sale but in agreement to sell   property  is transferred after sometime. A sale creates jus-in-ram (right against the whole world). But agreement to sell create jus-in-personam (right against an individual)  In case of sale risk passes along with the property, in case of agreement to sell as the property   is not transferred, risk is also not transferred. 

Difference between Sale and Agreement to SellSection 4(1) of the sale of Goods Act defines a contract of sale of goods as – “a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price”.

The definition of contract of sale of goods reveals that either actual sale or an agreement to sell both are covered under the act. But, there are certain differences between the two.

Where in a contract of sale, the property in the goods is immediately transferred from the buyer to the seller it is called a sale.

Where under a contract of sale, the transfer of property in the goods is to take place in the future or after the fulfillment of certain conditions, it is called ‘An agreement to sell”.

A sale and an agreement to sell can be distinguished as:-

i) Transfer of Property (Ownership): In a sale, the property in goods or the ownership is immediately transferred from the seller to the buyer.

In an agreement to sell the property in the goods is not transferred immediately at the time of contract, but the ownership is transferred at a later time either at the expiry of a certain period or fulfillment of certain condition. Until then, the seller continues to be the owner of the goods.

ii) Risk of Loss: The general rule is that, unless otherwise agreed, the risk of loss passes with property. In case of sale, if the goods are destroyed the loss falls on the buyer, even if the buyer is not in possession of goods because the ownership has been transferred.

In an agreement to sell, the loss is to be borne by the seller because the ownership has still not passed on to the buyer, even if the buyer has possession of it.

iii) Consequences of Breach: In case of sale, if the buyer fails or refuses to pay the price of the goods, the seller can sue for the price, even if he has the possession of goods.

In an agreement to sell, if the buyer fails to accept and pay the price, the seller can sue him only for damages and not for the price, even if the goods in possession of the buyer.

iv) Right of Resale: In a sale the property of goods is immediately transferred to the buyer and so the seller (even if the goods are in his possession) cannot result the goods. If the seller does so, the subsequent buyer cannot acquire the title to the goods. The original buyer can recover the goods from the third person and can also sue the seller for the breach of contract.

In an agreement to sell, the seller can sell the goods to anyone as he has the property of goods and the new buyer gets the title of goods as he purchases the goods for consideration and without any notice of prior agreement. In such  a case the original buyer can only sue for damages.

v) Buyers Insolvency: In a sale, if the buyer becomes insolvent before he pays the price of the goods, the seller will have to deliver the goods to the official assignee or receiver and he can only claim dividend for the price of the goods.

In an agreement to sell, if the buyer becomes insolvent and has not paid the price, the seller can refuse to deliver the goods to the official assignee or receiver until paid in full.

vi) Seller’s Insolvency: If the seller becomes insolvent then in case of sale the buyer is entitled to recover the goods from the official assignee of receiver since the ownership has been transferred to the buyer.

In case of an agreement to sell, if the buyer has paid the full price, he can only claim a rateable dividend and not the goods because the property in the goods still rests with the seller.

vii) Nature of Contract: A sale is an executed contract. An agreement to sell is an executary contract.

viii) Types of Goods: A sale can only be in the case of existing and specific goods. An agreement to sell mostly takes place in the case of future and contingent goods.

DISTINCTION BETWEEN SALE AND AGREEMENT TO SELL

A ‘Sale’ and an ‘Agreement to Sell’ can be distinguished as under: 

Basis of distinction

Sale Agreement to sell

1. Transfer of

ownership

Transfer of

ownership of goods

takes place

immediately

Transfer of ownership of

goods is to take place at a

future time or subject to

fulfillment of some

condition.

2. Executed

contract or

Executory

contract

It is an executed

contract because

nothing remains to be

done.

It is an executory contract

because something remains

to be done.

3. Conveyance

of property

Buyer gets a right to

enjoy the goods

against the whole

world including

seller. There fore, a

sale creates jus in

rem (Right against

property).

Buyer does not get such

right to enjoy the goods. It

only creates jus in personam

(Right against the person).

4. Transfer of

risk

Transfer of risk of

loss of goods takes

place immediately

because ownership is

transferred. As a

result, in case of

destruction of goods,

the loss shall be

borne by the buyer

even though the

goods are in the

possession of the

seller.

Transfer of risk of loss of

goods does not take place

because ownership is not

transferred. As a result, in

case of destruction of

goods, the loss shall be

borne by the seller even

though the goods are in the

possession of the buyer.

5. Rights of

seller against

the buyer’s

breach

Seller can sue the

buyer for the price

even though the

goods are in his

possession.

Seller can sue the buyer for

damages even though the

goods are in the possession

of the buyer.

CONTRACT OF SALE :-It is defined in the following words, " A contract whereby the seller transfers or agrees to transfer the property or the goods to the buyer for a price."

There are two parts of this definition :

6. Rights of buyer

against the seller’s

breach

Buyer can sue the seller

for damaged and can sue

the third party who

bought those goods, for

goods.

Buyer can sue the

seller for damages

only.

7. Effect of

insolvency of seller

having possession of

goods

Buyer can claim the

goods from the official

receiver or assignee

because the ownership

of goods has transferred

to the buyer.

Buyer cannot claim

the goods even when

he has paid the price

because the

ownership has not

transferred to the

buyer. The buyer

who has paid the

price can only claim

rateable dividend.

8. Effect of

insolvency of the

buyer before paying

the price

Seller must deliver the

goods to the official

receiver or assignee

because the ownership

of goods has transferred

to the buyer. He can

only claim rateable

dividend for the unpaid

price.

Seller can refuse to

deliver the goods

unless he is paid full

price of the goods

because the

ownership has not

transferred to the

buyer.

1. An actual Sale :-An actual sale property in goods transfers from sellers to buyers under the contract of sale.

Example :- Suppose Miss. Rina enters into contract of sale of horse in the hand of Mr. Guru against Rs. 30,000. Mr. Guru pays Rs. 30,000 to Miss. Rina and she delivers her horse to Mr. Guru. It is a sale.

2. An Agreement to Sell :-The contract is called agreement to sell when transfer of property takes place at a future time subject to some condition to be fulfilled.

Example :- Suppose Miss. Poonam agrees with Mr. Mirza to sell him her house against Rs. 30 lac after the construction next year.

DIFFERENCE BETWEEN SALE AND AGREEMENT TO SELL :-We can analyses the difference by the following facts :

1. Transfer of Goods :-

Sale : In case of sale property is transfers from seller to buyer.

Agreement to sell : In case of agreement only promise is made to transfer the goods.

2. Nature of Performance :-

Sale : A sale is a contract which is being performed.

Agreement to sell : An agreement to sell is a contract which is to be performed.

3. Rights of Buyer and Seller :-

Sale : Goods become the property of the buyer in case of sale.

Agreement to sell : Goods remain the property of the seller in case of agreement.

4. Insolvency of Buyer :-

Sale : In a sale case seller can use his right of lien or stoppage.

Agreement to sell : In case of agreement seller can refuse to deliver the goods if price is not paid.

5. Buyer's Default :-

Sale : In case of sale, a seller can claim for the price of goods.

Agreement to sell : In case an agreement the seller can claim only for damages.

6. Seller's Insolvency :-

Sale : In case of sale a buyer has no risk.

Agreement to sell : In case of agreement a buyer can claim only dividend.

7. Seller's Default :-

Sale : In case of sale the buyer has a personal remedy.

Agreement to sell : In case of agreement the buyer can claim only for damages.

8. Responsibility of Loss :-

Sale : In case of sale the responsibility of loss by accident falls on the buyers.

Agreement to sell : In case an agreement to sell responsibility of loss falls on the sellers.