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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