What is Sale and Agreement to Sale ?

By Joy Puri



Introduction

The term trade, which typically opines the exchange of goods and services compiled with the motive of something in return, talking about the human civilization the trade of goods and services, likely began with simple barter systems during prehistoric times in the world.

The old people or the early humans were engaged in the exchange of goods and services directly, which was deciphered as a means for survival and improving their quality of life thereof. With the time passing by, as the human societies evolved from different places, so did the complexity of trade at their respective levels between the parties.

Ancient civilizations of the humans at that time like the Sumerians, Egyptians, and Indus Valley people established trade routes and networks for facilitating the exchange of goods such as spices, textiles, and metals in their trades around and in their societies.

In furtherance to the aforesaid, the establishment of the routes connected distant regions, leading to cultural exchanges and the spread of ideas, technology, and innovations. With the advent of writing and record-keeping, trade expanded over larger distances at the global stage.

Furthermore, the invention of money revolutionized trade by providing a standardized medium of exchange, which simplified transactions and further boosted economic activity of the different countries and thereby boosted the human society’s development.

Therefore, the practice of trade has been a fundamental driver of social and economic development throughout history of human civilization thereof.

Agreement to Sale

The aforementioned topic has been entailed in the statute of  Sale of Goods Act, 1930 and thereby is a vital legal concept in Indian commercial law, demarcating future or conditional transfers of goods.

The Section 4 of the aforesaid Act ordains it as a contract where the seller agrees to transfer the ownership of goods to the buyer at a future date or upon the fulfillment of specific conditions.

This does not mean that it can be synonymous to the word “sale,” where the transfer of ownership is immediate and on the spot thereof. The agreement to sell serves as a step which heads to an actual sale, highlighting the terms under which the transfer will eventually occur between the respective parties.

The concept of agreement to sale specifies that the ownership will pass from the seller to the buyer either on a future date or upon the satisfaction of certain conditions which has to be thereby fulfilled by the respective parties.

These conditions must be explicitly ordained and mutually agreed upon by both parties thereof. Rolling the eye towards the legal aspect, an agreement to sell is enforceable, binding on both the parties to their contractual obligations stated in the agreement.

This future transfer distinguishes and marks a distinction of an agreement to sell from an outright sale, emphasizing the conditional nature of the transaction and the agreements.

If either of the party fails to fulfill their commitments, the other party can seek legal remedies against the another. Until the process of the process of transfer is complete, the seller retains certain rights over the goods, including the right to retain possession and the right to resell if the buyer defaults in making the payments.

Furthermore, taking a pragmatic view, agreements to sell are common in commercial transactions involving goods that need to be manufactured, customized, or delivered at a future date between the said and respective parties.

Talking about the domain of real estate, such agreements ensure property transfers only upon meeting certain conditions, like full payment by the buyer.

Thereby it is governed by a structured framework which thereby helps manage future or conditional sales, delineating the rights and obligations of the parties involved, and providing protection for both buyers and sellers of the agreement.

Sale

The concept of sale in the ambit or the purview as seen under the Sales of Goods Act refers to a legal transaction in which the ownership of goods is transferred from the seller to the buyer in exchange for a monetary consideration, known as the price which has to be mutually agreed upon. The Act highlights the conditions under which such a transfer occurs, ensuring that the process is legally recognized and binding by its very nature.

As stated under the Sales of Goods Act, a sale is characterized by the presence of certain key elements in the very process. Firstly, there must be an agreement between the seller and the buyer. This agreement typically involves a contract wherein the seller agrees to transfer the ownership of specific goods to the buyer.

The goods in question can be existing goods owned or possessed by the seller, or they can be future goods, which the seller may manufacture or acquire after the agreement is made.

Secondly, the exchange must involve a price, which is the money consideration for the sale. This distinguishes a sale from a barter or exchange, where goods are traded without the use of money.

The price can be fixed by the contract, left to be fixed in a manner agreed by the contract, or determined by the course of dealings between the parties.

A crucial aspect of the sale under the Sales of Goods Act is the very transfer of ownership  by the parties. The moment ownership is transferred, the risk associated with the goods also typically passes to the buyer, unless otherwise agreed by the conditions.

The act or the statute also provides protections and remedies for both buyers and sellers in case of breaches of the sale contract by any of the party to the respective case thereof.

The legislation also addresses issues such as the quality and fitness of the goods, the rights of the unpaid seller, and the buyer’s rights to reject goods that do not conform to the contract and many more which help in securing the ends of Justice.

It ensures that both parties’ interests are safeguarded by, law acting as a defence weapon against the wrongdoer and that there is a clear legal framework to resolve disputes that may arise from the sale of goods thereof.

Major Distinction

The concept of sale and the agreement to sale are two different and distinctive things and concepts as we can enumerate and decipher from the above entailed facts. For a layman, the two aforesaid concepts might be same but from the eye of legal arena the concepts are distinctive by their own nature.

Taking up the matter of Sale, the transfer of the ownership is immediate by the nature of the contract. The exchange of the respective good takes place between the seller and the purchaser at that very time or within a reasonable time between the parties. Whereas in the case of agreement to sale the transfer of ownership takes place in the future or is conditional by nature as per the provisions of the agreement.

Furthermore, in the view of the aforesaid, the risk of loss in the case of loss passes to the buyer immediately  whereas rolling the eye on the other side the agreement to sale remains with the owner until and unless the ownership passes on to the buyer of the particular good. The nature of the sale is stated as executed in nature but in the case of agreement to sale the nature is Executory which means that it is yet to executed.

Conclusion

The sales of goods act is the crucial document or the statute which therefore governs the aforementioned topics in the country. The statute therefore provides and strives for the betterment of the trading in the marketplace or anywhere in the parts of the country.

It thereby boosts the trade, ensures the consumer protection in the society, encourages fair competition, facilitates the trade in the country and the exports too.

It also further improves and encourages the small and medium enterprises and thereby promoting the stimulation of innovation in the country.


Disclaimer:

The information provided in the article is for general informational purposes only, and is not intended to constitute legal advice or to be relied upon as a substitute for legal advice. Furthermore, any information contained in the article is not guaranteed to be current, complete or accurate. If you require legal advice or representation, you should contact an attorney or law firm directly. We are not responsible for any damages resulting from any reliance on the content of this website.