Difference between Agreement to SELL and Agreement for SALE

There is a bit of bewilderment and confusion which takes a silent birth in one’s mind, when he/she is asked to distinguish between Agreement to sell and Agreement for Sale.

The SALE OF GOODS ACT, 1930, groups both under a single generic name of “contracts of sale”. However, taking in consideration the scheme followed in English Sale of Goods Act, 1893, it is treated differently in Indian Jurisdictions.

The fundamental point of distinction between remains that of the transfer of the concerned goods. In an Agreement for Sale (henceforth referred as “Sale”), there is a transfer of property from the goods from seller to buyer, but there is none, in case of Agreement to Sell.

Section 77 of the Contract Act defined sale as follows:

“Sale” is the exchange of property for a price. It involves the transfer of the ownership of the thing sold from the seller to the buyer.

In order to form Sale, as stated by Benjamin on Sale1, following conditions must be satisfied:

1) An ‘agreement to sale’ by which alone the property does not pass;

2) An ‘actual sale’ by which the property passes.

By this, we may infer that, when compared, Sale is a more comprehensive and wider term just because of the fact that it contains “agreement to sell” within itself.

A sale, in an ordinary course, takes place, when by general and mutual agreement goods are transferred and respectively appropriated towards the contract2. While on the other hand, an agreement to sell, is only a promise to sell, which of course, is enforceable by law3

For a sale, to be established at a legal platform, there must be an agreement amidst the parties for the sale of the goods in which eventually property passes4.

If an agreement contemplates that some particular goods or property would pass on a future date or on the happening of some eventuality, it would become sale when that particular eventuality occurs or whenever that “future date” comes, till then the sale is deemed as an agreement to sell.

1 Section 1 of the English Act. Eighth Edition, 19502 Anwar Khan Mahboob Co. Vs. Commissioner of Sales tax 1970(2) SCC 294 3 Ram Narain Mahtovs Vs. State of Madhya Pradesh (1970) 2 SCJ 3674 State of Gujarat Vs. Variety Body Builders 1976 (3) SCC 500

Tabular and Descriptive distinction between Agreement to Sell and Sale

S.No Agreement to Sell Sale1. An agreement to sell is an executory

contract.A sale is an executed contract.

2. An agreement to sell creates a jus in personam.

A sale creates a jus in rem5.

3. In an agreement to sell in case of breach of contract by the buyer, the seller is entitled only to damages since ownership has not passed to the buyer.

In a sale since ownership has passed to the buyer, the seller is entitled to sue for the price of the goods sold, even though the goods may still remain in his possession.

4. Since ownership has not passed to the buyer, the seller is at liberty to sell the goods to third parties and the buyer can only claim damages from the seller

Since the ownership has transferred, the seller will be guilty of conversion, if he sells the goods to third parties and the buyer can sue and recover the identical goods as owner, even from third persons6.

5. Since ownership does not pass to the buyer, if goods are destroyed by an accident, the loss will be seller’s, even though the goods happen to be in the buyer’s possession.

Since ownership has passed to the buyer even if the goods are lost buy an accident, while in the seller’s possession, the loss will be the buyer’s.

6. Where a buyer who has paid for the goods in which ownership has not passed to him, finds that the seller has become bankrupt, his only right would be to claim a rateable dividend.

Since ownership has passed to the buyer, if the seller becomes bankrupt, the buyer would be entitled to recover the goods from the assignee in insolvency.

7. Where the buyer becomes a bankrupt, without paying for the goods, since ownership has not passed to the buyer, the seller may refuse to deliver the goods unless paid for.

Since ownership has passed to the buyer if the buyer becomes an insolvent, without having paid for the goods, the seller if he is not entitled to a lien over the goods, just deliver them and will be entitled only to a rateable dividend for the price due.

5 Sales Tax Officer Vs. Budh Prakash Jai Prakash AIR 1954 SC 4596 Union of India Vs. Tarachand Ramprasad Agarwal AIR 1976 MP 101