This article has been written by Yash Dodani, a second-year student at NALSAR University of Law. He has tried to explain the difference between Sale and Agreement to sell.
Introduction
A contract is a private agreement between the parties involved. It clearly shows us the features of a capitalistic market. To encourage/regulate the business transactions in these market conditions, the colonial government came up with the Indian Contract Act, 1872.[1] The Indian Contract Act is considered as the mother of the Contracts governance in India. It governs as to how the contracts are to be made and what type of considerations are valid. It also governs the sale and agreement to sale. There is a considerable difference between the sale and agreement to sell. This article will deal with that difference. Let’s see the statutes and provisions that deal with the difference.
Statutory Provisions
Section 4 of the Sales of Goods Act, 1930[2] deals with the sale and agreement to sale.
It says that- 4. Sale and agreement to sell.—
- 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.
- A contract of sale may be absolute or conditional.
- Where under a contract of sale the property in the goods is 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.
- 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.
It says that an agreement to sell is an agreement where the merchant agrees to transfer the property for a consideration. It further says that an agreement to sell can be absolute in the sense that there is no other condition apart from what was decided as a consideration. It can also be conditional in the sense that there are some other conditions that need to be fulfilled. It says that when the goods are transferred from the merchant to the buyer, it is called as sale, however when the sale will occur in a future time, then it is said to be ‘Agreement to sell’.
The essentials of a valid contract must be there along with the condition that such as there must be some goods and they should have some price, they must have some monetary value.
Sale
Section 4[1] of Sales of Goods Act defines sale as under-
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.
Section 5 of the Sales of Goods Act gives as to how the contract can be made. It says —
- A contract of sale is made by an offer to buy or sell goods for a price and the acceptance of such offer. The contract may provide for the immediate delivery of the goods or immediate payment of the price or both, or for the delivery or payment by instalments, or that the delivery or payment or both shall be postponed.
- Subject to the provisions of any law for the time being in force, a contract of sale may be made in writing or by word of mouth, or partly in writing and partly by word of mouth or maybe implied from the conduct of the parties.
It clearly says that the contract of sale can be made in writing, orally or partly in writing and partly in oral form.
Agreement to Sell
An agreement to sell is an agreement whereby the goods will be transferred in the future. It is defined under section 4[3] of SGA. An agreement to sell becomes a sale when the actual sale of the goods takes place by the specified conditions. An agreement to sell can also be said as a contingent contract under section 31 of the Indian Contract Act.
Difference between Sale and Agreement to sell
| S.No | SALE | AGREEMENT TO SELL |
| 1 | Immediate sale of goods takes place | The sale of certain goods will take place in future upon fulfilment of certain conditions |
| 2 | The sale is absolute | It is conditional because it depends on certain terms and conditions |
| 3 | Sale is an executed contract because the sale is taking place in the present | The nature of the agreement to sell is executory because the sale will take place in future |
| 4 | Risk is immediately transferred | Risk is not transferred until the goods are transferred |
| 5 | Right in rem | Right in personam |
| 6 | Seller can’t resell the good because itis sold out already | Seller can resell if the conditions are not fulfilled by the earlier buyer |
In the case of Cehave N.V. v. Bremer Handelsgesellschaft mbH; the Hansa Nord[3] certain product was to be delivered to the plaintiff by the defendant. The product was to be delivered in certain quality and some quantity was not in that quality. But the product was still in a condition to be sold but the plaintiff sued.
The court held that the sale is valid and even if the agreement to sell conditions have been breached, the plaintiff can’t cancel the contract because the sale can still be made of that product.
Conclusion
Hence, there is a considerable difference between the sale and agreement to sell which was discussed above.
References
- [1] Indian Contract Act, 1872 [Act 9 of 1872].
- [2] Sales of Goods Act, 1930 [Act 3 of 1930].
- [3] [1976] QB 44.