Difference between Sale and Agreement to Sell

The sale of commodities is one of the most important types of contract under Indian laws. Sale transfers ownership of goods immediately, whereas an Agreement to Sell only promises to transfer ownership at a future date or upon certain conditions. The Sale of Goods Act, 1930 has been codified and made as a separate enactment to contain the provisions relating to the Sale of Goods, as this was earlier contained under Sections 76 to 123 of the Indian Contract Act, 1872. This act was passed because the provisions of the Contract Act were found to be inadequate to deal with new situations that were arising due to an increase in mercantile situations.

As per Section 2 of the Sale of Goods Act, 1930, “a Contract of Sale is a term that includes both Sale and Agreement to Sell and is characterized by an offer to buy goods for a price or an offer to sell goods for a price, and acceptance of the offer.”

What is Sale?

In Sale, the goods are transferred from the seller to the buyer immediately. The sale is considered when under a contract, the goods are transferred from the seller to the buyer at an agreed price, the contract is called a Sale. A contract of sale might be made in writing or may initiated by word of mouth, or partly in writing or partly orally, or can either be implied from the conduct of the parties. The process of forming a contract of sale has been explained in Section 5 of the Act. Contract of Sale is majorly concerned with existing goods; however, it may also include owned goods, possessed goods, or future goods. The contract of sale has the following essential elements:

• There must be at least two parties.
• The subject matter of the contract should be goods.
• The contract should mention the agreed price.
• Transfer of property in goods from seller to buyer.
• The contract of sale may either be absolute or conditional.
• All other essential elements of a valid contract must exist.

For example, Ravish agreed to purchase a laptop from Barkha. Barkha quoted the price of the laptop at ₹20,000. Ravish agreed to the price and paid the same. Barkha transferred the goods to Ravish on the said date. This is a basic Contract of Sale.

What is an Agreement to Sell?

In an Agreement to Sell, the ownership of the goods is not transferred straight away. The goods are to be transferred at a future date upon the completion of certain conditions as agreed in the contract. The Agreement to Sell differs from a contract of sale of goods in the sense that there is no immediate transfer from the seller to the buyer or the transfer is to take place at a future date. The Agreement to Sell is not completed until the agreed terms of the contract are fulfilled. An Agreement to Sell is an executory contract instead of an executed contract, this means that the risks with the goods are attached to the seller until the product is transferred to the buyer. Below mentioned are the essentials of an Agreement to Sell:

• There must be at least two parties.
• The subject matter of the contract should be goods.
• The contract should mention the agreed price.
• All other essential elements of a valid contract must exist.
• The agreement should specify the time and place of delivery.
• The agreement should specify the necessary terms and conditions incidental to the sale.

For example, Ravish contracted with Barkha on 1st Dec 2023 to buy her laptop on 22nd January 2024 at a price of ₹50,000. Here the ownership of goods is not transferred immediately but all the other elements of a contract of sale are present. This is a valid Agreement of Sale.

Difference between Sale and Agreement to Sell

Basis of Difference	Sale	Agreement to Sell
Transfer of Goods	The goods are transferred to buyer immediately.	The goods are transferred to the buyer at a future date or when the conditions are fulfilled.
Nature of Contract	Sale is an executed contract; i.e., it is a type of contract for which consideration has already been paid.	Agreement to sell is an executory contract, as here the consideration will be paid at a future date.
Status of Contract	It is a completed contract.	It is an ongoing contract.
Available Remedy on Breach of Contract	The seller has the remedy to sue the buyer for the price of the goods as the goods have been transferred to the buyer.	The aggrieved party in this case can sue for damages only, as the price is to be paid on some future date.
Liability of the Party	Any subsequent damage or destruction is the liability of the buyer as the property has been transferred and the contract has been executed.	Any loss or damage shall be the responsibility of the seller and any damage or destruction does not mean discharge of the contract.
Risk	The risk of loss is on the buyer as risk follows ownership.	Any risk of loss is of the seller.
Nature of Right	Sale creates Jus in rem, which means right against the whole world.	Agreement to sell creates Jus in personam means rights against a particular party to the contract.
Right to Sale	The seller can’t resale goods.	The seller can resale the goods as the seller is in the possession of goods.
Insolvency of Seller	The official assignee can only recover the price from the buyer.	The official assignee can recover the goods but not the price.
Insolvency of Buyer	The official assignee will gain control of the goods.	The official assignee cannot gain control over the goods

Conclusion

The Sale of Goods Act, 1930 is an umbrella act that governs all forms of sales. A sale is a general contract wherein the seller or owner of particular goods transfers or agrees to transfer the goods to a buyer at an agreed price. The Sales of Goods Act, 1930 specifies all rights and duties of the seller, and other provisions that are of major prominence. The Sales of Goods Act, 1930 is centered around the contract of Sale of Goods. The act has mentioned the definition of a Sale and an Agreement to Sell, and one of the major differences is the transfer of property. Under Sale, the goods are transferred immediately and under an Agreement to Sell, the goods are transferred on some future date or fulfillment of certain conditions.

Frequently Asked Questions (FAQs)

1. What is the meaning of Goods?

Answer:

According to section 2(7)of the Sale of Goods Act, 1930 Goods means “every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land, which are agreed to be separated from the land before sale or under the contract of sale”.

2. What is a Sale?

Answer:

According to the provisions of Section 4(3) of the Sale of Goods Act, 1930 Sale means “where under a contract of sale, the property in the goods is immediately transferred at the time of making the contract from the seller to the buyer, the contract is called a Sale.” It refers to an ‘absolute sale’.

3. What is an Agreement to Sell?

Answer:

According to the provisions of Section 4(3) of the Sale of Goods Act, 1930 “an agreement to sell is when the transfer of the property in the goods is agreed to take place at a future time or it is to take place with subject to fulfilment of some condition is called an Agreement to sell.”

4. What is the nature of Contract of a Sale and an Agreement to Sell?

Answer:

A Sale is an executed contract as the consideration is paid at the time of contract and An agreement to Sell is an executory contract as the consideration will be paid at a future date or event.

5. Does the seller have the right to sell under an Agreement to Sell?

Answer:

Yes under an Agreement to Sell, the seller have the right to sale as he is in ownership of the goods.