Agreement to sell & contract of sale
Q. Explain the difference and “agreement to sell” and contract of sale. Discuss the
essential features which govern the formation of two. (1998)
If goods are transferred under contract it is called sale. If transfer of property in goods is to
take place at a future time the contract is called an agreement to sell.
2. Contract of sale:
According to Sec 4 of sales of goods act.
“A contract where by the seller transfers or agrees to transfer the property or the
goods to the buyer for a price.
1996 CLC 1758
It was held that agreement to sell does not create any right, title or interest in immovable
property in question.
3. Form of contract of sale
(iii) Implied i. e. from the conduct of the parties.
PLD 1973 Lac. 387
It was held that 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 may be implied from conduct of the parties.
4. Essential features of sale:
Following are essential of sale.
(I) Bilateral contract:
There must be two parties the buyer and seller. The seller andbuyer must be different
Consideration for a sale of goods must be money called price. If goods are exchanged with
goods it is not sale.
The subject matter of sale must be goods meaning.
(a) Every kind of moveable property other than actionable claims and money and includes
stock and shares, growing crops, grass and attached to or forming part of the landwhich are
agreed to be served before sale or under a contract of sale.
(b) Things attaching to earth can be subject matter of sale provided they are served from
earth under the contract.
(IV) Transfer of ownership:
There must be agreement or agree to transfer the property to the buyer.
(V) Sale and agreement to sell:
The term contract of sale includes, both ‘sale’ and agreementto sell.
(VI) Essentials of a valid contract:
Contract of sale must have all the essential of a valid contract.
5. Distinction between ‘sale’ and agreement to sell:
Following are the main points of distinction.
(I) Transfer of property:
In contract of sale property is transferred from sellor to buyer.
In an agreement to sell only promise is to made to transfer the property.
In contract of sale risk is transferred by buyer.
In an agreement to sell risk remains with the owner.
(III) Types of goods:
In contract of sale there can be only existing and specific goods.
An agreement to sell is relate to future and contingent goods.
(IV) Consequences of breach:
If buyer commits default the seller may sue him for the price in contract of sale.
In an agreement to sell, the buyer can only sue for the damages.
(V) Nature of contract:
Contract of sale is an executed contract.
An agreement to sell is an executor contract.
(VI) Right of resale:
In contract of sale, seller cannot resell except in certain cases.
In an agreement to sell, the seller can resale to the new buyer.
(VII) Nature of performance:
A contract of sale is a contract which is being performed.
An agreement to sell is a contract which is to be performed.
(VIII) Insolvency of buyer:
In contract of sale, if buyer becomes insolvent seller can use his right of line or stoppage.
In an agreement to sell, seller can refuse to deliver the goods.
(IX) Insolvency of seller:
In a contract of sale buyer is entitled to recover the goods from official receiver. So he has
In an agreement to sell a buyer can only claim dividend.
To conclusion it can be said that, a contract of sale andagreement to sell are different terms. Contracts
of sale includes both the sale and an agreement to sell. Like any other contract it is formed by an offer
and acceptance by the persons of the contract. An agreement to sell becomes sale when that something
which prevented the property from passing from the seller to the buyer is done or fulfilled, resulting in
the passing of the property in the goods sold from the seller to the buyer.