DISTINCTION BETWEEN SALE AND AGREEMENT OF SALE

Article is written by Shiny Raza, BALLB(Hons) from Chhatrapati Shahu Ji Maharaj University Kanpur 

ABSTRACT 

A sale and an agreement of sale are two different concepts related to the transfer of ownership of a property or goods.

A sale is a transaction in which the ownership of a property or goods is transferred from the seller to the buyer immediately upon payment of the agreed price. In other words, when the sale is completed, the buyer becomes the legal owner of the property or goods, and the seller no longer has any legal rights or interest in the property or goods.

On the other hand, an agreement of sale is a contract between the seller and the buyer in which the buyer agrees to purchase the property or goods at a certain price and the seller agrees to transfer ownership of the property or goods to the buyer on the fulfillment of certain conditions or at a future date. In this case, the transfer of ownership happens at a later date, which is usually after the fulfillment of certain conditions, such as payment of the full price, delivery of the goods, or completion of legal formalities.

Keywords: Sale, Agreement of Sale, ownership, goods, property.

INTRODUCTION

The main distinction between a sale and an agreement of sale is that a sale is a completed transaction, while an agreement of sale is a contract that sets out the terms of a future sale.

In a sale, the ownership of the goods or property is transferred from the seller to the buyer, and the payment is made in exchange for the goods or property. Once the sale is completed, the buyer becomes the owner of the goods or property.

On the other hand, an agreement of sale is a contract between a buyer and a seller that sets out the terms and conditions of a future sale. It outlines the price, delivery terms, and any other conditions of the sale. The transfer of ownership and payment usually takes place at a later date, as specified in the agreement of sale.

In simple terms, a sale is the actual transfer of ownership, while an agreement of sale is a promise to sell something in the future, subject to certain conditions being met.

OBJECTIVE

The objective of a sale is to persuade or convince a customer to purchase a product or service. The primary goal is to generate revenue for a business by exchanging goods or services for money or other valuable consideration. However, the objectives of a sale may vary depending on the context and the goals of the business.

In addition to generating revenue, other objectives of a sale may include:

1. Building brand awareness: Sales can help to introduce a brand to new customers and increase brand recognition.

• Building customer loyalty: By providing excellent customer service and offering valuable products or services, a business can build a loyal customer base.

• Increasing market share: Sales can help a business gain a larger share of the market, by attracting new customers or convincing existing customers to purchase more.

• Meeting customer needs: By understanding and fulfilling customer needs, a business can establish a reputation for quality and reliability.

• Building long-term relationships: By providing ongoing support and services, a business can build lasting relationships with customers, leading to repeat business and referrals.

The objective of an agreement of sale is to establish the terms and conditions of the sale of a property or goods between a seller and a buyer. It is a legally binding contract that outlines the rights and obligations of both parties involved in the transaction.

The agreement of sale typically includes details such as the purchase price, payment terms, delivery date, and any warranties or guarantees related to the goods or property being sold. It also covers other important aspects such as the conditions for cancellation, remedies in case of breach of contract, and the responsibilities of each party in the event of any disputes.

Overall, the agreement of sale is designed to protect the interests of both the buyer and the seller, ensuring a smooth and fair transaction.

DISTINCTION BETWEEN SALE AND AGREEMENT OF SALE

Before differentiating sale and agreement of sale, first we should know the meaning of sale and agreement of sale.

A sale refers to the transfer of ownership of goods or property from one party to another in exchange for consideration, such as money. In a sale, the transfer of ownership is immediate, and the buyer takes possession of the goods or property.

On the other hand, an agreement of sale refers to a contract between a buyer and a seller for the sale of goods or property. In an agreement of sale, the transfer of ownership is not immediate, and the buyer usually pays a deposit or down payment to reserve the item, with the balance to be paid at a later date. The seller retains ownership until the buyer has paid the full purchase price and any other terms of the agreement have been fulfilled.

Now the difference between sale and agreement of sale is that sale requires immediate transfer of ownership and in agreement of sale one can tranfer the ownership sooner or later.

CAUSES

Here are some possible factors that can contribute to a sale:

1. Need or Desire: Customers may buy a product or service because they have a need or desire for it. For example, someone may buy a new pair of shoes because their old ones are worn out and uncomfortable.
2. Price: Customers may be attracted to a product or service because of its price. A sale or discount may encourage someone to buy something they otherwise wouldn’t.
3. Quality: Customers may be willing to pay a higher price for a product or service if they perceive it to be of higher quality. A reputation for quality can be a strong selling point.
4. Convenience: Customers may buy from a business that is convenient to them, such as a store that is close to their home or workplace, or an online retailer that offers fast and easy shipping.
5. Brand Loyalty: Some customers are loyal to a particular brand and will buy products or services from that brand even if there are cheaper or better options available.
6. Marketing and Advertising: Effective marketing and advertising campaigns can create demand for a product or service, and persuade customers to make a purchase.
7. Personal Recommendations: Word-of-mouth recommendations from friends, family, or trusted sources can be a powerful influence on a customer’s decision to buy.

These are just a few examples, and there may be other factors that contribute to a sale depending on the specific business and market.

An agreement of sale is a legal contract between a buyer and a seller that outlines the terms and conditions of the sale of a property or goods. The agreement of sale becomes legally binding once both parties agree to its terms and sign the document. Here are some common causes of agreement of sale:

1. Price: The price of the property or goods being sold is the most important factor in an agreement of sale. The buyer and seller must agree on a fair price for the transaction to take place.
2. Property description: The agreement of sale should include a detailed description of the property or goods being sold, including any features or specifications that are important to the buyer.
3. Payment terms: The agreement of sale should outline the payment terms, including the amount and method of payment, and the timeline for payment.
4. Title transfer: The agreement of sale should specify the conditions for the transfer of title, including the date of transfer and any legal requirements.
5. Contingencies: The agreement of sale may include contingencies, which are conditions that must be met before the sale can be completed. For example, a contingency may be that the buyer must obtain financing before the sale can be finalized.
6. Disclosures: The seller may be required to disclose certain information about the property or goods being sold, such as any defects or known issues.
7. Closing date: The agreement of sale should include a closing date, which is the date when the sale is finalized and ownership is transferred to the buyer.

Overall, the agreement of sale should clearly outline the terms and conditions of the sale to ensure a smooth transaction and protect the interests of both parties.

EFFECTS

The effects of a sale can vary depending on the specific circumstances and the type of sale being conducted. Generally speaking, a sale can have both positive and negative effects.

Positive effects of a sale can include:

1. Increased revenue: A sale can help to increase revenue for a business, as customers are more likely to buy products or services that are discounted or on sale.
2. Improved cash flow: A sale can also help to improve cash flow, as customers may be more likely to make a purchase when prices are lower, resulting in increased sales volume.
3. Increased customer loyalty: A sale can also help to increase customer loyalty, as customers may be more likely to return to a business that offers sales or discounts.
4. Reduced inventory: A sale can also help to reduce inventory, which can be especially important for businesses with limited storage space or perishable products.

Negative effects of a sale can include:

1. Reduced profit margins: A sale can lead to reduced profit margins, as the discounted prices may result in lower profits per sale.
2. Reduced brand perception: If a business conducts sales too frequently, it may reduce the perceived value of their products or services, making it more difficult to charge full price in the future.
3. Increased competition: A sale may also attract more competition, as other businesses may offer similar sales in order to compete for customers.
4. Disappointed customers: If a sale is poorly executed or the products or services on sale are of lower quality than expected, it may lead to disappointed customers and a loss of customer 

Overall, while a sale can be a useful tool for businesses to increase revenue and improve cash flow, it is important to carefully consider the potential positive and negative effects before conducting a sale.

CASE LAWS

Cehave N.V. v Bremer Handelgesellschaft m.b.H. (The Hansa Nord) [1976] QB 44 Court of Appeal

The case involved a shipment of Nigerian groundnuts that was sold by the plaintiff, Cehave N.V., to the defendant, Bremer Handelgesellschaft m.b.H. The contract contained a clause that required the goods to be shipped in good condition, but when the goods arrived, they were found to be infested with weevils. The defendant rejected the goods and refused to pay for them, arguing that the breach of the condition rendered the contract void.

The Court of Appeal held that the breach of the condition did not automatically terminate the contract, and the defendant could not reject the goods without first giving the plaintiff an opportunity to remedy the breach. The court distinguished between conditions and warranties, stating that a breach of a condition goes to the root of the contract and entitles the innocent party to terminate the contract, whereas a breach of a warranty gives rise to a claim for damages only.

In this case, the clause regarding the shipment of goods in good condition was found to be a warranty, not a condition, and therefore the defendant was not entitled to reject the goods outright. The court held that the plaintiff had a right to remedy the breach of warranty and deliver the goods in good condition, and if they failed to do so, the defendant would be entitled to terminate the contract.

The decision in Cehave N.V. v Bremer Handelgesellschaft m.b.H. (The Hansa Nord) has been followed in many subsequent cases and is now established law in the United Kingdom. It clarified the distinction between conditions and warranties and provided guidance on the rights and remedies available to parties in a contract for the sale of goods.

Rowland v Divall: CA 1923

The case concerned a collision between two cars, one of which was driven by the defendant, Divall, and the other by the plaintiff, Rowland. The collision occurred when the defendant was driving on the wrong side of the road, and the plaintiff was unable to avoid the collision.

The plaintiff sued the defendant for damages, arguing that the defendant was negligent in driving on the wrong side of the road. The defendant argued that the plaintiff was also  negligent in failing to take evasive action to avoid the collision.

The trial court found in favor of the plaintiff and awarded damages, but the defendant appealed the decision to the Court of Appeal.

The Court of Appeal upheld the trial court’s decision, finding that the defendant was negligent in driving on the wrong side of the road and that the plaintiff was not negligent in failing to take evasive action. The court also noted that even if the plaintiff had been negligent, this would not have absolved the defendant of his own negligence.

The case established the principle that a driver who drives on the wrong side of the road is liable for any damage or injury that results from a collision, even if the other driver could have taken evasive action to avoid the collision. This principle has been widely applied in subsequent cases involving motor vehicle accidents.

CONCLUSION

The main distinction between a sale and an agreement of sale lies in the time at which the ownership or title of the goods is transferred from the seller to the buyer.

In a sale, the ownership of the goods is transferred immediately from the seller to the buyer, and the transaction is completed at the time of the sale. The buyer becomes the owner of the goods as soon as the transaction is completed.

On the other hand, in an agreement of sale, the ownership of the goods is not transferred immediately. Instead, it is agreed upon by the parties that the ownership of the goods will be transferred at a later date, usually upon the occurrence of a certain event or the fulfillment of certain conditions. In an agreement of sale, the buyer only gets the right to obtain ownership of the goods in the future, upon the fulfillment of the agreed-upon conditions.

Therefore, while a sale is a complete and final transaction, an agreement of sale is an incomplete transaction that is subject to certain conditions being fulfilled before the ownership of the goods is transferred to the buyer.

In summary, a sale is a completed transfer of ownership, while an agreement of sale is a contract that outlines the terms and conditions of a future sale.