A Contract where the seller transfers or agrees to transfer the property in books to the buyer for a certain price is called Contract of Sale, according to Sec IV on Sale of Good Act, 1930. The Contract of Sale is of two types namely Sale and Agreement to Sell. Executed contract of sale is called Sale and if contract of sale is to be executed in future, it is Agreement to Sell.
Difference between Sale and Agreement to Sell
Title: In case of sale title gets shifted from seller to buyer. But in agreement to sell title rests with Seller himself till date.
Sales Tax: On Sale, sales tax will be imposed and agreement to sell is not chargeable to tax.
Loss on goods: Owner of the goods should bear loss on goods. In case of sale, as buyer is owner, he has to bear loss on goods. In agreement to Sell, as title rests with Seller, Seller has to face the loss on goods.
Right to Sell: The person who has title can sell the goods. In case of sale, since buyer gets title, he has right to sell. In case of agreement to Sell, as Seller has title, he has right to sell. Here let us consider hire purchase system. Under this system though buyer has procession of the articles, he cannot have title. Title comes to buyer only after payment of last installment. Therefore hire purchase system comes under agreement to sell and buyer cannot sell till Settlement of last installment.
Nature: Sale is executed contract and agreement to sell is executor contract.
Insolvency of Seller: In case of sale if seller becomes insolvent, Seller`s official receiver cannot have right on property concern because title is with seller. In case where buyer has paid any advance, to that extent buyer becomes creditor to Seller and gets final dividend from sellers official receives in full settlement.
Insolvency of Buyer: In case of sale if buyer becomes insolvent, his official receiver can have rights on property concern because title is with buyer. If seller has to receive any amount from buyer, Seller becomes creditor and takes final dividend. In case of agreement to sell, if buyer becomes insolvent, his official receiver cannot have right on property concern.
Suit for price or Damages: In case of sale, seller sues for price and in case of agreement to sell, seller can sue only for compensation.