Are you planning to sell a property? If so, it's important to protect yourself and ensure that the sale goes smoothly. That's where an agreement to sell comes into play.
In this blog, we'll dive into everything you need to know about it. We'll cover the key components of this document, the meaning of agreement to sell, legal requirements, and its importance in various types of sales transactions. By the end of this blog, you'll have a comprehensive understanding of how it can benefit you as a seller and how to create a solid agreement that protects your interests.
What is Agreement to Sell?
We may interpret varied ideas of an Agreement to Sell. But, here what it actually means:
An agreement to sell is a legally binding document that outlines the terms and conditions of a transaction between a buyer and a seller. It's an essential tool that helps prevent misunderstandings and disputes by clearly defining the expectations and responsibilities of each party involved.
The legal definition of an agreement to sell is a contract between a buyer and a seller that sets out the terms and conditions for the sale of goods or services. It is an important document that establishes the intent of the parties to buy and sell the property and the terms of the sale, including the purchase price, payment schedule, possession date, and other important conditions.
Is Agreement to Sell a Valid Document?
An agreement to sell is usually executed before the actual sale deed or conveyance deed is signed, as it allows both parties to negotiate and finalize the terms of the sale. Once the agreement is signed, the buyer is obligated to pay the agreed-upon purchase price, and the seller is obligated to transfer the ownership of the property to the buyer as per the terms and conditions outlined in the agreement. It is an important legal document that protects the interests of both the buyer and the seller and helps to avoid any disputes or misunderstandings in the future.
Is Agreement to Sell Legally Binding?
A legally binding agreement of sale is a contract between a buyer and a seller that is enforceable by law. It is a written document that outlines the terms and conditions of a property sale, including the purchase price, payment schedule, possession date, and other important conditions.
To be legally binding, an agreement of sale must meet certain criteria. It must be signed by both parties, contain a clear description of the property being sold, and clearly state the terms and conditions of the sale. The agreement must also be entered into freely and without any undue influence or coercion.
Once an agreement of sale is signed, it becomes a legally binding contract that both parties are obligated to fulfill. If either party breaches the terms of the agreement, the other party may seek legal remedies, such as specific performance, damages, or cancellation of the contract.
It is essential for buyers and sellers to understand the legal implications of an agreement of sale and to ensure that all terms and conditions are clearly defined and agreed upon before signing the contract. It is also advisable to seek legal advice to ensure that the agreement is legally binding and enforceable.
What is an Agreement to Sell in Indian Law?
According to the Indian Contract Act, an agreement to sell is a contract where the seller agrees to transfer the ownership of the property to the buyer at a future date, subject to certain conditions, such as the payment of the purchase price, completion of documentation, and other terms agreed upon by the parties.
It is an important legal document that establishes the intention of the parties to buy and sell the property and the terms of the sale. It must contain a clear description of the property being sold, the purchase price, payment schedule, possession date, and other important conditions.
Once the agreement is signed, the buyer is obligated to pay the agreed-upon purchase price, and the seller is obligated to transfer the ownership of the property to the buyer as per the terms and conditions outlined in the agreement. It is an essential document for both parties as it protects their interests and helps to avoid any disputes or misunderstandings in the future.
In India, an agreement to sell is usually followed by the execution of a sale deed or conveyance deed, which legally transfers the ownership of the property to the buyer.
What are the Key Differences between Sale and Agreement to Sell?
Sale and Agreement to Sell are two important concepts related to the transfer of ownership of immovable property in India. While both of these terms are related to the transfer of ownership of property, there are some key differences between Sale and Agreement to Sell:
Transfer of Ownership: In a Sale, the ownership of the property is transferred from the seller to the buyer immediately upon the execution of the sale deed. On the other hand, in an Agreement to Sell, the ownership of the property is transferred from the seller to the buyer at a future date, subject to the fulfillment of certain conditions.
Payment of Purchase Price: In a Sale, the purchase price is paid at the time of execution of the sale deed, while in an Agreement to Sell, the purchase price is paid either in installments or at a future date as per the terms of the agreement.
Legal Status: A Sale is a completed transaction, and the ownership of the property is transferred to the buyer immediately. However, an Agreement to Sell is only a promise to transfer the ownership of the property at a future date, subject to the fulfillment of certain conditions.
Risk of Loss: In a Sale, the risk of loss or damage to the property is transferred to the buyer immediately upon the execution of the sale deed. In an Agreement to Sell, the risk of loss or damage to the property remains with the seller until the ownership is transferred to the buyer.
Stamp Duty and Registration: A Sale deed needs to be registered and stamp duty needs to be paid to make the transfer of ownership valid. On the other hand, an Agreement to Sell does not require registration, but stamp duty may need to be paid depending on the state laws.
While both Sale and Agreement to Sell are legally binding contracts that involve the transfer of ownership of immovable property, the key difference is that in a Sale, the ownership is transferred immediately, while in an Agreement to Sell, the ownership is transferred at a future date, subject to certain conditions.
Agreement to sell format
THIS AGREEMENT for SALE executed on the...................... day of................... 2021
between (name of seller) son of ............,, resident of......................, hereinafter called the "Vendor" of the one part and (name of buyer), son of ............, resident of...................... hereinafter called the "Purchaser" of the other part.
WHEREAS the vendor is the sole and absolute owner of the property more fully set out in the Schedule hereunder:
AND WHEREAS it is agreed that the vendor shall sell and the purchaser shall purchase the said property for the sum of Rs....................... (Rupees in words) free of all encumbrances.
NOW THIS AGREEMENT OF SALE WITNESSES AS FOLLOWS:
The price of the property more fully set out in the Schedule is fixed at Rs.......................(Rupees......................) free of all encumbrances.
The purchaser has paid to the vendor this day the sum of Rs......................(Rupees......................) by way of earnest money for the due performance of the agreement, the receipt of which the vendor doth hereby admit and acknowledge.
The time for performance of the agreement shall be...................... months from this date, and it is agreed that time fixed herein for performance shall be the essence of this contract.
The purchaser shall pay to the vendor the balance sale price of Rs............. (Rupees.........................................................) before registration of the sale deed.
The vendor agrees that he will deliver vacant possession of the property to the purchaser before registration of the sale deed.
The vendor shall execute the sale deed in favour of the purchaser or his nominee or nominees as purchaser may require.
The vendor shall hand over all the title deeds of the property to the purchaser or his advocate nominated by him within................... days from the date of this Agreement for scrutiny of title and the opinion of the vendor's Advocate regarding title of the property shall be final and conclusive. The purchaser shall duly intimate the vendor about the approval of the title within................ days after delivering the title deeds to him or his advocate.
If the vendor's title to the property is not approved by the purchaser, the vendor shall refund to the purchaser the earnest money received by him under this Agreement and on failure of the vendor to refund the earnest money within...................... days he shall be liable to repay the same with interest thereon at...................... per cent per annum.
If the purchaser commits a breach of the Agreement, he shall forfeit the earnest amount of Rs...................... (Rupees......................) paid by him to the vendor.
If the vendor commits a breach of the Agreement, the vendor shall not only refund to the purchaser the sum of Rs................. (Rupees......................) received by him as earnest money, but shall also pay to the purchaser an equal sum by way of liquidated damages.
Nothing contained in paras 9 and 10 supra shall prejudice the rights of the parties hereto, to specific performance of this Agreement of sale.
(Schedule of Property)
IN WITNESS WHEREOF the vendor and the purchaser have set their hands to the Agreement of sale on this the..................day of...................... 2021 in the presence of the witnesses:
Witness: Vendor
Witness: Purchaser
