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How Sale is different from Agreement to Sale

A contract of sale is a generic term and it includes both sale and agreement to sell. Where under a contract of sale, the property in the goods is transferred from the seller to the buyer, the contract is called Sale. But where the transfer of property in the goods is to be transferred at a future time or such transfer is contingent upon fulfillment of certain conditions thereof, the contract is referred to as Agreement to Sell. An agreement to sale becomes a sale when the time elapses or contingent condition thereto is fulfilled.
Basis Sale Agreement to Sell
Nature of Transfer In the case of a sale, there is an immediate transfer of property in goods. In this case, the transfer of property in goods is postponed to a later stage and is not immediate.
Type of Goods Sale can be of only existing and specific goods. Agreement to Sell usually occurs in case of contingent and future goods. It may also take place in case of un-ascertained goods.
Right To Re-Sell Generally, in case of sale, the seller cannot re-sell the goods. If he does so then the subsequent buyer does not assume the right title to such goods. In this case, the subsequent buyer, who takes goods for consideration and without notice of the prior agreement, gets a good title. In such cases, the original buyer can only sue the seller for damages.
Risk Assumption The risk is assumed by the buyer even if the goods are in the possession of the seller. The risk is assumed by the seller even if the goods are in possession of the buyer.
Breach of Contract - Consequences If the buyer defaults the price of the goods, the seller can sue the buyer for the price of the goods even if the goods are in possession of the seller. In this case if buyer breaches the contract, the seller can sue the buyer only for damages even if the goods are in possession of the buyer.
 
General and Particular Property A sale is a combination of contract and conveyance. It creates jus in rem i.e. gives right to the buyer to enjoy the goods as against the world at large including the seller. An agreement to sell is merely a contract, pure and simple and creates jus in personam i.e. gives the right to the buyer against the seller to sue for damages.
Insolvency In case of sale, if the buyer becomes insolvent before discharging the seller’s due, in absence of any lien over the goods, must return to the official receiver or assignee. He can only claim a rateable (estimated) dividend for the price of the goods. In this case, if the buyer becomes insolvent, and has not yet paid the price, the seller is not bound to part with the goods until he is discharged in full.

Status of an unregistered Agreement to Sell:

Judiciary has taken a conflicting position pertaining to the captioned issue. The question before it for consideration was “whether an unregistered agreement to sell, acquired by delivery of possession or executed in favor of a person in possession, i.e. an agreement that conceive of part performance, of an agreement to sell as conceived by Section 53A of Transfer of Property Act 1882, can be received in evidence as proof of the agreement and as to whether a suit for specific performance would lie on the basis of such an unregistered agreement to sell.”

The object of Section 53A of the Transfer of Property Act 1882 gives a right to the defendant to protect his possession against the transferor. It is equally available against a person who claims under him such as heirs, assigns and legal representative. This section is ordinarily to be used as a defense and not as a weapon of attack.

The Hon'ble Court in the case of Gurbachan Singh V. Raghubir Singh where there is a conflict regarding the legal position as to whether a suit for specific performance can be decreed on the basis of unregistered agreement to sell in view of Section 17(1A) and the section 49 of the Registration Act. The conflicts between two Single Bench judgments came across to the court.

In the case of Gurbachan Singh V. Raghubir Singh, the Hon'ble court held that agreement to sell, acquired by delivery of possession is inadmissible in evidence if it is not registered but in the matter of Birham Pal & Ors. V. Niranjan Singh & Ors., the Court held that on the basis of section 49 of the Registration Act, such an agreement can form the basis of a suit for specific performance. These two judgments are contrary to each other and conflicting the legal position of two sections of the Indian Registration Act.

It has been judicially held that section 17(1A) merely declares that such an unregistered contract shall not be pressed into service for the purpose of Section 53(A) of the Transfer of Property Act, 1882. Section 17(1A) of the Registration Act, 1908, does not, whether in specific terms or by necessary intent, prohibit the filing of a suit for specific performance based upon an unregistered agreement to sell, that records delivery of possession or is executed in favour of a person to whom possession is delivered and the proviso to Section 49 of the Indian Registration Act, 1908 put paid to any argument to the contrary.

Further, it is legally expounded that a suit for specific performance, based upon an unregistered contract/agreement to sell that contains a clause recording part performance of the contract by delivery of possession or has been executed with a person, who is already in possession shall not be dismissed for want of registration of the contract/agreement. The proviso to Section 49 of the Registration Act, legitimizes such a contract to the extent that, even though unregistered, it can form the basis of a suit for specific performance and be led into evidence as proof of the agreement or part performance of a contract.


Hon'ble Supreme Court in the case of Suraj Lamp & Industries (P) Ltd vs State Of Haryana & Anr makes following observations while discussion scope of an agreement to sell in paragraph 11 & 12 of its judgment:

Section 54 of the TP Act makes it clear that a contract of sale, that is, an agreement of sale does not, of itself, create any interest in or charge on such property. Refer to this Court's judgment in Narandas Karsondas v. S.A. Kamtam and Anr.

The protection provided under Section 53A of the Act to the proposed transferee is a shield only against the transferor. It disentitles the transferor from disturbing the possession of the proposed transferee who is put in possession in pursuance to such an agreement.

It has nothing to do with the ownership of the proposed transferor who remains the full owner of the property till it is legally conveyed by executing a registered sale deed in favour of the transferee. Such a right to protect possession against the proposed vendor cannot be pressed in service against a third party.

It is thus clear that a transfer of immovable property by way of sale can only be by a deed of conveyance (sale deed). In the absence of a deed of conveyance (duly stamped and registered as required by law), no right, title or interest in an immovable property can be transferred.

Any contract of sale (agreement to sell) which is not a registered deed of conveyance (deed of sale) would fall short of the requirements of sections 54 and 55 of TP Act and will not confer any title nor transfer any interest in immovable property (except to the limited right granted under section 53A of TP Act).

According to TP Act, an agreement of sale, whether with possession or without possession, is not a conveyance. Section 54 of TP Act enacts that sale of immovable property can be made only by a registered instrument and an agreement of sale does not create any interest or charge on its subject matter.

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