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Pankaj Tyagi
| Updated: 22 Jun, 2021 | Category: Deeds Agreements

Agreement of Sale and Sale Deed: Know the Key Differences

Agreement of Sale and Sale Deed

Though agreement of sale and sale deed sounds similar, they have some key differences. Both these documents refer to a legally binding agreement that encloses a long list of clauses for a property’s transfer. After reading this write-up, you will be able to pinpoint the key differences between these two agreements.

The formalization of property sales is done in a stage-wise manner. One of the initial paperwork that is executed, to render a legal status to an understanding between a seller and buyer, refers to an agreement of sale. This vital document is widely known as a sale agreement. But, such an agreement should not be confused with a sale deed.  

There is a common misconception that these similar-sounding agreements serve an identical purpose. However, the reality is otherwise. Have a glance over the following table that pinpoint the main difference between the agreement of sale and sale deed.

Sale Deed Agreement for sale
Sale deed refers to an actual transfer of property ownership Sale agreement is an assurance for the future transfer of property ownership
Sale deed entails detail about the buyer and seller, such as age, addresses and other details. Sale Agreement sets out conditions and norms under the property will be transferred.  
Sale deed transfer the seller’s right over the property to the new owner. Sale agreement set out rights that enable the purchaser to legally purchase the property in question upon meeting certain conditions.
Buyer has to pay the registration fee as well as stamp duty for the execution of a sale deed.
Sale agreement precedes sale deed, attest & executed by the seller as well as the buyer on a non-judicial stamp paper.
 

What Do You Mean by Agreement for Sale?

An agreement of sale refers to an agreement to sell out a property in the future. Such an agreement entails terms and conditions for the proposed transaction of the property in question. Section 54 of the Transfer of Property Act, 1882 defines the contract sale as a contract to sell the immovable property as per the conditions agreed by the involved parties.

Section 54 further states that such a property should be free of any charge or interest that hinders the parties’ interest.

It is evident from the above that an agreement of sale is nothing but an assurance to transfer a property in question in the future, on fulfillment of certain conditions set out by the parties. Therefore, this agreement defies the self-creation of any rights or interest over the property in question, for the proposed buyer.

The sale agreement specifically revolves around the purchaser’s rights to buy the property in question on the meeting of certain conditions. Similarly, the seller also has access to rights to receive the consideration from the buyer on meeting conditions meant for him/her.

In case of default of the seller to pass the property’s title to the buyer, the buyer will have access to the right of specific performance as per the Specific Relief Act, 1963[1]. The same goes with the seller as well, in case the buyer commits some statutory mistake in this context.

Agreement of sale doesn’t ensure instant transfer of property; instead, its talks about the fulfillment of certain conditions set out by the parties for the future transaction of property. It is advisable to proceed cautiously while setting out the conditions for the same.  

Read our article:An Outlook on the Essential Sale Deed Components for Property Transfer

Significance of Agreement for Sale in Legal Parlance

Signing a sale agreement is important in light of given factors: 

  • A Sale agreement serves as legal proof in a court proceeding, helping the non-offending party to demand compensation for losses triggered by the defaulter. 
  • If you are seeking a home loan, the bank would reject the application for the same if you refuse to sign an agreement of sale.
  • Adherence to the conditions mentioned in the agreement of sale is of utmost importance. Hence, any non-conformity in this context would trigger the chance of penalties and even compel the offending party to face the legal proceeding. 
  • Agreement of Sale is admissible in the court as it acts as prima-facie evidence. 

What is a Sale Deed?

A Sale deed is nothing but a statutory document for legalizing the transaction of property between the seller and the buyer. The passing of the property’s title to the new owner is only possible through this document. After being executed, the sale deed dissolves all the rights of the previous owner over the property. Therefore, the sale deed ensures the complete transfer of ownership’s right from the seller to the buyer mentioned therein. Such a document comes in handy in a legal dispute as it acts as prima-facie evidence in the legal proceeding.

The sale deed usually encloses information, such as;

  • Detail of the sellers as well as buyers, such as name, age, and addresses.
  • Property details, such as total area, exact address, and details of constructions.
  • Sale amount + advance payment paid
  • Mode of payment
  • The time frame when the property in question shall be actually passed to the buyer.
  • The exact date for the delivery of possession.
  • Indemnity clause for ensuring reimbursement of losses incurred by the buyer with regards to the property in question. It is a kind of assurance for the buyer to negate any mishaps from the seller’s end.
Key takeaway: One of the key differences between an agreement of sale and a sale deed lies in their way of execution. While the sale deed ensures instant transfer of property’s rights after being signed by either of the parties; the sale agreement waits for the predetermined time line in which it is proposed to be executed against the conditions mentioned therein. Knowing this difference will be enough for you to overcome skepticism around these documents.

Conclusion

The line that differs between that agreement of sale and sale deed is quite thin. This is the reason why most people get confused between the two. Hopefully, the information above will boost your understanding of this topic. In case of doubt, share your concern by dropping the comment in the comment section.

Read our article:Sale Deed Format: Know the Process of Drafting a Sale Deed in India

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Pankaj Tyagi

Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.

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