Sales Agreement: Meaning, Types, and Importance

Published On: Jun 12, 2023Last Updated: Jul 31, 20236 min read

A sales Agreement or an agreement to sell is the legal document that governs the terms of the sale and purchase of any asset. A well-drafted sales agreement usually protects the interests of both parties, i.e., the buyer and the seller. A sales agreement usually denotes the agreement drafted before the actual purchase of assets. Hence, the sales agreement usually refers to the terms of a proposed sale transaction. Getting legal drafting services online is easy. Yet before we draft your contract for you, you should be aware of the essential terms, their types, and their importance.

Table of Content

  • What is a sales agreement?
  • What is the difference between a sale and an agreement to sell?
  • What are the essential clauses of a sales agreement?
  • Types of Sales Agreement
  • What is a sales agreement?

    The legal agreement that defines the transaction of the sale of certain goods, services, or property is a sales agreement. It revolves around the roles and responsibilities of the seller and the buyer. When you draft a sales agreement from the point of view of the buyer, it becomes a purchase agreement. As a result, it is most commonly known as a “Sale and Purchase Agreement”. The Sale of Goods Act, 1930 governs all contracts of sale in India. A sales agreement is useful in the purchase and sale of the following assets 

    1. Goods; 
    2. Services;
    3. Company Stock;
    4. Goods with ancillary services; 
    5. Real Estate Property; and
    6. Other assets

    When the parties enter a sales agreement, they agree to define the ownership of the property on a future date in exchange for a consideration. An agreement to sell will transfer into an actual sale upon completion of the ancillary conditions attached to it. 

    What is the difference between a sale and an agreement to sell?

    Generally, a sale happens after the parties agree to sell. The most important difference between a sale and an agreement to sell is the fact that an agreement to sell does not necessarily reflect a transfer of ownership. However, when the sale eventually happens, through a definite sale deed, then it means that there has been a transfer of ownership. The following points cover the difference between a sale and an agreement to sell:

    Sr No. Contract of SaleAgreement to Sell
    1It entails that transfer of ownership has taken placeAn agreement to sell soes not necessarily mean the transfer of ownership has taken place. 
    2It is also referred to as the sales deed after registration processIt is usually referred to as the sale and purchase agreement
    3Here the transaction of sale takes place immediatelyHere the transaction of sale of property is contingent to some event or fulfillment of a condition.
    4 All the risk attached to the property is also transferred through the contract of sale. In an agreement to sell, there is no transfer of risk.
    5The contract of sale is executed by registrationThe registration of an agreement to sell is not mandatory.
    The nature of a sale is absoluteThe nature of an agreement to sell is conditional.
    Difference Between Sale and Agreement to Sell

    What are the essential clauses of a sales agreement?

    An agreement to sell forms an integral part of the sale. Hence, making it important to have a sales contract that protects the rights of the parties. Below is the list of most essential clauses that both parties should be aware of, to protect their interests: 

    Party details

    In a legal agreement, it is important to define the buyer and the seller, with their specific details. 

    Details of proposed transaction

    This clause must mention the terms on which the sale is contingent. Further, the details of the property/asset being sold and the deposit to be incurred  is also required. This includes the other deliverables such as the estimated date of actual transfer etc. 

    Delivery measures 

    If the transaction is for a moveable asset, both the parties need to be aware of the delivery terms, such as who will bear the cost of delivery, when the goods will be delivered to the buyer, and consequences of damages to the goods while delivering them, etc. are all very essential to mitigate future liabilities. Further, if delivery is in parts, then each date of estimated delivery must be mentioned in the agreement. 

    Inspection of goods

    The right to inspect the goods before sale or upon delivery is the buyer’s right as well as their duty. If the buyer does not conduct proper inspection and damages are found at a later stage, then the buyer becomes liable to bear the damages to the goods/property. 


    Both parties to any sales contract must have a precise knowledge of when they will be liable legally. The liability clause gives that clear idea to all parties. Further, it also limits the extent of liability of both parties. 

    Ownership of Goods/Property

    Sale entails that there has been a transfer of ownership. However, a mere agreement to sell does not necessarily mean the transfer has taken place. Hence, in an agreement to sell, it is important to disclose the actual ownership of the property. 

    On the other hand, when you are living in a rental, the ownership stays with the Landlord. Read all about Rent Agreement in our blog.

    Payment Terms

    All terms related to payment amount, mode of payment, bank details, date of payment, consequences of non-payment are requisite for a valid sales agreement. 

    Also Read: Loan Agreement: Key Terms of Loan Contract in India

    Types of Sales Agreement

    The following three are the major types of sales agreement formats: 

    Vehicle Sale Agreement 

    A vehicle sale agreement focuses on the transfer of ownership of different vehicles. The majority of the terms in a vehicle sale agreement remains the same as a normal sale agreement format. However, specific details of the vehicles such as its mileage, model, color, etc.. also form an integral part of this sale agreement format. 

    Property Sale Agreement 

    When it comes to transfer of real estate property, buyers need to beware from falling into property related scams. A specific property sale agreement helps the buyer protect their interest. In a specific agreement, you can also mention the exact ownership- details, add the blueprint of the property, etc. 

    Sale Deed

    Sale deed is a part of conveyance deeds, such as leases, mortgage deeds, etc. here registration of the deed is mandatory. This is a document subsequent to the agreement to sell. It means that the buyer is acquiring the ownership of the product. 

    Also Read: Freelance Agreement – understand the basics!

    Why choose 

    You can get the standard drafts of an agreement to sell at low costs on the internet. However, there are certain cons tailed with such standard drafts. The major benefits of getting an agreement from experts at are: 

    • Get personalisation at its best;
    • Our experts ensure that no party incurs any unnecessary liabilities; and
    • Protect yourself from fake and misleading claims in the future. 

    Contact us today and get your draft agreement in just a few clicks! 

    Related Services

    Related Articles

    Share This Post:

    Diksha Shastri
    About the Author

    Diksha Shastri

    As a writer, Diksha aims to make complex legal subjects easier to comprehend for all. As a Lawyer, she assists startups with their legal and IPR drafting requirements. To understand and further spread awareness about the startup ecosystem is her motto.

    Leave A Comment