In India List of fraud and scams in Real Estate, Goods and Services are
Increasing day by day the reason for this fraud are such as; Title fraud (Title
fraud is something where the owner is not clear), Fake Promises, Selling without
authorization, Forcefully cancellation due to prices went higher, Selling the
same unit to multiple buyers, etc, therefore, it is important to prepare proper
registered sales agreement before any deal.
This Article identifies the procedure of registering a sales agreement, the
document required for a sales agreement, registration charges, important clauses
of a sales agreement, sample format of a sales agreement, etc. This may help you
draft a sales agreement on your own.
What is a sales agreement?
Section 4(3) in the Sale of Goods Act, 1930 defines it as, "where the transfer
of the property in the goods is to take place at a future time or subject to
some condition thereafter to be fulfilled, the contract is called an agreement
A sale agreement is an important legal document that evidence ownership of goods
and property in the future. A proportion of risk reduces by clearly mentoring
the terms of a particular agreement and getting it signed by both parties, i.e.
the buyer and the seller. If one party violets it, then the other can seek
redressal by filing a suit for specific performance in civil court. The sale
agreement is not a title document. Failure to register the sale agreement of a
property could put you at high risk.
Advantages of a Sales Agreement
- Minimizes Risk
A sales agreement is always advantageous because it reduces the loss risk of a
company or individual and also reduces the risk of a person getting sued. A
proportion of risk reduces by mentioning terms clearly on the particular
agreement and get it signed by all the important parties. Having of proper sales
agreement will provide you ground to take legal action in the failure of meeting
conditions mentioned in the contract.
A sales agreement provides clarity to both buyer and seller. A sales agreement
contains all important details which are required for a valid contract and
expectations from both parties. The agreement makes both the parties stay true
to what they have agreed on while writing an agreement and avoid the risk of a
Types of A Sales Agreement
- Conditional Sale Agreement
A conditional sale agreement safeguards a seller's repossession right regarding
a transaction where a buyer purchase goods or property without giving advance
payment. Such agreement is important from a seller's point of view as it
prevents any chance of non-payment or fraud.
- Sale Agency Agreement
A sale agency agreement is usually drafted between a seller and an agent. Such
an agreement enables the seller to grant the right to sale negotiation to the
agent in exchange for a mutually used agreed commission.
- Amendment to the sale agreement
In Amendment Agreement parties decides to draft an agreement to amend one or
multiple clauses of the existing agreement.
- Commission Sale Agreement
A commission sale agreement is a legally binding document that reflects the
terms regarding the work paid on commission. Such an agreement helps in prevent
disputes that are likely to be arisen between the parties over the percentage of
commission to be paid.
Essentials of a sales agreement:
- Lawful Consideration
Lawful consideration is nothing but the value of goods and services at may be
transferred in exchange for something else of value. Thus there must be mutual
consideration between both parties.
Example: A decides to sell goods to B in exchange for Rs 1000.
- Free Consent
Section 13 of the Indian Contract Act 1872, "Consent is when to or more persons
agrees upon the same thing and in the same sense."
Example: A agrees to sell his bike to B.
- Competent Parties
Competent parties are parties who are themselves legally capable of entering
into the agreements and contracts. Peoples who may not qualify as competent
parties include minors and people with severe mental disabilities.
Example: A is a 14year old child who wants to purchase land from B who is
60years old person, hence this contract will not be considered valid.
- Two Parties
There must be a minimum of two parties to the agreement of sales. In a sale
agreement contract, the ownership of goods has to pass from one party to another
party. Hence the seller and buyer must be different persons because one person
cannot be both the buyer and the seller.
Example: A is buying a car from B.
- Transfer of Ownership
In a sale agreement, ownership over goods and services or property is
transferred to the buyer by the seller.
Example: A agreed to buy a new bike at Rs. 50000 from agent B. A paid the price
and got the bike registered in his name and the registration book was delivered
by B to A. hence ownership of the bike transferred to A.
The Procedure for registering a sales agreement
As per Section 17 of the Indian Registration Act, 1908, any agreement for the
transfer of any interest in immovable property of value more than one hundred
rupees, is required to be registered. A sale agreement is compulsory to make a
sale deed in the future. To be considered valid evidence in a court of law the
agreement of sale needs to be registered.
The agreement should be registered in the Sub-Registrar Office within four
months from the date of execution of the document.
The Sub-Registrar verifies
the document to ascertain whether it is legal to register it or not. He further
verifies that the full stamp duty is paid. In his presence, both the parties
executing the document admits that they have executed the document presented for
registration. Parties who are present and admitting to executing the document
are then personally identified by two independent witnesses. Both parties and
witnesses present, again sign in the presence of a sub-registrar on an
additional page attached to the document.
Parties photograph to the document and
also thumb impression is taken and then photograph and thumb impression is
affixed on the additional page attached to the document. The sub-registrar puts
his official seal on each page of the document and on the last page he signs the
document as being registered. He records the content of the document, including
the additional pages, either by photocopying the content or by scanning the
content of the document.
The photocopy or scanned image is permanently retained
by him in his records so that in the future whenever a copy of the document is
required it can be obtained. Also, that copy becomes a public document, as
mentioned above, on the record, and after completing the above formalities the
original document is returned to the party presenting the document for
registration. This completes the process.
Documents required for a sales agreement:
- Aadhar Card of both parties (buyer and seller)
- Pan card of buyer and seller
- Passport size photographs of both the parties.
- Date and place of execution of the agreement
- Aadhar card of 2 witnesses
- The deal value and all the financial details (including TDS payment) plus
receipt of registration charge payment and stamp duty fees.
- 7/12 extract or Record of Rights and Tenancy Crops (RTC)
- A Copy of all registered last agreements (in case of resale property)
- Copy of No objection certificate under the land ceiling Act.
- Copy of Municipal tax bill
- Construction completion certificate
- Building plan authorized by the Statutory Authority
- Documents If any loan on the property (Past/Current)
- Recorded agreements between the builder and landowner.
- Allotment letter from the Builder/Co-Operative Society/Housing Board
- NOC from Apartment Association (in case of resale property)
- All title documents of a landowner
Registration Charges for a sales agreement
In every state, there are different registration charges for sales agreements,
All the charges put together can come up to 7% to 10% of the total market value
of the property or more than that. In most states in India charges are from 5%
to 7% of the total market value of the property as a stamp duty while 1% or
Rs.30000 whichever is less is charged as registration fees.
Important Clauses in a sales agreement
Every legal document consists of clauses that carry significant meaning. A
clause can be a sentence or paragraph of a document that identifies a situation
that may arise in the future and directs a lawful course of action.
The buyer of a property is always at more risk than the seller. Having the
following clauses in the Agreement to sell is a must to ensure there is no issue
in the future for all parties concerned.
- Indemnity Clause
Indemnity clauses in a sales agreement are designed to seek compensation from
the seller should there be any losses or expenses in the future possible
scenarios must be taken into account before drafting the indemnity clause.
- Penalty Clause
The token amount is generally paid by the buyer to the seller to assure his
interest in buying the property. Sometimes, the sale may not happen due to some
genuine reason or the seller might find a better deal and may not return the
token amount. To ensure the seller does not make a business out of such
transactions a penalty clause is advised.
- Transfer of Membership/Advances/Deposits
This clause prescribes the seller to pass on all privileges and conveniences
that he may have had during his ownership. Deposits made by the seller for club
membership, electricity, gas, gym, etc. subscription.
- Right to Call Of The Deal
The right to refuse and call off the agreement helps the buyer or the seller to
cancel the deal without any implication. Reasons to call off the deal may range
from personal disputes and financial constraints to loan refusal.
- Outstanding Dues
It helps to have this clause in the sales agreement as it prevents the seller
from passing his outstanding dues to the buyer. Taxes, electricity, sewage,
water, bills, etc. are covered in this clause.
Format of a Sales agreement
This is the sample format of a sales agreement
Agreement to Sales
This Agreement of sales made at
..(name of seller) S/o
..(father's name of the seller),
.(residential address of the seller)
hereinafter called the SELLER of the ONE PART
(name of the buyer) S/o
..(father's name of the buyer),
...(residential address of the buyer)
hereinafter called the BUYER of the OTHER PART
WHEREAS the SELLER is absolutely seized and possessed of or well and
sufficiently entitled to the house more fully described in the Schedule
AND WHEREAS the SELLER has agreed to sell his house to the BUYER on the terms
and conditions hereafter set forth.
NOW THIS AGREEMENT WITNESSETH AS FOLLOWS:
- The SELLER will sell and the BUYER will buy that entire house No
. More particularly described in the Schedule hereunder written for Rs.
.. Free from all encumbrances.
- The BUYER has paid a sum of Rs.
as earnest money on
receipt of which sum, the SELLER hereby acknowledges) and the balance amount of
consideration will be paid at the time of execution of the conveyance deed.
- The sale shall be completed within a period of
months from this
date and it is hereby agreed that time is the essence of the contract.
- the SELLER shall submit the title deeds of the house in his possession
or power to the BUYER's advocate within one week from the date of this agreement
for investigation of title and the BUYER will intimate about his advocate's
.. days after delivery of title deeds to his advocate.
- If the BUYER's Advocate reports that the SELLER's title is not clear, the
SELLER shall refund the earnest money, without interest to the BUYER within
Days from the date of intimation about the advocate's report by the BUYER If the
SELLER does not refund the earnest money within
from the date of intimation about the advocate's report, the SELLER will be
liable to pay interest @
% p.m. up to the date of repayment of earnest
- The SELLER declares that the sale of the house will be without
- The SELLER will hand over the vacant possession of the house on the
execution and registration of the conveyance deed.
- If the BUYER commits a breach of the agreement, the SELLER shall be
entitled to forfeit the earnest money paid by the BUYER to the SELLER and
the SELLER will be at liberty to resell the property to any person.
- If the SELLER commits a breach of the agreement, he shall be liable to
refund earnest money, received by him and a sum of Rs.
. By way of liquidated
- The SELLER shall execute the conveyance deed in favor of the purchaser
or his nominee as the purchaser may require, on receipt of the balance
- The SELLER shall at his cost obtain a clearance certificate under the
Income-tax Act, 1961 and other permissions required for the completion of
- The expenses for, preparation of the conveyance deed, cost of a stamp,
registration charges, and all other cuts of pocket expenses shall be borne
by the purchaser.
The schedule above referred to
IN WITNESS WHEREOF the parties have set their hands to this Agreement on the day
and year first hereinabove written.
Signed and delivered by Mr./Mrs.
the within named Seller
Signed and delivered by Mr./Mrs.
the within named Buyer
A sale agreement is the most important agreement which both parties should go
through it before any important deal. After drafting a genuine sale agreement
the seller and the buyer can confidently proceed without worrying about
fraudulent or doubtful transactions.
A sales agreement is always advantageous as it protects both parties in the
event of legal action. The purpose of a sales agreement is legally binding for
both parties buyer and seller involved in the exchange of money for goods &
services or properties.
Written By Advocate Aashish Chimnani
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