Distinction between a Sale and an Agreement to Sell

A sale is a contract whereby the seller transfers the ownership of goods to the buyer for a price. An agreement to sell is a contract whereby the seller agrees to sell the goods to the buyer but the ownership of the goods does not pass until the goods are delivered.

The main difference between a sale and an agreement to sell is the time at which the ownership of the goods passes from the seller to the buyer. In a sale, the ownership of the goods passes immediately upon the sale. In an agreement to sell, the ownership of the goods does not pass until the goods are delivered.

Here are some other key differences between a sale and an agreement to sell:

  • Risk of loss: In a sale, the risk of loss of the goods passes to the buyer immediately upon the sale. In an agreement to sell, the risk of loss of the goods remains with the seller until the goods are delivered.
  • Liability for breach: If the seller breaches a contract of sale, the buyer can sue the seller for damages. If the seller breaches an agreement to sell, the buyer can sue the seller for damages only if the seller has failed to deliver the goods.
  • Statute of limitations: The statute of limitations for a breach of contract of sale is four years. The statute of limitations for a breach of an agreement to sell is three years.

Here are some MCQs on the distinction between a sale and an agreement to sell:

  1. Which of the following is a sale?
    • A seller agrees to sell goods to a buyer for $10,000. The buyer takes delivery of the goods immediately.
    • A seller agrees to sell goods to a buyer for $10,000. The buyer will take delivery of the goods in one month.
    • The answer is (a). In the first scenario, the ownership of the goods passes to the buyer immediately upon the sale. This is a sale.
  2. Which of the following is an agreement to sell?
    • A seller agrees to sell goods to a buyer for $10,000. The buyer takes delivery of the goods immediately.
    • A seller agrees to sell goods to a buyer for $10,000. The buyer will take delivery of the goods in one month.
    • The answer is (b). In the second scenario, the ownership of the goods does not pass to the buyer until the goods are delivered. This is an agreement to sell.
  3. A seller agrees to sell goods to a buyer for $10,000. The seller fails to deliver the goods. Can the buyer sue the seller for damages?
    • Yes, the buyer can sue the seller for damages.
    • No, the buyer cannot sue the seller because there was no sale.
    • The answer is (a). The seller breached the agreement to sell. The buyer can sue the seller for damages.