A SMOOTH SALE AND CLEAN BUY

An Agreement to sell is the first step taken towards purchase of a property. This
facilitates trouble free transfer of property based on the terms and processes that have
been already discussed and agreed to between the seller and the buyer.
Sale and purchase of immovable property requires considerable time for completion of
process and compliance of various obligations, since the stakes are high. Hence both the
parties have to come to an agreement regarding the consideration amount, mode of
payment and time duration. The terms agreed are put in writing in the form of an
agreement, which is known as Agreement to Sell. The Agreement to Sell is governed by
the provision of the Indian Contract Act 1872 and the Transfer of Property Act 1882.
Being in accordance with the provisions of the Transfer of Property Act 1882, a legally
valid contract between the parties as per the provisions of Indian Contract Act, 1872 is
mandatory.
This Contract may be oral or written. Further it may be exhaustive or open. An open
contract is just a skeleton, referring to the names of parties to the contract, property to
be sold and the consideration amount.
An exhaustive contract is a detailed one referring to the title, modes of payment, time
duration for competing the transaction, obligations to be complied with etc. In
immovable property dealings, it is not advisable to go for oral open type of contracts, as
the stakes are generally high and consequences are grave. Such contracts need to be
diligently prepared referring to minute details. The services of an expert advocate in
property matters should be availed. Section 54 of the Transfer of Property Act refers to
the Contract of Sale/Agreement to Sell.
It defines the agreement to sell as a contract that a sale of such property that a sale of
such property takes place on terms settled between the parties. It further specifies that
the agreement to sell does not create any interest in property or charge on such
property. The purchaser who has entered into an agreement to sell with the owner of

the immovable property is not entitled to any compensation if the property is acquired
by the government. Further in case of suit of injunction against the owner, the
purchaser who has entered into an agreement with the owner does not have any right
to be impeded in the suit and heard on the basis of the agreement to sell.
The rights and liabilities of the purchaser and seller:
Section 55 of the Transfer of Property Act deals with the rights and liabilities of seller
and purchaser. If the agreement to sell does not specifically refer to the rights and
liabilities of seller and purchaser, the provisions of section 55 are enforceable.
There is a caution against the use of words like as is where is basis , since in such
circumstances, the purchaser has to specifically perform the contract irrespective of the
material defect in the title of property. There is no prescribed format of agreement to
sell in respect of an immovable property. It has to be ensured that the agreement is
legally enforceable and binding on the parties and that it is not a mere formality.
Persons entering into the agreement:
Persons must be competent to enter into a contract. They must be major, sound mind
and not disqualified from contracting. The names of the parties to the contract, their
age, fathers a e, i

ase of

arried wo a , the hus a ds a e, a d pla es of their

residence should be mentioned. Care should be taken to make all the owners as parties
to the contract. In case any of the joint owners is not available to execute the
agreement, a clause is added to the agreement that all persons having interest in the
property shall execute the conveyance deed. A partnership firm is not a legal person and
as such all the partners should sign the agreement.
Exact location and description of the property agreed to be sold: Location and
description should contain the roads on which they front, the existing and former
occupations, the municipal number, street, road with complete boundaries, and
properties surrounding the property agreed to be sold. It should also include the area of
the site, built up area, floors, type of constructions, materials used etc. The details

should be exhaustive so as to identify the property clearly. Sections 21 and 22 of the

Indian Registration Act makes it mandatory to disclose the details.
Agreed consideration amount and mode of payment:
Consideration amount, the price at which the property was agreed to be transferred is
very important and an essential portion of the agreement. If the consideration amount
is not mentioned, the contract becomes void. The consideration disclosed should be in
money value, and it should not attract the provisions of exchange of property as
detailed in Sec 118 of the Transfer of Property Act. Whether the consideration amount
is adequate or not is immaterial. The agreement should disclose any part payment of
consideration or earnest money, the mode, place and time of payment of balance
money.
Production and scrutiny of documents of title:
The agreement should contain a clause that the seller should produce the documents of
title in his possession for scrutiny by the purchaser and his advocate. Sec 55 (1) of
Transfer of Property Act makes it mandatory to produce the documents for scrutiny.
Period of completion of sale process: The sale agreement should contain a clause
stipulating the time within which the purchaser will pay the full consideration amount
and get the sale deed executed and registered by the seller. It is always advisable to pay
less amount of the sale consideration as advance and further, it should be kept in mind
that the balance maximum portion of the sale consideration must be paid only at the
time of registration of the sale deed.
Conditions and obligations to be complied with:
There may be local laws and other statutory obligations to be complied with for
completion of sale. Permission may have to be procured from certain institutions. Any
such obligations to be completed and the time for such acts are to be incorporated in
the agreement.

Expenses to be met:
Sale process includes various expenses like legal fee, stamp duty, brokerage and
expenses towards statutory clearances. Terms of agreement should be clear as to who
has to meet these expenses.
Miscellaneous:
The agreement should also contain penalties for non-performance of the terms of the
agreement. The onus on the seller is that he shall during the period between the date of
agreement to sell and actual handing over of the property to the purchaser, not create
any charges no the property and at the same time maintain the property.
Remedy:
If any of the parties fail to perform, a party may sue the other party for specific
performance as per the terms of the agreement. The limitation available is three years
and it starts from the date on which the act is to be performed.
For example, a sale agreement is dated 1-7-2003, where it is mentioned the purchaser
should pay the final installment of consideration and get the conveyance completed by
the seller on 31-8-2003. The Purchaser, however, failed to pay the final installment on
31-8-2003 and the limitation started from the date.
The agreement to sell is to be executed on a requisite stamp paper as prescribed by the
state. Purchase of property is a transaction where the parties to the transaction must be
of identical mind to ensure smooth and uncomplicated execution of the transaction. The
agreement to the sale contains all the terms and conditions on the basis of which the
physical process of transfer of property will take place on a step-by-step basis. The
agreement to sell clearly defines the duties of the buyer and the seller and the tasks to
be performed by each, ultimately leading to the registration of the sale deed and thus
ensuring a successful and stress free sale and purchase of immovable property.