Agreement Of Sale | Key Terms | Things To Check | Sale Deed | Content | Differences | Supreme Court Ruling | FAQ

Until and unless you have a deep knowledge of real estate, you may think that the agreement of sale and sale deed are one and the same thing. However, this is not so. Both of these are two different documents and serve different purposes and needs. There is another document called the title deed. Each of these is different.

The agreement of sale is a document that validates the fact that the seller and buyer are entering into a deal. On the other hand, the sale deed is a document that is legal proof that enlists the buyer as the new legitimate owner of the property. So, while they do have overlapping needs, they are largely different and one has to be clear about the purpose they serve.

We will be shedding light on these details to ensure that you have a clear picture of the specifics.

What Is An Agreement Of Sale?

An agreement of sale is a property document that mainly entitles both the seller and the buyer are willing to engage in a property transaction at some point in future when they will mutually agree to the terms and conditions. However, there is no legal binding as such and it doesn’t involve any immediate transfer of ownership. The buyer will have no right to the property until the deal has been finalized.

The Terms Of The Document

In the agreement of sale, there are certain terms that need to be present. Here, they are.

  • The proposal to buy and sell the land in future
  • The value of the property
  • The details of the payment
  • Method of delivery of property
  • Complete and thorough property description
  • A disclaimer stating that the property doesn’t have any legal encumbrances
  • Delivery of the original documents when the final payment is done
  • Tax-related certificates duly transferred
  • Execution of sale deed and registration
  • Payment refund if needed
  • Loss of advance payment if the transaction isn’t made
  • Other matters related to the proposed sale

So, these are some of the terms that the agreement of sale is going to outline.

Key Things To Check

Here are the key things you need to check when you are looking to sign the sale agreement.

  • The details of the property should be well listed
  • A property map needs to be present
  • The penalty clause has to be there
  • The details of the possession
  • The time period of the transfer of property should be written
  • The address of the property
  • The Encumbrance Certificate
  • The name of the parties should be duly mentioned

What Do You Mean By A Sale Deed?

A sale deed is made when there is an actual transfer of property involved. As soon as this document is executed, the buyer will become the new owner of the property even in the books of law. So, this deed is drawn only when all the terms have been settled and both the buyer and seller agree to make a transfer of property.

sale agreement
irapong Manustrong / Shutterstock

Along with this, it is also compulsory by law books to register the sale deed at the registrar’s office as per the Registration Act, 1908.

Let us take a look at some other details in this deed.

The Details Of The Deed

Here are some of the details that are a part of the deed.

  • The complete details of the buyer and the seller
  • Thorough property description
  • The clause of sale consideration
  • The authority of the seller for selling the property
  • The references to the agreement of sale along with the payment details
  • The transfer of rights and interest of the property to the buyer
  • The clause that clearly states the seller will not have any authority over the property whatsoever
  • Compensation amount to the buyers for losses that may occur because of the negligence of the seller

Usually, it is seen that the sale deed is shorter because most of the terms have been already clearly listed in the agreement of sale.

The Key Points Of Differences

Here are some of the key differences between the two documents.

  • The agreement of sale doesn’t imply any immediate transfer of the property. It is indicative of a future sale. The sale deed implies an immediate sale.
  • Any breach of sale can result in a legal suit for damages in case of an agreement of sale. Any sale breach that occurs as per the terms of the sale deed will lead to a legal complaint that is likely to trigger monetary compensation as well
  • The agreement of sale doesn’t need to register but the sale deed has to be registered compulsorily
  • The risk and liabilities will stay with the seller in case of an agreement of sale and the sale deed implies that all risks are transferred to the user with immediate effect
  • The agreement of sale is an executory contract that hasn’t yet been implemented but the sale deed is an executed contract.

The Ruling By The Supreme Court

The supreme court stated that “Immovable property can be transferred/conveyed only by a deed of conveyance (sale deed), duly stamped and registered as required by law. We, therefore, reiterate that immovable property can be legally and lawfully transferred/conveyed only by a registered deed of conveyance.”

“Any contract of sale (agreement to sell), which is not a registered deed of conveyance (deed of sale), would fall short of the requirements of Sections 54 and 55 of the Transfer of Property Act and will not confer any title, nor transfer any interest in an immovable property (except to the limited right granted under Section 53A of the Transfer of Property Act).”

So, it is important that the sale deed is duly registered for it to be considered legally binding or else the new buyer will not be deemed as the legal owner in the eyes of the books of law.


Does the sale agreement need to be done in writing?

As per section 9 of the transfer of Property Act, you can only settle for the verbal agreement if the title of the property doesn’t exceed Rs. 100. If the value is more, you will need to register the deed in writing.

Are the sale deed and conveyance deed the same thing?

The sale deed is a type of conveyance deed. All sale deeds are conveyance deeds but not all conveyance deeds are sale deeds. Conveyance deeds also cover exchange deeds, gift deeds, and more.

Are the sale deed and the agreement of sale the same thing?

No, both deeds are different and serve varying needs. You need to understand the key purpose of both documents and use it accordingly.