What Is a Sales Agreement?

A sales agreement is a contract that is considered to be one of the most important legal documents in any transaction. It defines the transaction of certain goods, services, or property and clarifies what is being purchased, the terms of the transaction, as well as the roles and responsibilities of the seller and the buyer. The buyer as well as the seller may be individuals, developers, or individuals or developers and a business. A sales agreement is considered to be valid only if it contains all critical components as defined under Section 54, Transfer of Property Act (1882). The validity of a sale agreement depends on whether certain essential elements have been covered in it. Another crucial requirement for the validity of the sale agreement is that the properly formatted copy of the agreement, which includes all the required clauses, should be signed by the buyer and the seller.

The Sales Agreement Format

For drafting a sales agreement, the format should follow a specific flow. It generally begins with –

“This Property Sales Agreement is entered into on [Date] by and between the parties listed below:

Party A [The seller, their name, address, and specific details]

Party B [The buyer, their name, address, and specific details]

The format of the sales agreement should then cover the following:

• Details of the Property: This will cover all the important details that describe the exact property in question.


• Purchase Price and Terms of Payment: This will specify the agreed-upon price of the property, followed by the plan and terms of the payment to be made.


• Title Ownership: This will be a declaration from the seller warranting clear marketable property title to the buyer, free of liens, encumbrances, and claims.


• Closing Possession: This specifies the date on which the transaction will be closed at an agreed-upon location, where possession of the property will be transferred to the buyer.


• Representations and Warranties: Here, the seller and buyer warrant to one another that they have the power and authority to enter the agreement and fulfil their obligations.


• Governing Law:This section specifies the state where the transaction is being conducted, and the laws of which govern the agreement.


• Entire Agreement:This section clarifies that the Agreement covers the entire understanding and agreement between the buyer and the seller and that it supersedes any prior understanding or agreements. This is also where both parties sign in witness thereof.

The Difference between a Sale Deed and a Sale Agreement

There is a clear difference between a sale deed and a sale agreement. The sales deed and sales agreement contract are both necessary documentation for buying property but differ in several aspects, including:

• Purpose:A property sale agreement is an implication that specifies that the property in question will be transferred from the seller to the buyer in the coming future. On the other hand, the sales deed of a property indicates that the titles of the property are to be transferred immediately or that they have already been transferred.


• Risks:Under the contract of a sales agreement, the seller remains liable for the risks that arise until the property is transferred. Under a sales deed, the risks are transferred immediately to the buyer.


• The Contract:The property or land sales agreement is a contract, under which the agreed-upon terms have not been implemented yet, which makes it an executory contract. The sales deed on the other hand is an executed contract.


• Violation:Breach of a sale agreement charges the perpetrator for terminating a contract and may lead to a suit being filed for damages. Breaching a sales deed on the other hand can lead to a legal complaint being filed along with an ask for monetary compensation.


• Contents:The sales agreement includes the terms and conditions and the contingencies of the agreement, while the sales deed covers the details of the property, transfer of ownership, and encumbrances.


• Registration:The rules concerning the registration of a property or land sales agreement vary from state to state and several states also allow you to register your sale agreement online. For instance, in Tamil Nadu, registration of the sale agreement is mandatory. However, sales deeds must mandatorily be registered across all states. Sale deeds can also be registered online.

Suggested Read:

  Sale Deed - Meaning, Format & Registration Process

Suggested Read:

Sale Deed - Meaning, Format & Registration Process

Sales Agreement: The Different Types of Agreements

• Conditional Sales Agreement

  A conditional property sale agreement is an important contract from the seller’s point of view, in transactions where a buyer plans to make a purchase without any advance payment. This agreement prevents the risks of fraud or non-payment.

• Sale Agency Agreement

  This agreement is drafted between a seller and an agent, enabling the seller to grant the rights to sale negotiation to the agent for an agreed-upon commission.

• Amendment to Sale Agreement

  An amendment agreement is drafted by the agreement of both parties for drafting an agreement that amends one or multiple clauses of the current agreement.

• Commission Sale Agreement

  This type of sales agreement reflects terms regarding work paid on commissions. Commission sale agreements help prevent disputes that may arise between the two parties over the percentage of commission that is to be paid.

Sales Agreement Registration Charges

The applicable cost for the sale agreement registration varies from state to state. However, most states in India generally charge from 5 to 7 per cent of the property’s total market value as stamp duty and 1% of the property’s total market value or Rs 30,000 (whichever is less) as the fees for registration.

There are several options in land for sale in Tambaram, Madhavaram, Poonamallee, Porur, and many other prominent localities in Chennai for real estate investors and homebuyers to choose from based on their preferences and budget. The city offers numerous advantages and lucrative opportunities in terms of real estate investments.