Sales Agreement: Everything You Need to Know

8 NOV 2023

What is a Sales Agreement?

Sales Agreement

A sales agreement, also called a sales contract, is a binding contract between the seller and buyer that outlines the exchange terms. A sales agreement is most commonly created when buying a home. Understanding the intricacies of a sales agreement is vital for safeguarding your interests and ensuring a smooth deal.

The Key Components of a Sales Agreement

This contract serves as a roadmap for both parties, as it entails the rights, responsibilities, and obligations. Some of the key components that make the sales agreement are:

    1. Identification of the parties involved
    2. Description of the product or service
    3. Time limit
    4. Closing date
    5. Items included
    6. Items not included
    7. Legal description
  1. Date of walk-through inspection
  2. Liquidated damages clause

When do You Need a Sales Agreement

A sales agreement is needed whenever a buying or selling of something which is much beyond transferring ownership takes place. There are high chances of misunderstandings creep in, especially when you buy a home. Important aspects like down payment, closing charges, insurance companies, titles, financing, etc. must be understood by both parties.

A sales contract becomes necessary in another situation when someone is transferring goods, services, or property at a later date. The sales contract clearly states that every party involved in the agreement are responsible for ensuring the sales go as planned.

It is also wise to use a sales agreement to transfer a liability of a property, goods or services to a new party.


The Details Required in the Sales Agreement

The law requires the buyer to be aware and cautious before entering a property sale contract. Section 55 of the Transfer of Property Act requires the seller to provide enforceable information and disclosures to the buyer, including the following:

  1. The seller, who has absolute possession of the property has the authority to transfer the sale agreement in the favor of the buyer.
  2. It should disclose any defect in material, third-party disputes or claims if any.
  3. Details of Nil encumbrance/lien on the property.
  4. Transferring the property’s title deeds from the seller to the buyer, along with receiving the full payment and giving the buyer physical possession of the property.
  5. Paying the seller and settling all government dues for the property.
  6. The seller assures to provide additional documents to protect the buyer’s rights, like transferring utilities and municipal records to the buyer’s name.

Furthermore, the buyer should request indemnity from the seller for title issues and agreement violations, with the indemnity contract specifying entitlement to property-related costs.

The indemnity agreement remains a vital document even after signing the sale agreement. The buyer can request compensation and remedies for future title flaws from the seller, emphasizing the need for a comprehensive indemnity contract free of specific time frames or conditions. The sale agreement validity is 3 years from the date of execution.

Things to Consider Before Signing a Sales Agreement

  1. The name of the agreement should detail the identity of the respective parties, like the name, father’s name and address.
  2. List all the property elements, including the carpet area, and note that the agreement is subject to RERA laws for clarity.
  3. It is important to highlight that the seller has all the rights in terms of the possession of the property that is to be sold.
  4. Ensure that the measurements of the property are clearly stated, like the Carpet area, ,built-up area, etc.
  5. Obtain channel documents as it is mentioned from where the property was acquired that is being sold.
  6. Ensure to check the terms of payment as the agreement would state how the payment is done, either in advance or due to be paid.
  7. Verify the time limit as it should encompass the duration required for transferring the property from the seller to the buyer. Additionally, include a penalty clause to address any unjustified delays by the seller.
  8. Ensure that you attach the encumbrance certificate, which clearly states that the property is free of any mortgage, loan, or other debt.
  9. The signature of both the buyer and the seller is mandatory on every page of the agreement.
  10. Obtain the registration certificate, which is not mandatory but can be created on a stamp paper of Rs. 500 or Rs. 1000 (according to state rules). The certificate should include signatures from at least two witnesses, with their identity proofs attached to the agreement.


At Confident Group, transparency and authenticity with our homebuyers and investors are the foundations of our success. We recognize the importance of delivering a home, including critical aspects like the sales agreement.

Author - Webdura


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