AGREEMENT FOR SALE

It would be a wise decision to fully aquaint oneself with the terms "Agreement", and "Sale" before we embark to understand what is an Agreement for sale and the various clauses, which normally should exist in an agreement for sale.

Agreement

As per Section 2(e) of Indian Contract Act, "every promise and every set of promises forming the consideration for each other is an agreement".

Sale

Section 54 of Transfer of Property Act, 1882 defines sale as "Sale is a transfer of ownership in exchange for a price paid or promised or part paid or part promised". Therefore, in a sale there must be transfer of ownership for some consideration and the consideration would be the price paid or agreed to be paid or partly paid and partly promised.

Contents of Agreement for Sale

Normally, the main contents of an agreement for sale are as follows :

1. Names of Vendor/s and the Purchaser/s, their ages and addresses :
   The Vendor/s and the Purchaser/s who intend to execute an agreement for sale must be competent to contract in law. It is always desirable that all persons having interest in the immovable property should be parties to the agreement. It is not the requirement of law to mention the age and address of the parties to the agreement, but it is a common practice to mention the same.
    

2. Recitals :
   It is desirable to recite important facts regarding ownership of the Vendor/s to the Property. If the property agreed to be sold is a leasehold property or is subject to mortgage, the terms and conditions of lease or mortgage are to be mentioned. Reference to any permission or prerequisite for completion of the sale should be mentioned. The recital should also mention that the Vendor has agreed to sell and the Purchaser has agreed to purchase the property at the price and on the terms and conditions mentioned in the agreement.
    

3. Detailed description of the property :
   A detailed description of the property agreed to be sold should be given in such a way so as to clearly identify the property. It is usually given in the form of a separate schedule to the agreement. The area, situation and character of the land such as freehold, leasehold, boundaries are to be mentioned in the schedule. The City Survey Number, with Hissa Number if any should also be mentioned. The Registering Officer may not accept a document if the description is not sufficient to identify the property.
    

4. Payment Clause :
   The total payment intended to be made alongside the mode thereof should be mentioned in the agreement. The amount of earnest money which is generally 10% of the purchase price must be paid by the Purchaser to the Vendor at or before the time of execution of agreement for sale must be clearly referred to. The earnest money or a part thereof may be forfeited if so agreed between the parties to the agreement when the Purchaser fails to complete the transaction. There must be clear provisions for forfeiture in case of default and time is made essence of the contract. If the Vendor fails to the complete the sale, the amount paid by the Purchaser to the Vendor under the agreement, would be a charge on the property under section 55(6)(b) of the Transfer of Property Act and can be enforced by the sale of property through the court.
    

5. Title :
   Under the Transfer of Property Act, the Vendor is under an obligation to disclose any material defect in the property or in his title, and he is supposed to produce all documents of title to the Purchaser.
    

6. Inspection of title :
   The agreement for sale usually contains a clause to the effect that the Vendor shall produce the title deeds in his possession or power for the inspection of the Purchaser or his Advocate.
    

7. Pre-requisites :
   Sometimes the sale may be subject to certain pre-requisites like obtaining the permission of Charity Commissioner in case of Public Trust Property if the apparent consideration exceeds specified sum, permission of RBI, ULC authorities etc. It should be expressly stated in the Agreement that the sale is subject to the above referred permissions as may be applicable.
    

8. Period of completion of Sale :
   An agreement for sale should provide for the time within which sale is to be completed. In the case of sale of immovable property time can be said to be of the essence of the contract if the parties have expressly agreed amongst themselves. As per Section 55 of the Indian Contract Act, when a party to the contract promises to do a certain things but fails to do so before the specified time, that contract or the unperformed part of the contract becomes voidable at the option of the promisee if the intention of the parties was that time should be the essence of the contract.
    

9. Protection of the Property by the Vendor :
   Under Section 55 (1)(e) of the Transfer of Property Act, the Vendor during the pendency of the agreement for sale, is under an obligation to protect the property. Thus, the Vendor holds the property for the Purchaser as a trustee till the completion of sale.
    

10. Handing Over of possession :
    Normally a Vendor either agrees to hand over the possession of the property on execution of Deed of Conveyance or on happening of certain events. As per Bombay Stamp Act, 1958,
    
    Explanation I of Article 25, it is clarified that if possession is transferred or agreed to be transferred either before or after or even at the time of execution of an Agreement to sell, then in all such cases, such an agreement is deemed to be a conveyance for the purpose of stamp duty accordingly attract stamp duty and accordingly on the execution of agreement itself.
     

11. Execution of Deed of Conveyance :
    The agreement of sale provides for a clause for execution of proper deed of conveyance by the Vendor and all persons interested in the property in favour of the Purchaser or his / her nominees on payment of the balance amount due in respect of the property intended to be sold.
     

12. Expenditure till the completion of sale :
    This Clause provides for payment of the outgoings of the property such as Municipal taxes, Government taxes and other dues, society outgoings before completion of sale. Usually the Vendor pays the outgoings upto the date of completion of sale and thereafter the Purchaser pays the same.
     

13. Notice for Reservations. :
    This clause is inserted in the Agreement for sale for the sake of caution, as by this clause, the Vendor gives a declaration that the property is not subject to any notice from any local authority or Government for complying with any requirement of law nor it is under reservation for any public purpose.
     

14. Handing over of Documents of title:
    A clause to the effect that on completion of sale the Vendor will handover to the Purchaser all documents of title in his possession or power is normally provided in the agreement for sale. The possession of the title deeds in the hands of the Vendor normally indicate that there is no equitable mortgage existing in respect of the property.
     

15. Default clause :
    Generally this clause will define the consequence if either of the Vendor or the Purchaser default in their respective commitments:

    1. In favour of the Vendor :
       If Purchaser makes default then the Vendor has a right to cancel the agreement by prior notice of stipulated period and in that event the Vendor can forfeit the earnest money or a part thereof and may claim damages or the Vendor will have the right to specific performance of the contract.
        

    2. In favour of the Purchaser :
       The clause provides that if the Vendor makes default, the Purchaser will have the right to cancel the agreement and claim damages and return of the earnest money or he may seek specific performance.
        

16. Legal Fees and Other Miscellaneous Expenditure :
    This clause deals with the expenditure incurred by the Vendor and Purchaser including out of pocket expenses and Lawyer’s fees required to be spent during the time of entering into an agreement for sale.
     

17. Stamp Duty and Registration :
    Normally the stamp duty and registration charges are paid by Purchaser. This clause is to be added in the agreement to record as to whether the same shall be paid by the Vendor or the Purchaser.
    
    The purpose of the above discussion is to acquiant the reader about the steps he should take to safeguard his interest. However, it is recommended that the parties should take expert advice and guidance before entering into any agreement as the compliance to the various laws relating to immovable property are very complicated and stakes involved are very heavy.

specimen

THIS AGREEMENT made at Mumbai on the __ day of ______ Two Thousand Five Between ___________________, of Mumbai, Indian Inhabitant, residing at ________________________________, hereinafter called "the Vendor" (which expression shall unless it be repugnant to the context or meaning thereof shall mean and include his heirs, legal representatives, executors and administrators) of the One Part And ________________________________, of Mumbai, Indian Inhabitant, residing at __________________________ hereinafter called "the Purchaser" (which expression shall unless it be repugnant to the context or meaning thereof shall mean and include his heirs, legal representatives, executors, administrators and assigns) of the Other Part;

WHEREAS the Vendor is a member of ______________________ Co-operative Housing Society Limited, registered under Serial No._________ of _____ (hereinafter referred to as "the said Society") and as a member of the said Society, the Vendor herein was allotted five fully-paid-up shares of the said Society of the face value of Rs.50/- (Rupees Fifty Only) each bearing distinctive Nos._________ to ____________ (both inclusive) under share certificate No.___ (hereinafter referred to as "the said Shares") and as a member of the said Society he was allotted flat No. ___, admeasuring about _____ square feet on ___ floor of building known as "_________" (hereinafter referred to as "the said Building") belonging to ______________
Co-operative Housing Society Limited situated at _______________________ (hereinafter referred to as "the said Flat");

AND WHEREAS the Vendor is now absolutely seized and possessed of and is otherwise well and sufficiently entitled to the said Flat in the said Building of the said Society;

AND WHEREAS the Vendor herein has agreed to transfer and the Purchaser has agreed to acquire all right, title and interest of the Vendor in the said Flat and the said Shares with all legal consequences including the right of occupation of the said Flat in the said building of the said Society including his right, title and interest in the said Flat for a total consideration of Rs. ________/- (Rupees ______________________ only);

AND WHEREAS the Parties hereto have agreed to reduce into writing the Terms and Conditions on which the Vendor has agreed to transfer and the Purchaser has agreed to purchase and acquire the right, title and interest of the Vendor in the said Flat including the entire interest of the Vendor in the said Society;

NOW IT IS HEREBY AGREED BY AND BETWEEN THE PARTIES HERETO AS FOLLOWS:

1. The Vendor doth hereby agree to transfer unto the Purchaser and the Purchaser doth hereby agree to purchase and acquire all the right, title and interest of the Vendor in the said Society including the said Flat admeasuring about _____ Square Feet of built up area on the ____ floor of the building known as ____________________ belonging to the ___________________ Co-operative Housing Society Limited situated at _________________________, together with the said Shares bearing distinctive Nos.________ to _______ (both inclusive) allotted under share certificate No.______ and all the right of the Vendor as to the use, occupation and enjoyment and ownership of the said Flat together with all rights, title and interest of the Vendor in the said Society for a total consideration of Rs.________/- (Rupees __________________ _______ only) to be paid by the Purchaser to the Vendor in the manner hereinafter mentioned.
    

2. The said consideration will be paid by the Purchaser to the Vendor as follows: that is to say:

   1. Rs. ________/- (Rupees_________________________ only) paid on or before execution of this agreement as Earnest Money or Deposit (the payment and receipt whereof the Vendor doth hereby admit and acknowledge and acquit, release and discharge the Purchaser from the payment and receipt thereof and every part thereof);
      and

   2. the Balance consideration of Rs. ________/- (Rupees ______________________ only) will be paid on or before ____________  and against the delivery of vacant and peaceful possession of the said Flat by the Vendor to the Purchaser.
       

3. It is agreed that in the event of any delay or default by the Purchaser in making payment of the balance consideration on the due date, the Vendor shall be entitled to give seven days notice in writing to the Purchaser making time the essence of the contract and if the Purchaser fails to make payment within such notice period, then and in that event this Agreement shall be terminated and the Vendor shall be entitled to forfeit the earnest money of Rs.__________/- Rupees __________________________ only) paid by the Purchaser on the execution hereof.
    

4. It is agreed between the parties that if there is any delay or default on the part of the Vendor in performing his part of the contract then the Purchaser shall be entitled to specific performance of this Agreement together with right to claim costs, charges and expenses and losses from the Vendor.
    

5. The Vendor doth hereby declare and convenant with the Purchaser that the said Flat is free from all encumbrances of any nature whatsoever and that the Vendor has full right, title and interest in the said Flat and has full right and authority to assign and transfer his entire interest in the said Society including the said Flat and the said Shares to the Purchaser.
    

6. The Vendor has represented to the Purchaser :-

   1. that the Vendor has paid all the dues and outgoings in respect of the said Flat up-to-date.

   2. that the said Flat is free from all encumbrances.

   3. that the said Flat belongs to the Vendor absolutely and that no other person or persons have any right, title or interest whatsoever therein by way of sale, gift, exchange, inheritance, lease, lien or otherwise in the said shares / said flat.

   4. that notwithstanding anything herein contained, any act, deed, matter or thing of whatsoever nature done by the Vendor or any person or persons lawfully or equitably claiming by from through or in trust for Him, the Vendor has himself full right, power and absolute authority to sell or transfer to the Purchaser the said Flat and his right, title and interest in the said Society and that the Vendor has not done or committed or omitted to do any act, deed, matter or thing whereby the ownership, possession and/or occupation of the said Flat by the Vendor may be rendered illegal and/or unauthorised for any reason or on any account.

   5. that the Vendor shall obtain the necessary No Objection Certificate from the said Society for transfer, sale of the interest of the Vendor in the said Society, as well as the right, title and interest of the Vendor in the said Flat as herein contained to the Purchaser and also to the admission of the Purchaser to the membership of the said Society in place and instead of the Vendor when the sale herein is completed by delivering the vacant and peaceful possession of the said flat to the Purchaser.

   6. that on payment of the full purchase price herein reserved, the Purchaser shall be entitled to the vacant and peaceful possession of the said Flat.
       

7. The Vendor doth hereby agree to sign and execute any deed or writing as well as all other papers and documents as may be required by the Purchaser for transferring the said Flat and the said shares to the name of the Purchaser in pursuance of this Agreement.
    

8. The Purchaser doth hereby covenant with the Vendor that he shall always abide by the Rules, Regulations and By-laws of the said Society and shall pay the municipal taxes and maintenance charges in respect of the said Flat from the day the Vendor delivers possession of the said Flat to the Purchaser. It is specifically agreed by and between the parties that till the said Flat is transferred in the name of the Purchaser, the Purchaser shall not be liable to pay any maintenance charges in respect of the said Flat to the said Society and the same shall be borne by the Vendor.
    

9. That the Vendor declares that his Membership of the said Society is subsisting and is in full force and has not been terminated.
    

10. The Vendor has represented to the Purchaser that the total transfer fee / transfer premium / donation payable to the said Society for transfer of the said flat / said shares of the said society in the name of the Purchaser shall be borne and paid by both the parties in equal proportion.
     

11. It is agreed between the Vendor and the Purchaser that the expenses for stamp duty on these presents or on final sale deed / transfer deed and registration charges in respect of this transfer shall be borne and paid by the Purchaser alone and the Vendor shall not be liable to pay the same or any part thereof. However, the stamp duty or duties in respect of all previous transfers in respect of the said flat shall be the responsibility of the Vendor.
     

12. The Vendor doth hereby undertake to hand over all the documents including share certificate, receipts, papers concerning the said Flat to the Purchaser against the receipt of the balance consideration of Rs. _________/- (Rupees ________________________ only).
     

13. The Vendor doth hereby undertake to do and to execute all acts, deeds, matters and things as are or may be necessary, proper or expedient for the purpose of fully and effectually transferring the said Flat and the said Shares of the said Society to and in favour of the Purchaser in the record of the said Society to enable the Purchaser to have and to hold the said Flat and the said Shares absolutely.

IN WITNESS WHEREOF the parties hereto have hereunto set and subscribed their respective hands and on the day and the year first hereinabove stated.