Legal Definitions - agreement of sale

An agreement of sale is a legally binding contract between two or more parties that outlines the terms and conditions for the future exchange of a specific asset, such as real estate, goods, or a business, for an agreed-upon price. It details the rights and obligations of both the buyer and the seller, ensuring that the transaction proceeds as planned, even if the actual transfer of ownership (the "closing" or "completion") occurs at a later date. This document commits both parties to the transaction, provided all specified conditions are met.

Here are some examples illustrating an agreement of sale:

• Residential Property Purchase: A young couple finds their dream home and makes an offer. After negotiation, they sign an agreement of sale with the current homeowners. This document specifies the purchase price, the closing date, the amount of the earnest money deposit, and contingencies such as a satisfactory home inspection and the buyers securing mortgage approval. This agreement legally obligates both the couple to buy and the homeowners to sell the property under the agreed terms, even though the actual transfer of ownership won't happen until the closing date.

• Business Acquisition: A successful restaurant chain decides to expand by acquiring a smaller, independent bistro. The two companies enter into an agreement of sale that details the purchase price for the bistro's assets (including its lease, equipment, and goodwill), the timeline for due diligence, the conditions for the transfer of licenses, and the responsibilities of each party leading up to the final acquisition date. This agreement ensures both the buyer and seller are committed to the transaction and outlines the precise steps for the business transfer.

• Purchase of Custom-Made Goods: A client commissions a bespoke yacht from a shipbuilding company. They sign an agreement of sale that outlines the yacht's specifications, the total cost, the payment schedule (e.g., a down payment, progress payments at various construction milestones, and a final payment upon delivery), and the estimated completion date. This agreement legally binds the client to purchase the yacht upon its completion and the shipbuilding company to deliver it according to the agreed specifications and timeline.