Legal Definitions - agreement to sell

An agreement to sell is a type of contract where a seller agrees to transfer the ownership of goods to a buyer at a future date or upon the fulfillment of certain conditions. Unlike an immediate "sale," where ownership (title) passes to the buyer at the time the contract is made, an agreement to sell defers the transfer of ownership. The buyer acquires a right to the goods, but the legal title remains with the seller until the agreed-upon future time or conditions are met.

Here are some examples to illustrate this concept:

• Custom-Built Furniture: Imagine a customer visits a furniture workshop and orders a custom-designed dining table. They sign a contract today, agreeing on the design, materials, price, and a delivery date three months from now. The customer makes a deposit, and the workshop begins construction. This is an agreement to sell because the ownership of the dining table will not transfer to the customer until it is fully built, inspected, paid for, and delivered on the specified future date. Until then, the workshop retains legal title to the unfinished and finished table.

• Future Crop Purchase: A food processing company enters into a contract with a farmer to purchase 500 tons of corn from the farmer's upcoming harvest. The agreement specifies the price per ton, quality standards, and a delivery window several months in the future, after the corn has been harvested and processed. This constitutes an agreement to sell. The ownership of the corn will only transfer from the farmer to the food processing company once the corn is harvested, meets the agreed specifications, and is delivered according to the contract terms. Before that, the corn is still the farmer's property, even though a contract exists for its future sale.

• Pre-ordered Electronic Device: A technology enthusiast pre-orders a highly anticipated new smartphone model that is announced but not yet released. They pay a deposit and sign an agreement with the retailer, securing their purchase. The phone is scheduled to be released and shipped in two months. This is an agreement to sell because the customer does not gain ownership of the smartphone at the moment they place the pre-order. Ownership will transfer only when the phone is officially released, shipped by the retailer, and the full payment is processed, which occurs at a future date.