Legal Definitions - conditional sale

A conditional sale is a type of contract where a buyer takes physical possession of goods and has the right to use them, but the seller retains legal ownership (known as "title") until a specific condition is met. Most commonly, this condition is the buyer's full payment of the purchase price. Until that condition is satisfied, the buyer does not legally own the goods, even though they are using them.

Here are some examples to illustrate how a conditional sale works:

• Example 1: Appliance Purchase with Installment Payments

  Imagine a family purchasing a new refrigerator, oven, and dishwasher from a large electronics and appliance store. They opt for a "buy now, pay later" financing plan, agreeing to make 24 monthly payments. Under this conditional sale agreement, the family immediately takes the appliances home and begins using them. However, the store's contract specifies that the store retains legal title to all the appliances until the family has successfully made every single payment. If the family were to default on their payments, the store would have the right to repossess the appliances because, legally, they still own them.

• Example 2: Business Equipment Acquisition

  A small graphic design studio needs a high-end, professional-grade printer and scanner but lacks the immediate capital to purchase it outright. They enter into a conditional sale agreement with an office equipment supplier. The studio receives the equipment and integrates it into their daily operations. The agreement, however, clearly states that the supplier holds the legal title to the printer and scanner until the studio has completed all 36 monthly installment payments. Only after the final payment is processed does the studio become the legal owner of the equipment.

• Example 3: Rent-to-Own Furniture

  An individual needs to furnish a new apartment but prefers not to use traditional credit or make a large upfront payment. They choose a "rent-to-own" agreement for a living room set (sofa, armchair, coffee table) from a furniture store. The individual takes the furniture home and uses it daily. Each weekly payment they make contributes towards the eventual purchase price. However, the contract explicitly states that the furniture store retains legal ownership of the living room set until all scheduled payments have been successfully completed. If the individual stops making payments, the store has the right to reclaim the furniture, as they are still the legal owner.