Agreement of sale and key provisions

Business Law

An agreement of sale is an important document used almost daily in transactions.

Things sold vary widely from immovable properties, movable properties and even intangibles. In this article, I wish to highlight some of the key provisions to watch out for in agreements of sale.

Key provisions in agreement of sale

Like in any agreement, the parties ought to be captured correctly with details as per registration documents. Natural persons/individuals use full names, date of birth, and ID number per registration documents.

For juristic persons such as companies use details as per the registration companies, such as the full registered name and registration number.

Preamble

The preamble gives background information or context to the agreement of sale. It is advisable to include that.

The transaction

The transaction being undertaken by the parties should be clear to all. You may find wording such as “the seller hereby sells to the purchaser who hereby purchases the ….” or “the seller offers to sell to the purchaser who hereby accepts to purchase from the seller the ….”

This establishes offer and acceptance.

Asset being sold

The asset being sold should be described so that it is identifiable. In the case of immovable property you use details per the deed of transfer or cession documents.

For motor vehicles, it is common to quote the registration, chassis and engine numbers.

For machines, parties may also quote the serial number.

Purchase price

The purchase should be clearly stated.

The price includes the currency and the amount in both figures and words. It should be clear whether the price includes or excludes taxes.

Payment terms

The payment terms can easily be a source of dispute or breach. The payment terms ought to be stated very clearly so that both the seller and the purchaser have the same understanding.

Currency of the agreement

It may be important to state the currency of the transaction and what may happen in the effect of currency changes.

Transfer/delivery

The agreement should state when the purchaser takes transfer or delivery of the asset, for example upon payment of the full purchase price.

Breach

An agreement of sale should state what amounts to be a breach. Some agreements state what amounts to a material breach. In addition, they state what happens in the event of breach of agreement or breach that has not been rectified.

It is common for agreements to state that in the event of a breach, the aggrieved party shall given the defaulting party written notice to rectify the breach within a certain number of days.

If breach is not rectified within that period then the aggrieved party reserves the right to summarily (immediately) terminate the agreement of sale or sue for specific performance.

Dispute resolution mechanism

This provision is critical but many people do not pay attention. The clause may provide for dispute resolution through negotiation, conciliation, mediation, arbitration or litigation.

Many people hardly pay attention only to regret when there is a dispute. Some may approach the court without exhausting arbitration, for example.

Termination

Parties may also have disputes over the termination of an agreement of sale. The clause usually provides for circumstances leading to termination and the consequences of termination.

Circumstances leading to termination may include:

By mutual agreement of the parties.

If it is no longer possible to implement the agreement.

In the event of material breach that has not been rectified.

In the event of termination it has to be clear what happens, for example:

Restitution

Currency of restitution

Any damages particularly in the event of breach

Conclusion

An agreement of sale is used almost every day. Key provisions therein include parties, preamble, description of the transaction, asset being sold, purchase price, payment terms, currency of the agreement, delivery or transfer, breach, dispute resolution mechanisms and termination.

Disclaimer

-herald