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Unregistered agreement to sale

Shivendra Pratap Singh



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My friend has made an unregistered agreement to sale on Rs. 100 stamp paper. He did not ready to purchase my land on the price mentioned in the agreement. After five years from the date of such agreement, I sold that property to another person. My friend is threatening to file a civil suit for cancellation of that sale deed and performance of unregistered sale agreement. Please guide.

Question from: Delhi

Agreement to sale is an executable contract thus it is not a final agreement between the parties. Any party can refuse to perform his part, to which he has accepted in the agreement to sale. Whereas, sale deed is an executed contract because it transfers the right in property from seller to buyer.

Agreement to sale

Section 54 of the Transfer of Property Act (TPA), defines the agreement to sale. It says that “A contract for the sale of immovable property, is a contract that a sale of such property shall take place on the terms settled between the parties”. Agreement to sale contains only terms and conditions of proposed sale. It shows that parties are agree to buy & sell the immovable property on such terms and conditions.

According to the provisions of Section 54, the agreement to sale does not confer any right to the parties. It is not a valid documents of ownership or title of the land. Since, buyer does not pay consideration to the seller hence, agreement to sale does not creates any right in the favour of buyer. Therefore, buyer cannot claim any right in property barely on the agreement to sale.

Signing of agreement to sale does not mean that property has transferred to the buyer. It is an executable contract and its execution depends upon fulfilment of some other conditions such as payment of consideration etc. It contains terms and conditions of the proposed sale thus parties are abide by those conditions. The final sale deed will execute on those terms and conditions.

If a party is trying to recuse himself from the agreement the other party can prohibit him to do so. He can bind the other party when he is ready or willing to act on those terms and conditions. This condition is mandatory because if he is not ready then he cannot compel the other party. This is the limited use of the agreement to sale.

Sale deed

Sale deed is an executed or final contract between the buyer and seller. When seller receives value of the property (consideration) the he executes a sale deed. Registration of sale deed is mandatory if value of property is more than one hundred rupees. Sale deed is a valuable and vital evidence to prover ownership because it confers right in property to the buyer. It is an evidence of actual delivery of possession from seller to buyer.

Unregistered agreement to sale

Registration of agreement governs by the provision of Registration Act 1908. Section 17 gives a list of documents whose registration is compulsory. Agreement to sale is not subject to compulsory registration under the Registration Act. Hence, registration of agreement to sale is optional.

Can your friend file a civil suit?

Your friend cannot file a civil suit because an agreement to sale does not confer him any right. He cannot claim right in the disputed property barely on that agreement. That agreement has no legal validity after sale of that land. Your friend had enough opportunity to purchase that land but he had been stalled it for five years. His conduct proves that he was not willing to purchase that land.

You have sold the land by executing a valid sale deed, hence, the buyer has obtained an absolute right in the property. He is the bonafide purchaser, therefore, the law shall protect his right first [Ramesh Vajabhai Rabari v. Pratiksha Real Estate (P) Ltd., (2014) 12 SCC 190]. There is no ground for filing a civil suit on the basis of agreement to sale. It does not matter that it was registered or unregistered agreement.

I am a real estate broker and purchase lands from the owner on installments. So, I do prepare an agreement with the owner for sell his land in a fix period of time. For those period I promise him to pay the whole value of land in equal installments. The number of installments vary according to value of the land. I made a contract with a owner for selling of his land and payment of consideration in ten equal installments. Now, I have paid three installments but he is refusing to sign the sale deed. Thereafter, I have stopped the remaining installment but he did not agree to sign the sale deed. Now, I want to cancel the agreement. That agreement is unregistered.

Question from: West Bengal

Agreement to sale between real estate broker and landlord

This is not a valid agreement. You want to purchase the land on the payment of equal installments. In the meantime you find a buyer and want to execute sale deed from the owner. You are selling the land in parts and paying installments from the sale proceed. Thus, you are not a buyer. The real buyer is that person who is agree to pay the consideration of that land.

This is also not an agreement to sale. However, it contains terms and conditions of sale but you do not purchase whole land as a single buyer. You just engaged the owner through this illegal agreement and prevented him to sell his land as per his wish. In this situation you cannot enforce this agreement. This agreement has not valid consideration. An agreement becomes void in lack of a valid consideration.

Refund of money paid under agreement to sale

You have paid three installments therefore, you can recover it from him. I think you have evidence to prove that you have paid some money to the owner of the land. You should file a civil suit for the recovery of money. The owner has accepted those installment hence, he has to refund whole amount.

In Suraj Lamps and Industries Pvt. Ltd. v. State of Haryana & Anr. (2012) 1 SCC 656, the Supreme Court has held that only valid sale deed transfers ownership from seller to buyer. Transfer of property through POA (power of attorney) or sale agreement is invalid. Hence, you can’t file civil suit for the cancellation of that agreement.

My uncle has received one lakh rupees from his friend as an advance for sale of agriculture land. His friend took a notary on ten rupees stamp paper. In that notary his friend did not mention the amount as an earnest money. He said in the notary that my uncle wants some money for medical treatment and he will sell the land upon failure to repayment in three months. Now he does not receiving the money and pressurizing him to sell his agricultural land. If my uncle refuses to sell his land then could he take any legal action?

Question from: Tamil Nadu

This is an ambiguous agreement because it does not reflecting the real fact. Your uncle’s friend wants to purchase the land by deceitful act. He concealed the fact of earnest money and shown in the agreement as a loan. Therefore, he can recover that amount only on the basis of the notarise agreement.

Specific performance of agreement to sale

Specific performance means enforcement of exact terms of the contract. The terms of agreement are ambiguous because they are against the real intention of parties. That is neither an agreement to sale nor a loan receipt. Since he is not accepting the money therefore, he cannot file a civil suit for the specific performance of contract. He did not suffer any loss so he has no grievance against your uncle. In absence of any loss he cannot seek any relief from your uncle. Actually he is a guilty party because he does not accepting one lakh rupees.

File a civil suit for rectification of agreement

In this situation, your uncle should file a civil suit for the rectification of agreement. Your uncle is ready to return the loan amount. Thus he can file a civil suit under section 26 of the Specific Relief Act for the rectification. Don’t admit that amount an an earnest money because his friend has admitted that amount in the notary as a sundry loan.

If a party defaults in performance of duty in a valid agreement then other party can invoke the provisions of Specific Relief Act. Your uncle’s friend has defaulted by not receiving the one lakh rupees. Therefore, your uncle is the real aggrieved party to that contract. Hence, he can file a suit under section 26. File the civil suit as soon as possible.

I have five acre land in Haryana. The market value of that land is more than six crore. Last year, I contracted to sell this land to a person living in Australia. However, he is living in Australia but his parents are living in my village. We are old friends and have faith on each other. He remitted three crore rupees in my bank account and prepared a notary agreement. After three years he is claiming ownership on that land. He filed a civil suit for permanent injunction and declaration of right. Please help.

Question from: Haryana

Civil suit on the basis of notarised agreement to sale

In T.G. Ashok Kumar v. Govindammal, (2010) 14 SCC 370 the Supreme Court held that the buyer would not get any legal right in the property unless the sale deed is duly registered and attested by the witness. You have not executed any sale deed. In absence of sale deed no right in property has vested in him.

Whether he can file a civil suit based upon notarised agreement

This agreement has no element of a valid sale deed because your friend did not pay the full consideration and proper stamp duty. He has signed a notary affidavit on hundred rupees stamp paper. This is only an agreement of sale.

Generally, the shady property owners or brokers enter into that kind of agreement. They give huge earnest money then sell the property to others. In this type of transactions, they evade stamp duty and causing financial loss to the government exchequer. Therefore, such kind of transfer is invalid in the eyes of law.

The law declares that an unregistered sale agreement is void. You should not be afraid and let him file a civil suit. In the written statement you should take these plea

  • You are in the possession of land,
  • Plaintiff did not pay full consideration,
  • There is no sale deed in force,
  • Plaintiff is purporting agreement to sale as a sale deed.

He has no evidence which tend to prove his ownership in the land. The court will deny that notarised agreement if he produces as an evidence of ownership. He has no right to invoke legal process for enforcement of that unregistered sale agreement. You will win the case.

A person contacted me through the Magicbrics and shown interest in purchasing of my house. We had finalised the deal and prepared an unregistered agreement to sale. He did not deposit money as per the agreement and also do not come forward to purchase the land. The agreement to sale is still exist. Sir, please help how to solve this issue?

Question from: Uttar Pradesh

That person have no interest to purchase your house. Therefore, he is not coming forward to execute the sale deed. In this situation you should proceed to cancel this agreement.

Cancellation of unregistered agreement to sale

This unregistered agreement became useless if one party is not willing to perform his promise. When that person came and discussed to purchase your house then you have prepared this agreement. This agreement contains terms and conditions of the proposed sale. Now he is not ready to purchase your house. So, it is better to cancel this agreement. You should send him a notice towards cancellation of this unregistered agreement to sale.

He did not give you earnest money thus, no party has any liability under this agreement. This is a stale agreement which does not ensue any right and liability. So legal notice for cancellation of agreement is sufficient. Section 37 of the Indian Contract Act (ICA), says that parties to the contract should perform their promises. If a party to the contract is not performing his promise then other party can end the contract under section 39 of the ICA.

Section 37 of the Indian Contract Act reads as: The parties to a contract must either perform, or offer to perform, their respective promises, unless such performance is dispensed with or excused under the provisions of this Act, or of any other law.

Section 39 of the Indian Contract Act reads as: When a party to a contract has refused to perform, or disabled himself from performing, his promise in its entirety, the promisee may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance.

Hence, you should send him a legal notice thereby intimate him that you have cancelled this agreement to sale. Thereafter, you can sell your house to any other person without any legal hitch.

I made an unregistered sale agreement with a buyer (who happened to be a real estate broker) and I want to cancel the unregistered sale agreement (within two weeks of its execution). However, that buyer refuses to get back his advance amount and forces me to register the property. What is my legal right and how can I return his money? ” The clause mentioned in agreement is if either of the parties fail to honour the agreement then the aggrieved party can take action as per law” so what is the legal right for me as a seller to unilaterally cancel the unregistered sale agreement.

Question from: Uttar Pradesh

You can cancel this agreement and the buyer has to return the money which he has received under the agreement to sale. This agreement does not confer any right and title in the property. The buyer cannot compel you to sell that land on the basis of this sale agreement. There is a difference between an agreement and contract. An agreement is not binding if a party has retracted his consent. You have withdrawn your consent then this agreement is not enforceable by law. Hence, the buyer cannot execute this agreement however, there is an indemnity clause. 

Send him a legal notice towards cancellation of agreement and withdrawal of consent. You should inform the buyer that you are not willing to perform this agreement.

shivendra pratap singh advocate

Shivendra Pratap Singh


Practising lawyer in the High Court Lucknow. You can consult on Criminal, Civil, Matrimonial, Writ, Service matters, Property, Revenue and RERA related issues.

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