What does a "Contract to Sell" Mean?

A "contract to sell" refers to the sale of physical goods, services, and property.
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  • Written By: Alexis W.
  • Edited By: C. Wilborn
  • Last Modified Date: 28 August 2015
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A contract to sell refers to a contract for the sale of goods. Such contracts can include physical goods as well as services and property. The law in many country enforces contracts for the sale of goods under a private law system that allows for lawsuits for breach.

A contract is any legally enforceable promise between two entities. To be legally enforceable, contracts must meet certain criteria. For example, there must be promises of value on both sides in order for a contract to be valid. In the US system, these promises are referred to as "consideration," but most countries require a similar promise to enforce a contract.

In a contract to sell, there are certain other requirements. These requirements are imposed by the law in the relevant country. For example, the Uniform Commercial Code (UCC) governs most contacts for the sale of goods within the United States, while the 1979 Sale of Goods Act governs contracts for sale in the UK.

Out of practical necessity as well as tradition in most jurisdictions, contracts for the sale of goods must meet certain conditions. First, one party must promise to sell a specified number of goods or to provide a specified amount of services. The other party must make a comparable promise.


All contracts for the sale of goods must state a price in order to be valid. Other rules may also apply. For example, in the United States, a contract to sell goods valued at over $500 US Dollars (USD) must also be in writing under Uniform Commercial Code Rules. The Statute of Frauds in the US also mandates that if a contract to sell will take more than two years to perform, it too must be in writing, regardless of the value of goods.

When a contract to sell meets all the required criteria, it is enforced in a court of law. This means if one party breaches the contract, the other party can sue. A breach refers to any failure to perform the material terms of the contract as written.

In most jurisdictions, damages for breach are determined by the terms of the contract, especially by the price. For example, if a buyer breaches the contract to sell by not buying the product, the seller will be awarded damages based on how much the buyer was supposed to purchase the item for. The seller's damages will be equal to the difference between what he was actually able to sell the goods for, and what he would have been able to sell the goods for had the buyer not breached the contract. The buyer's damages are calculated in a similar manner: his damages are equal to the amount he ended up paying for the goods, versus what he would have paid if the seller had not breached.


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In real estate transactions, when should the contract to sell be executed?

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