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What is a Conditional Sale?

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  • Written By: Mary McMahon
  • Edited By: O. Wallace
  • Last Modified Date: 15 November 2016
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    Conjecture Corporation
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The term “conditional sale” is used in several different senses in the business world, with all meanings implying that there are conditions attached to the sale which must be met before the sale will be valid. Whether or not a sale is described as conditional, it is important to read the documentation which accompanies it so that both buyer and seller fully understand their rights and responsibilities in regards to the sale. It is also strongly recommended to retain legal counsel for sales which are large or complex, as a lawyer can save people expensive disputes in the future.

In the classic sense, a conditional sale is a sale in which the title to the property being sold is only transferred after the buyer has met certain conditions. For instance, a buyer might purchase something on the installment plan. Once all the installments are paid, the buyer receives the title, but until then, the property is held by a seller or by a third party. This type of conditional sale allows people to use things which they cannot buy outright until they have been able to fully pay for them and the title can be transferred.

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Another type of conditional sale is a sale in which one or both parties has conditions which must be met before the property can be sold. This type of sale is commonly seen with real estate. Buyers, for example, may declare that they will only make a purchase if a property passes inspection and if they are able to secure financing. This allows buyers to exit the sale if it does not meet their terms without violating the contract in any way.

The basic documentation for a conditional sale can often be drawn up from boilerplate agreements, because people often have simple conditions. In other cases, it may be necessary to draft a contract from scratch to cover all of the details of the sale. This contract is usually passed back and forth between the legal representation for the parties involved until it is acceptable, at which point it can be signed.

When a contract is drawn up for a conditional sale, both parties have an opportunity to make input. If problems are identified, they should be discussed during this phase, not after the contract is already signed and all parties have obligations. It is better to take the time to confirm that the terms and conditions are correct and reasonable than to hurry into a sale which may be a source of regret later.

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