A Contract of sale is not a good title to land, beware!

A contract of sale is a written agreement between a buyer and seller of real estate, setting forth the terms of the sale, and specifying the rights and duties of the parties in the real estate transaction. It will be signed by the buyer and seller and their witnesses and will become legally binding upon each party. The parties would enter into a contract by which they bind themselves to complete the transaction. It is not enforceable against a party unless all the terms of the agreement are evidenced in writing and signed by the parties involved or their agents.

Terms of a Contact of Sale

1. Capacity in which the vendor is selling: It is expected that the vendor should disclose the capacity to which he is selling the property either as inhertiance, purchase from another person, etc. The purchaser has the right to rescind the transaction where the vendor at completion conveys in a different capacity.
2. Payment of deposit: The sum to be paid as an initial deposit for the purchase of the property has to be spelt out in the contract of sale.
3. Date and place of completion: Parties should expressly agree on the date and place of completion of the transaction on the contract of sale.
4. Possession before completion:  A purchaser has no right of possession until completion unless expressly agreed upon by both parties.
5. Exceptions and reservations: All exceptions and reservations must be clearly stated.

Advantages of a formal Contract of Sale

1. It affords the purchaser the opportunity to investigate title of the vendor.
2. It is binding on both parties and prevents the parties from withdrawing from the contract.
3. It prevents unexpected increase in purchase price i.e gazumping
4. Parties can convey special privileges on each other such as possession before completion given to the purchaser.
5. The death of any party will not affect the completion of the transaction.
6. by the doctrine of conversion, the vendor or his successor’s interest is in terms of money (outstanding purchase price) and not on the land.

Perfection of Contract of Sale

1. Consent: It does not require the Governor’s consent for perfection.
2. Stamping: Contract of sale attracts payment of stamp duties.
3. Registration: Whether or not a contract of sale is registrable depends on the location of the land. It is registrable in the South, East and West. It is not registrable in the North.

Effect of non registration of Contract of Sale

1. The contract is inadmissible as evidence of equitable interest in land, though it is admisible to prove payment of money by the purchaser.
2. The document losses priority as agaisnt a subsequent contract of sale on the same land that is registered, so long as the subsequent purchaser is a bonafide purchaser for value without notice.

It is to be noted that a contract of sale only spells out the terms of the proposed transaction/conveyance and is not in itself a title document. Therefore, one cannot use a contract of sale to transfer legal interest in land.

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