Conditional Sale Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Conditional Sale, written in plain English, along with examples of how it is used.

What is Conditional Sale?

In the sale of property or goods the title of the property can only be transferred after certain specific conditions have been met by one or both the parties.Example-payment of full purchase price by the buyer.

History and Meaning of Conditional Sale

A conditional sale is a legal agreement where the transfer of ownership of a property or goods to the buyer is conditional upon the completion of certain conditions by one or both the parties involved. Typically, one of the most common conditions is full payment of the purchase price by the buyer. In this type of contract, the buyer is usually given possession of the property or goods but is not entitled to claim complete ownership until the specified conditions have been fulfilled.

Conditional sales have been widely used for decades, particularly in the automotive and real estate industries. They were first developed as a way to provide an alternative to traditional loans or credit sales by allowing buyers to purchase goods and pay for them over time while still enjoying the benefits of immediate ownership. The contract of conditional sale also allows sellers to secure payment for goods sold without having to bear the cost of financing or taking legal action against a buyer in the event of default.

Examples of Conditional Sale

Here are some examples of conditional sale in different contexts:

  • A buyer purchases a car from a dealership and agrees to pay the full purchase price in monthly installments over the next two years. The dealership retains ownership of the car until the buyer has completed all payments.
  • A homeowner sells a property to a buyer and accepts payment in installments. The seller retains a mortgage or lien on the property until the buyer has paid the full purchase price.
  • A business sells equipment to a customer on the condition that the customer will make full payment by a specified date. The seller retains ownership of the equipment until payment is received in full.

Legal Terms Similar to Conditional Sale

Here are some related legal terms to conditional sale:

  • Hire purchase: this is a type of conditional sale where the buyer pays in installments, and the seller retains ownership until the last payment is made.
  • Mortgage: this is a loan agreement where the lender has the right to take possession of the property if the borrower defaults on the loan.
  • Lease: a legal contract that allows a tenant to use and occupy a property in exchange for rent payments, typically with a fixed term and conditions for renewal or extension.