Vehicle Sale Agreement

Written by CS Shirish Bhootra

Ram owns a City Honda, and he wants to sell his car to purchase the new Honda Amaze. Still, he wants that after the sale of the car, he should not have any link with the car concerning its use, like if the purchaser of the car uses it for any illegal purpose, then his name must not be involved in this regard. He was reading a newspaper where an ad was displayed regarding an agency dealing with selling and purchasing cars. He contacted with agency wherein Shyam, owner of the car-selling agency, assured him that after the sale of the car to the agency, his name would in no manner be involved with the car. Both parties, to achieve this, executed a Vehicle Sale Agreement, wherein all details related to the car were mentioned. After its execution, Ram was not attached to the car's ownership.

Introduction

To understand the Vehicle Sale Agreement, let us bifurcate its keywords. The keywords are Vehicle Sale and Agreement. The first key term is "Vehicle Sale." Vehicle Sale can be understood as any sale, lease (other than being classified as under a Qualifying Rental), transfer, loss, assignment, damage, or destruction( subject to the situation of loss, damage, or destruction to the extent covered by insurance) or other disposition (either by way of merger or else) of vehicles to any person other than borrower or borrower's wholly owned subsidiary.

The other key term is "Agreement." An agreement is said to be a promise between either two persons or two entities, resulting in the creation of mutual obligations by law. It has been defined under the law as "Every promise and every set of promises, forming the consideration for each other is an agreement" [section 2 (e) of Indian Contract Act, 1872.]

An agreement comprises of following :

1. Parties

2. Offer/Proposal

3. Acceptance

4. Promise

5. Consideration.

Agreement = Promise or set of promises (offer + acceptance + consideration for all the parties)

I offer my pencil to Neelam, and she accepts it. Here an agreement is made, but such an agreement is made out of friendship and has no consideration. An agreement without consideration is not a contract (an exception to this is Section 25 of the ICA, which states that near relation and natural love and affection can be said to be a consideration).

Vehicle Sale Agreement: Meaning

The Vehicle Sale Agreement is a legal document that discloses the terms and conditions between two parties, the seller and the buyer of the vehicle. Parties can execute this agreement, i.e., buyer or seller, for either buying or selling any vehicle, be it two, three, or four-wheelers, and so on—examples like bikes, taxis or cars, etc.

This agreement is customized and drafted as per the requirements of the parties to the agreement. Parties include but are not limited to individuals or business entities. It also covers vehicle dealers authorized by the vehicle manufacturing units.

This document serves as a tool to avoid disputes concerning aspects related to the sale of vehicles, as all aspects are disclosed in the agreement. Bill of Sale is considered to be different from Vehicle Sale Agreement. A document executed during actual vehicle delivery is known as a Bill of Sale. In contrast, an agreement executed before the actual delivery of the vehicle is known as Vehicle Sale Agreement.

This agreement covers a situation wherein either seller intends to sell the vehicle or the buyer intends to buy or purchase a vehicle. All details of the parties, both seller and buyer, are mentioned in the agreement. The agreement is drafted as per the parties' requirements. However, a few important clauses form part of every agreement, which are mentioned below :

• Consideration/Price: It deals with aspects related to the total price, down payment, commission, etc.

• Delivery: It highlights the details related to delivery, such as the delivery date, place of delivery, and delivery cost.

• Representations and warranties of the seller: These include the warranties about the accuracy of the odometer, finance, service record, etc.

• Obligations of the buyer: It provides details regarding payment structure, payment schedule, providing accurate information, and so on. Specific obligations, if any, also form part of this clause.

• Arbitration clause: In this, it is mentioned that in case of dispute, if any arises, between parties to the agreement would be referred to the person being independent and not related to parties known as "Arbitrator." After having an opportunity of being heard by both parties, the arbitrator would provide a decision on the basis of merits and whose decision would be final and binding to both parties.

For the contract to be valid, it must be duly signed by both parties to the contract and comprise the signature of witnesses. It must be executed on stamp paper as applicable under the concerned state laws. On the sale of the vehicle, the relevant forms in this regard are to be submitted to the concerned Regional Transport Office to complete all aspects related to the sale of the vehicle and have its legal and binding effect on all parties to the agreement.

Applicable law

1. Indian Contract Act. 1872: Sale agreements are enforceable under this Act.

2. Consumer Protection Act, 2019: Sale of vehicle for non-commercial purposes (other than self-employment employment).

3. Vahan Portal: Availability of details related to the vehicle.

Conclusion

A Vehicle Sale Agreement is necessary to sell of vehicle. It helps in resolving disputes related to the transaction of sale. So it must be drafted carefully, covering all aspects related to the sale of vehicles.

References

• Wonder Legal, Vehicle Sale Agreement (wonder.legal)

• Law Insider, Vehicle Sale Definition (lawinsider)

• iPleaders, Contract Law Notes (blog.ipleaders)

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