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What Does a "Contract to Sell" Mean?

Alexis W.
Alexis W.

A contract to sell is basically an agreement between two or more parties that provides for the transfer of some item in exchange for payment. Most of these sorts of contracts are in writing, but they can also be oral or implied. There are a number of features most contracts contain naturally, and also a few that are required in order for the agreements to be enforceable under the law. Most set out a price, for example, and also describe in some detail the good to be exchanged. Terms of return or refusal are also common.

People typically encounter these sorts of contracts every day, and most aren’t challenged and don’t present any problems. They are legal instruments, however, and as long they’re formed in accordance with the governing law, parties do usually have legal recourse if things don’t happen the way the contract said they would. Sometimes this is as easy as confronting the breaching party and asking to make things right, a process known in law as “restitution.” This is often the best practice for minor or incidental contracts. When there’s a lot of money at stake, though, it sometimes makes sense to involve the courts and file a formal lawsuit for breach of contract. It’s in these settings that the specifics of exactly what was included and what was agreed to become the most important.

Basic Criteria and Core Elements

A "contract to sell" refers to the sale of physical goods, services, and property.
A "contract to sell" refers to the sale of physical goods, services, and property.

In its broadest sense, a contract is any legally enforceable promise between two entities — usually people, but sometimes also corporations or organizations. 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 no matter what it’s called, there usually has to be something of value provided from each party in order for the contract to be considered legally enforceable. Archaic law calls this quid pro quo, a Latin term that basically means “something for something.”

Out of practical necessity as well as tradition in most places, contracts for the sale of goods must usually clearly state the quantity of goods exchanged. Timing is also really important, which is to say, when the goods will be shipped, delivered, or set to arrive. Quality is usually implied, but in some cases must also be stated. In nearly all cases contracts for the sale of goods must also state a price in order to be valid.

Jurisdictional Specifications

Different countries have different rules when it comes to more of the granular specifics of how contracts are formed and what they must contain. In the United States, the Uniform Commercial Code (UCC) governs most contacts for the sale of goods, and sets out precise rules and also guidance for courts faced with enforcement actions. In the United Kingdom, the 1979 Sale of Goods Act acts the same way; other countries also usually have their own statutes and regulations.

Interpretation of these rules almost always influences how contracts are made from the beginning, especially by businesses and corporate entities. 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 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 under the relevant codes, it is considered enforceable. This means if one party breaches the contract or fails to perform up to the standard required, the other party can sue. In general, a breach refers to any failure to perform the material terms of the contract as written, regardless of whether it was intentional, and usually attaches even if most of the agreement was lived up to.


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 by not buying the product, the seller will be awarded damages based on how much the buyer was supposed to purchase the item for — and in many cases also any damages the seller incurred as a result of the breach, such as attempted delivery or wholesale value of goods that aren’t able to be resold.

In most cases the seller's damages are 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. In most cases the cost of mounting a lawsuit is immense, so people usually only take this course if there is a lot of money at stake or some issue that can’t be resolved outside the courts. Just because a contract is enforceable in court doesn’t mean it has to end up there, in other words.

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

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    • A "contract to sell" refers to the sale of physical goods, services, and property.
      By: Bruce Shippee
      A "contract to sell" refers to the sale of physical goods, services, and property.