The Center For Debt Management
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Guide To Understanding
Conditional Sales

A conditional sale is where the agreement between a buyer and seller for the transfer of ownership is made subject to a contingent situation being satisfied, which once satisfied solidifies the sale agreement into a contract.

A contract is formed with offer and acceptance. When an offer or acceptance is made it can be made subject to a condition. If the condition becomes satisfied then the offer or acceptance will become binding. It may also be that there are moral or legal duties for the person who made the conditional offer or acceptance to properly pursue that condition being satisfied.

For example, the offer from a buyer of real estate is often made subject to finance (a loan being approved for the buyer to purchase the land, often with the land as security for the loan). This is a conditional sale, however the buyer must then pursue finance, and if finance is approved the sale agreement becomes enforceable. If the buyer does not properly pursue finance then they may be liable for breaching the terms of the agreement to purchase the property.

An alternative to conditional sale is instead of the person making a conditional offer, or conditional acceptance, they make an invitation to treat, which is the step prior to offer and acceptance, and cannot bind the person making the invitation, whether or not it is conditional and the condition becomes satisfied. The invitation to treat can induce a counter offer, and then a counter acceptance, but the invitation itself cannot create a binding contract. Issues arise as to the distinction between actions which constitute an offer or an invitation to treat when the intention is not clearly specified about which the person intends at the time.


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