Conditional sale agreement

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Conditional sale agreement
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Conditional sale agreement is a kind of borrowing or installment purchase. The person making a purchase agrees to pay the price or part of it in installments, usually monthly or quarterly. Over this time period, seller is still the owner of sold goods. Legal title of ownership is given to the purchaser only after paying all the installments. It's often called "getting good title"[1].

When speaking about common law, there's one major difference between conditional sale agreement and hire-purchase contracts: in the case of conditional sale agreement, the purchaser can sell the good title to another third party entity, if he sells it before paying all the installments. Under hire-purchase contract, purchaser can't do that[2].

Differences between conditional sales and other agreements

Conditional sale agreement is very similar to hire-purchase contract and credit-sale agreement. There are few key differences between them though[3]:

  1. Credit-sale agreement - In this case, buyer agrees to pay the price in installments as in conditional sale, but he obtains the good title instantly after signing the contract. The legal title is transferred immediately.
  2. Hire-purchase agreement - Similar as in both previous agreements, buyer agrees to pay the price of goods in installments, but the main difference here is, that the buyer doesn't receive the ownership of the goods by default. He has to pay an additional sum of money, during or after paying all the installments. Without that additional payment, buyer has to return the goods to the seller. In conditional sale agreement, buyer receives the ownership after paying all installments, while under hire-purchase contract, buyer is not obliged to take the ownership. This case is often used by "rent-to-own" retailers.

Ending an agreement

Purchaser can end the conditional sale agreement or hire-purchase agreement at any given time during the installment payment period. Goods have to be returned to the seller immediately, and all the due installments have to be finished (from the time before the agreement cancellation date). If the buyer did process less than half of all the installments, he may still have to pay required sum to balance it out. If the buyer paid more than half of the installments, no refund will be issued[4].


  1. Boczko T., 2016, p. 51
  2. Owens K., 2013, p. 509
  3. Boczko T., 2016, p. 51
  4. Boczko T., 2016, p. 52


Author: Jakub Urban