Is Contract to Sell Different from Contract of Sale?

Someone asked me, "I have a friend who...

is buying a house. Why does the seller insist on a contract to sell, and not a deed of absolute sale?"


My answer is because the two contracts are different. The Contract to Sell protects the interest of the seller more.

A Contract to Sell is a preparatory contract and does not vest any right of ownership, while a Deed of Sale or Contract of Sale means there is a perfected sale and there will be transfer of ownership coupled with demandable rights.

In the former, the ownership of the property is still with the seller. Only upon full payment of the price and fulfillment of other condtions will the parties execute a deed of sale. And only then can the buyer claim to own the property.

Therefore, if the seller signs a Contract to Sell only, in case the buyer fails to pay, then there is no need to cancel the sale, because no sale has taken place yet. It merely documents the intent of the parties to enter into a sale in the future. Since the suspensive condition didn't happen, the seller reassumes right of possession and full ownership of the property.

Only a contract of of sale passes title to the buyer. The Register of Deed will not allow you to transfer title on the strength of a mere Contract to Sell. The RD will require the parties to still execute a Deed of Sale even if you can prove that you have paid all your obligations.

And if the Contract to Sell is not annotated on the title, the rights of creditors of the seller might be preferred over those of the would be buyer. In case of double sale, as between one with a contract to sell and one with a contract of sale, the one with the sale will have preference.

The remedy for those engaging in Contract to Sell over a long period is to have the CTS annotated on the title to protect your interest.