In a land Sale/Purchase transaction, a ‘Sale Agreement’ or ‘Agreement for Sale’ is an agreement entered into by the Buyer and Seller. It sets out all the essential terms of the transaction and the rights/obligations of the parties. It binds the parties to the Sale.
The following clauses are very important in a Sale agreement and should always be included and written in a clear manner. The list is not exhaustive but as a legal practitioner I consider the clauses to be the most importance in any Sale agreement.:
1.Description of the parties: The Buyer and the Seller should be well described and a distinction made where property is being purchased by individuals or organizations. For instance, if one of the party is a company, the name of the company should be described and not the director/shareholder of the company.
2.Description of the property: the property being sold should be described in a clear manner including the title number, measurement of the property, location etc.
3.Consideration:One of the essential elements for a contract to be considered valid is consideration. Consideration in sale agreements is basically the purchase price. It should be indicated correctly.
4.Terms of Payment: Duration of payment should be clear. If payment is by instalments the date of payment and the amount to be paid on that date should be clear and not subject to interpretation. The method of payment should also be noted. Eg direct bank transfer, cheque, cash etc. As much as possible avoid cash payment so that you may have a clear bank record of the payment.
5.Termination/Right to call off agreement: This clause states the circumstances when the agreement can be brought to an end by either parties. Notice period before termination should be indicated. This should also provide for situations where termination happens due to no party’s fault, such as the death of either party before the completion of the transaction.
6.Completion Period: Completion is the point at which the property changes hands.This is the transfer of ownership of the property to the Buyer, and the payment of any unpaid balance of the purchase price to the Seller. The period should be clear. At completion date, the completion documents (which should be listed in the agreement), should be ready/transfer registered in the name of the Buyer, purchase price fully paid and possession handed over to the Buyer.
7.Default clause/penalty clause:provides for situations where either of the parties defaults in fulfilling their obligations.
8.Possession: the agreement should state when and how the Buyer should receive possession of the property. It is important to make sure that the property is being handed over by the set deadline.
9.Warranties: despite due diligence, there are matters affecting the property that the Buyer may not be able to establish. The Seller should therefore be expected to give such warranties. For instance, there are no pending litigation/court cases over the property, there are no boundary disputes, the land is not public land etc.
10.Force Majeure:In case any event is beyond the control of the parties or unforeseeable circumstances occur, parties may be relieved from performing their contractual obligations during the existence of the event or as may be agreed by the parties. For instance, The Covid 19 pandemic led to lockdowns and many people were unable to fulfil their contractual obligations. This led to a lot of disputes and it has also led to more awareness on the importance of including the force majeure clause in agreements.
11. Resolution - This is a very important clause in any property purchase agreement. Parties should always be aware that a dispute may occur, such as delay in payment of the purchase price, failure to hand over possession etc. The agreement should provide the preferred mode of dispute resolution such as mediation, arbitration or litigation.
12.Signing the Agreement : Ensure the agreement is well signed/executed. It is important to sign on every page. In certain agreements, attestation from witnesses like advocates is required.
NB: This is for general information and does not constitute legal advice. For further inquiries on Sale/Purchase of properties please get in touch with the author (Gladys Mwangi) at gm@gladyswangi.com
Gladys Mwangi is an advocate of the High Court of Kenya and a Certified Professional Mediator.