A Contract of Sale is not a title document. It is common for land agents and vendors/purhasers to either request for a contract of sale as a title document or present one as a title document during the conveyance process. This notion that a contract of sale is a title document is not only misleading but also fraudulent. We had earlier differentiated between a contract of sale and a deed of assignment here. A contract of sale does not transfer legal interest in land and as such cannot be termed a title document. The foregoing are the effects a contract of sale has in a conveyance transaction;

1. It passes equitable title: Equitable title refers to the right to obtain full ownership (legal title) of the property. It gives the buyer the right to demand performance of the contract, specifically the transfer of the legal title after fulfilling certain conditions, such as payment of the purchase price. In Nigeria, the moment a valid contract of sale is executed between a buyer and seller, equitable ownership passes to the buyer, even if the legal title (the formal registration of ownership) remains with the seller until completion of the transaction. This is based on the principle that “equity regards as done that which ought to be done.” Therefore, once the buyer has agreed to buy the land and the seller has agreed to sell, equity treats the buyer as the beneficial owner of the property.
2. It allows the purchaser to investigate title: This is an important phase in the property transaction process known as due diligence or title investigation, where the purchaser ensures that the seller has a valid and unencumbered legal right to transfer the property. A well-drafted contract of sale for real estate includes provisions that give the purchaser the opportunity to conduct a thorough investigation of the seller’s title before the legal title passes.
3. It prevents gazumping: Gazumping occurs when a seller accepts a higher offer from another buyer after already agreeing to sell the property to the first buyer, but before the contract has been signed. This often leaves the original buyer at a disadvantage, as they may have already invested time and money in legal fees, property inspections etc. A contract of sale that is properly executed and legally binding helps prevent gazumping by securing the agreement between the buyer and seller. Once both parties sign the contract, the seller is legally committed to selling the property to the buyer at the agreed price.
4. It ensures certainty of terms of sale: Once a contract of sale is signed by both the buyer and the seller, it creates a legally binding agreement. This means that both parties are now obligated to proceed with the transaction according to the terms specified in the contract. This eliminates uncertainty because the seller cannot back out arbitrarily or accept a higher offer from another buyer (i.e no gazumping). If either party breaches the contract without a valid legal reason, the other party can seek legal remedies, including compensation for damages or a court order for specific performance, which compels the defaulting party to complete the sale.
5. It is enforcebale and binding on the parties: A contract of sale must contain certain key elements to make it enforceable and binding on both parties. These key elements include offer and acceptane, intention to create legal relations, consideration sum, legal capacity of parties to enter into the contract, compliance with the legal formality of being in writing.

Conclusion

Though a contract of sale is a valuale document in conveyance, it does not confer legal title and as such cannot be termed as a title document in property transactions.

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