This article is written by Nirali Shah, pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from Lawsikho.com. Here she discusses “Bill of Sale: all you need to know”.  

Bill of Sale

In practical sense, a bill of sale is known as a document that includes the details of a sale of goods in written form or transfer of property from one person/ party to another person/ party. It is accepted as legal evidence to prove that the full consideration has been paid to conclude a transaction and also, to acknowledge that the seller has transferred the rights attached to the asset(s) as mentioned in the bill of sale documented to the buyer.  

A bill of sale is the document used commonly to record the transactions relating to the sale of automobile, aircraft, motorcycle and also, it can be used to record the transactions relating to sale of animal, furniture and personal property as well. Generally, a bill of sale is used while transferring title of property from one person to another person.

As a rule, the Bill of Sale shall be issued/ drafted by the seller which includes the mode, particulars of the transaction and consideration. It helps to protect both parties to the transaction, if any disagreement arise in near future. 

A Bill of Sale can also include warranties (promises and assurances as to the condition).

Indian Bill of Sale

In India, a Bill of Sale is considered similar to a Sales Agreement. It is used as documentary evidence to record a transaction where a buyer has bought and paid for one or more specific items (worth more than INR 500/-) from the seller and is entitled to ownership of such item(s). The transactions relating to sale of tangible assets such as car, animal, electronics, furniture are recorded. In addition to the consideration, the time and place of purchase, mode of payment and other related details are also included. Depending on the jurisdiction of buyer or seller, a Bill of Sale may be required as a condition to transfer title to the buyer. 

What qualifies a Bill of Sale? 

• A Bill of Sale is accepted as legal document that stands as evidence to recognize a complete sale/purchase transaction; 
• It is valid in any Court of Law;
• The bill of sale is generally drawn by the seller of the goods similar to other negotiable instruments;
• The basic information recorded in the bill of sale is “transfer of ownership/ property”;
• Depending on the type of transaction, a Bill of Sale can be simple or complex;
• To qualify a document as a Bill of Sale it should record private transactions involving valuable items like art, machinery, vehicles or any other tangible assets except immovable property etc.

How a Bill of Sale works

Depending on the type of transaction, a Bill of Sale can be simple or complex. A retail purchase or sale receipt from the buyer or seller respectively, can be considered as a bill of sale, as it includes the details relating to specific goods that have been sold to the buyer at a specific price which was agreed between both the parties and paid respectively. 

For example the holder of a futures contract is generally given a delivery instrument, which acts as a bill of sale, in that it can be exchanged for the underlying asset when the futures contract expires.

Kinds of Bill of Sale

There are two kinds of Bill of Sale – ‘Absolute Bill’ and ‘Conditional Bill’ which is explained as follows:

1. Absolute Bill: An Absolute Bill of Sale does not represent any form of security, but it is simply, a document evidencing transfers, assignments and other assurances of personal assets, which are materially covered by the common law of contract and the sale of goods law.

A bill of sale is referred to as absolute when the property transfer is completed in one go, totally without any condition, restriction, part payment or payment due after the transaction is concluded/finished. For example, in a sale, you can call an absolute bill of sale if you are buying a used car and paying the full consideration at the time of transfer. Once the transaction is complete, you are the owner of that car and the seller has no right to it and can make no further monetary demands.

An absolute bill of sale also includes mentioned mode of payment, monetary consideration/amount and payment types.

2. Conditional Bill: A Conditional Bill of Sale does represent any transfer or assignment of personal assets to a person by way of security/surety/condition for the payment of money. The conditional bill of sale creates security in favor of the grantee of the bill whereby the grantee/buyer is given the right of a seizure by giving the right to a security interest. It is known as possessory right in favor of grantee by grantor/seller.

For example, a puppy breeder may establish the condition that dogs be spayed or neutered at six months of age. Any breeding that occurs with the dog may be subject to a predetermined fee. Other requirements may include not giving the dog to an animal shelter and notifying the seller of the dog’s new home address if given away.

Is a Bill of Sale required?

A bill of sale is considered as proof of purchase/ sell.  In many states, it is required while transferring a title with your state’s DMV (Department of Motor Vehicles) or when buying and selling branded livestock, including horses or any other intangible assets.

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In a sale of motor vehicle, the automobile bill of sale represents the transfer of the actual RIGHT to ownership while the vehicle’s certificate of title represents ACTUAL ownership and is required in every state. In exchange for the signed auto bill of sale and a small title transfer fee, the purchaser can apply for a title in his/her name at the state’s DMV.

Who provides the Bill of Sale?

A Bill of Sale is a record of a sale/ transaction/ transfer of property, stating that an item was sold by a particular seller on a particular date, at a particular place and for a particular value of money or other valuable property. Both parties should sign a bill of sale but, in many instances, only the seller needs to sign it and it is acceptable by the court of law.

Difference between Bill of Sale and a Deed

A Bill of Sale

A Bill of Sale is a document issued in a written form as a receipt used to transfer the ownership of an item/ material object. It typically mentions important information about the purchase or sell transaction such as the names of the buyer and seller, contact information, item description, item price, consideration, payment methods and terms/warranty/ conditions. As a seller or purchaser of a particular transaction, one can use a bill of sale for a used car, or for any other personal property such as a laptop or bike or any tangible fixed assets which are movable property.

When should I use a Bill of Sale?

• Sell off own motor vehicle or other property (not real estate) 
• Buy an automobile or other items from a private seller 

When shouldn’t a Bill of Sale be used?

• For Real Estate
• For Services
• For Small Sales

A Bill of Sale includes the following information:

• Date of purchase
• Name and address of seller and of buyer
• Amount paid for the transfer of ownership
• Description of the assets being transferred
• Guarantee that the item is free from all claims and offsets
• Representations or warranties
• Signatures of seller, of buyer, and of a notary public

A Deed

Anciently deed was known as ‘evidence’. A Deed is any legal document/instrument in written form which affirms/confirms/ passes a right, an interest or property and that is attested, signed and delivered and also it should be sealed. It is commonly associated with conveyancing or to transfer the title of property from one person to another. A deed can be unilateral or bilateral. Deeds include the following documents: 

As mentioned above, signed, sealed and delivered of a deed is referred to the practice of sealing; generally, attesting witnesses have replaced seals to some extent for ease of transaction. In the United States of America, agreements under seal are known as Contracts by Deed or Specialty; whereas, a Specialty can be enforceable without consideration. 

In some jurisdictions, specialities have a clause related to a limitation period of double that of a causal contract and it allows a third-party beneficiary to enforce an undertaking in the deed, thereby overcoming the doctrine of privity. 

As a form of contract, Specialty deeds are bilateral deeds and can, therefore, be distinguished from covenants, which are basically being unilateral promises.

At common law enforceable by any court of law and held to be valid, a Deed must meet several requirements:

It must state on its face that it is a deed, using wording like “This Deed…” or “executed as a deed”. It must indicate that the instrument itself conveys some privilege or thing to someone.

The grantor as specified in the deed must have the legal ability to grant the privilege and the grantee must have the legal capacity to receive it. It must be executed by the grantor in presence of the prescribed number of witnesses, known as “Instrumentary Witnesses”.

In some jurisdictions, a seal must be affixed to it. In earlier times, affixing seals made person/parties to the deed and signatures optional, but recently, in present times, seals have been outdated, so the signatures of the grantor and witnesses are primary and mandatory.

It must be delivered to (delivery) and in some jurisdictions must also be accepted by the grantee (acceptance).

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.