An absolute sale is any type of business transaction in which the transfer of ownership of an asset is fully completed according to the terms of a purchase contract. Typically, the terms of the purchase are considered completely fulfilled when the seller receives the agreed-upon compensation for the purchase. At that point, ownership of the asset is considered to rest solely in the buyer as the new owner.
One of the easiest ways to understand the nature of an absolute sale is to consider the purchase of a piece of residential real estate. Sales of this type normally require the creation of a sales contract that specifies specific terms and conditions that will govern the sale. As part of the process, both the buyer and the seller agree to perform specific tasks that will result in the full resolution of the sale at some point. This may include concessions on the part of the seller to vacate the property within a certain period of time, make certain improvements to the property before turning it over to the physical possession of the buyer, and arranging for a specific date for the buyer to tender the full purchase price to the seller. Once all the terms of the sales contract have been fulfilled, including the tendering of payment in full to the seller, the purchase activity is considered absolute.
The same general process can apply in a number of other financial transactions. When a business purchases goods and services from a vendor and those orders are invoiced with payment terms of 30 days or more, the sale is still considered to be in process until the payment in full is received. Upon receipt and posting of the customer payment, the order is considered fulfilled in full and constitutes an absolute sale. In the broadest sense, cash sales that are settled in full at the time of purchase can also be considered examples of absolute sale activity.
Since the defining characteristic of an absolute sale is the fact that the buyer fully settles his or her obligation to the seller, according to the terms agreed upon by the two parties, this designation serves as evidence that the transaction has been completed to the mutual satisfaction of both parties. Should the buyer fail to remit payment according to the terms of the agreement, the seller may have the option of taking steps to recover the purchased asset if it has been delivered to the buyer. At other times, the seller may agree to amend the terms and allow the buyer more time to fulfill his or her obligations, delaying the resolution of the transaction but leaving open the possibility of eventually completing an absolute sale.
