Well.. The iPhone must first be activated under your account first. This is a security measure by Apple. You can then step into a corporate store and get a SIM card for your previous device.

You can sell the iPhone after... However, keep in mind that your friend will not be able to unlock the iPhone if they wanted to for use on T-Mobile for the following reasons:

1) It's not under their account
2) It is serving a 24- month term

If they are a AT&T customer, then yes they should have no problems using it after connecting it to your account first. They will need to adjust their data plan as well.

Hope that helps!