Sale and Purchase of Property
(Real Estate)
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V. Consequences of breaching the sale and purchase agreement

The consequences of breaching the terms of the sale and purchase agreement will depend on the type of breach and the terms written on the agreement. It is impossible to mention all the scenarios here. However, due to some financial factors (e.g. fluctuation of the real estate market or loss of job), the vendor or the purchaser may back out after signing the agreement. The following table highlights the possible consequences of such breach of contract:

 

The agreement that is broken

Who breaks the agreement, and how it is broken.

Responsibility or legal consequences

Remarks

1.

Provisional Sale and Purchase Agreement

Vendor refuses to sell.

Vendor pays the purchaser a sum equivalent to twice the amount of the initial deposit if such has been expressly written on the provisional agreement.

Agreement terminated.

2.

Provisional Sale and Purchase Agreement

Purchaser refuses to buy.

Purchaser loses the initial deposit and may have to pay compensation to the vendor.

Agreement terminated. Vendor is free to sell the property to another person.

3.*

Formal Sale and Purchase Agreement

Vendor refuses to sell.

i) Refund the initial and further deposits to the purchaser.
ii) Be sued by the purchaser for compensation.

Agreement terminated. The amount of compensation depends on the actual loss suffered by the purchaser in purchasing a similar flat elsewhere (e.g. rise on market price of the flat after vendor's back out).

4.*

Formal sale and Purchase Agreement

Purchaser refuses to buy.

i) Purchaser may lose all the initial and further deposits.
ii) Be sued by the vendor for further compensation.

Agreement terminated. The amount of compensation depends on the actual loss suffered by the vendor (e.g. price reduction arising from the resale of that flat).

In usual case, vendor may not be able to claim all the deposits as forfeiture if they exceed 10% of the purchase price, unless the actual loss has justified such forfeiture.


* In both cases where there has been a breach of the formal agreement, either the vendor or the purchaser may apply to the Court for "specific performance", which compels either the purchaser or the vendor to complete the sale and purchase instead of terminating the agreement. The Court will consider whether the vendor or the purchaser is still willing, able and ready to complete the sale and purchase after the breach.

You should also note that the final outcome of the breach is always dependent on the terms of the sale and purchase agreement and the decision of the Court.

  1. If one party commits other wrongful acts, e.g. the vendor broke a small window in the kitchen, can the other party terminate the sale and purchase agreement or claim for compensation?
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