Agreement to sell
Querist :
Anonymous
(Querist) 19 January 2012
This query is : Resolved
Thank you all for taking the time out to answer this question.
Case: I am trying to sell a property and found a buyer. However, he will be able to pay in full in about 4 months from now. He will be giving me 10% as the advance amount.
The clause that I inserted in the agreement to sell document is as follows:
6. Time shall be essence of this Agreement. It is agreed between the Parties that in case the Second Party fails to pay the balance sale consideration on or before June 30, 2012, the First Party may rescind this Agreement and would also be entitled to forfeit the advance amount of Rs. xxx/- paid by the Second Party under this Agreement, without any protest and demur from Second Party.
My question:
If he fails to comply with these terms, what happens afterwards. Do I go to court? Can he fight for this money back? Can the advance amount used in this agreement be forfeit? Is the word "advance amount" correct terminology to use?
Thank you
prabhakar singh
(Expert) 19 January 2012
Let the clause read as follows:..............
"6. Time shall be essence of this Agreement. It is agreed between the Parties that in case the Second Party fails to pay the balance sale consideration on or before June 30, 2012,it would be strictly understood that the second party is not ready and willing to perform it's undertaken obligations under the Agreement and as a consequence this Agreement shall stand cancelled on its own without any notice required by the first party to be served upon the second party and the earnest amount of Rs. xxx/- paid by the Second Party under this Agreement shall stand forfeited as damages caused to first party and the first party shall be entitled to enter into any fresh contract with any other party of his choice."
Devajyoti Barman
(Expert) 19 January 2012
No you need not go to court.
You can simply cancel the agreement by intimating the purchaser through a letter.
Thereafter you can enter into agreement with any other person..
It is the purchaser of the said agreement who needs to visit court to obtain any restraint order if he so wishes.
Mere recital in the agreement may not interpret that time as indeed essence of contract. It is always rebuttable by the defaulting party.
Khaleel Ahmed Mohammed
(Expert) 19 January 2012
If the purchaser fail to pay the balance with in the prescribed time, what ever has been agreed in the terms of agreement, the seller should give the notice to the purchaser in this regard.
V R SHROFF
(Expert) 19 January 2012
If your Agreement is Registered, You have to issue notice to Purchaser for cancellation, and thereafter get Court order for Specific performance / or rescind the Agreement.Issue Notice on 15 June 2012, 15 days in Advance, that u will cancel agr on 1st July if you fail to pay for any reason whatsoever. Incorporate the draft suggested by Shri Prabhakarji,.
If you directly enter into agreement and receive money, may fall in Cheating case.
If not Registered, you can follow advise of Experts given above.
Raj Kumar Makkad
(Expert) 19 January 2012
I have similar views as express above.
Deepak Nair
(Expert) 19 January 2012
You are very well advised by the experts above.
You have the right to forfeit the money in case of failure to pay the money as agreed in the agreement. The buyer, once signed the agreement with the above clause with his consent and free will, is not entitled to claim the said amount back from you.
Querist :
Anonymous
(Querist) 19 January 2012
Thank you all for taking the time out to respond to my message. Is there any law stating, say after 4-5 months, the buyer has the right to pay within 3 years?
Can I also mention in the clause that the buyer, if failure to pay in the allotted time frame as mentioned above, cannot take this matter to a court of law? I am more than willing to put 3 clauses in here to safeguard my investment.
Thanks once again.
prabhakar singh
(Expert) 19 January 2012
Any agreement in restraint of legal proceedings would be void under section 28 of Indian Contract Act.
If parties by their conduct take the payment clause not seriously with respect to time,then the agreement would be valid for 03 years from the date of its execution.Not only the term but conduct of parties during the course of agreement is also important with relation to"time essence clause".
Querist :
Anonymous
(Querist) 19 January 2012
Hi Shri Prabhakar Ji,
Therefore I will not be able to put that clause in the agreement, mentioning that the buyer can't take me to court if failure to pay in the allotted time frame?
Thanks
Querist :
Anonymous
(Querist) 19 January 2012
Thank you Shri Prabhakar Ji. In regards to the 3 years. In layman's terms this means he has 3 years in order to pay the full amount or does this mean that he has 3 years to appeal this in court, to get back the advance amount? Can you please clarify the 3 year law.
Also you mentioned ernest money however, i wrote advance consideration amount in the contract. Does this make a difference?
Thank you
prabhakar singh
(Expert) 19 January 2012
The question whether or not time was of the essence of the contract would essentially be a question of the intention of the parties to be gathered from the terms of the contract. Even where the parties have expressly provided that time is of the essence of the contract such stipulation would have to be read alongwith other provisions of the contract and such other provisions may, on construction of the contract, exclude the inference that the completion of the promise by a particular date was intended to be fundamental. For instance if the contract were to include clauses providing
for extension of time in certain contingencies or for payment of fine or penalty for every day or week the promise undertaken remains unfinished on the expiry of the time provided in the contract such clause would be construed as rendering ineffective the express provision relating to the time being of the essence of the contract.
Hence to make time as essence of contract there must not be any extension clause of any nature in the agrement.
prabhakar singh
(Expert) 19 January 2012
Three years from the date of default to seek relief from the court,the buyer thinks he is entitled to.It includes seeking specific enforcement of agreement and in alternative for realizing back the earnest/advance paid.
In counter you shall be pleading "time essence of contract"and forfeiture clause of earnest/advance,the damages can not be any more than it but subject to actual damages caused to you due to breach commited by prospective buyer.
Sankaranarayanan
(Expert) 19 January 2012
almost all experts are given you advise , so now you follow according to to their view, no words for me to express more
prabhakar singh
(Expert) 19 January 2012
Use of advance or earnest not any big problem as more or less both or synonymous
Querist :
Anonymous
(Querist) 19 January 2012
so I am entitled to the advanced amount but can't exceed this amount. There are many cases in regards to this that I found online. So I am a little worried that this might go to court in which case, I need to know the outcome of such cases.
Generally speaking and you must see this a lot as well in your profession, has the court ruled in favour of the buyer during such proceeding involving forfeiture.
Thank you
Advocate. Arunagiri
(Expert) 19 January 2012
Do I go to court?
You need not.
Can he fight for this money back?
No he can not.
Can the advance amount used in this agreement be forfeit?
Yes it is possible.
Is the word "advance amount" correct terminology to use?
Yes it is a correct terminology.
M/s. Y-not legal services
(Expert) 19 January 2012
am missed to answer this query.. even my seniors answered you.. now you should be cleared..
-tom-
Querist :
Anonymous
(Querist) 19 January 2012
Thank you all for your help. God Bless
Querist :
Anonymous
(Querist) 20 January 2012
Dear Shri Prabhakarji,
In regards to your reply to the 3 year law, you had mentioned "not only the term but conduct of parties during the course of agreement is also important with relation to "time essence clause". My question is what is conduct mean within the time essence clause? What conduct by the buyer and seller would nessistate for the three year clause to take into effect?
Thanks
prabhakar singh
(Expert) 20 January 2012
Look it from this angle that if a contract provides even in writing that "time shall be essence of the contract"but other clauses of the same very contract speak of certain circumstances in which one party may consider the request of time enlargement by other party,then before courts it would be a hard nut to chew that "time was the essence of the contract"
Similarly even if a contract provides even in writing that "time shall be essence of the contract" but during actual course of inter action dilutes the hardness of the clause,say you accept some part payment on 15 July 2012 in your case and orally or in writing agree that rest of the payment would be payable by 30th August 2012,then by conduct of you two the clause in original agreement reading "time shall be essence of the contract" has stood diluted,and courts would be inclined to infer that parties actually did not mean "time to be essence of the contract".
When there is no legislation Parties them selves legislate for them selves.
No law provides NOTICE to be a must in this type of cases,it is done as gentleman business and also to prove the fault of other side that it was not ready and willing to perform its'obligations under the contract.
BUT IF CONTRACT IT SELF PROVIDES THAT IT SHALL CEASE TO HAVE ANY EFFECT JUST ON DEFAULT OF ONE PARTY AND NO NOTICE WOULD BE REQUIRED THEN I DO NOT KNOW WHY OTHER BROTHERS AT BAR DIFFER WITH ME AND STILL INSIST YOU TO SEND NOTICE AS YOU INFORMED ME.
I THINK AGAIN THE SAME THING GENTLEMAN'S BUSINESS.
Deepak Nair
(Expert) 20 January 2012
You are rightly and sifficiently advised by the experts above.
Querist :
Anonymous
(Querist) 20 January 2012
Shri Prabhakar Ji,
Thank you so much for an in-depth response to my questions above. I PM'd you, so please check you inbox.
I like to thank everyone for your assistance in this matter.
girish shringi
(Expert) 20 January 2012
I differ on the point,If purchaser once replies to your notice of forfeiture on reasonable ground and or circumstances and later on file for specific performance,he can
girish shringi
(Expert) 20 January 2012
differ on the point,If purchaser once replies to your notice of forfeiture on reasonable ground and or circumstances and later on file for specific performance,he can demand stay against the property's further deal.
Civil Laws can not allowed the right of person on unilateral ground.
Despite the agreement might be on Bilateral.
Querist :
Anonymous
(Querist) 21 January 2012
Girish,
So what you are saying is that then the forfeiture clause is nonsense and can be extended by the purchaser on reasonable grounds if he so wishes? How can this be possible.
