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Abhi   06 December 2015

Buyers liability incase of agreement of sale


My company had entered into an unregistered agreement of sale with a landowner for the purchase of land worth 50 Lakhs. On the  agreement it was specified that the registration would take place within 1 week of the date of agreement. Hence a very small amount of Rs 10000 was paid to the owners. Since the land was in very bad shape we requested the land owners to clear the land and mark boundaries before purchase. However due to some internal problems and severe fund crisis our company decided not to go forward with the purchase. The information was duly shared with the land owners and the company was even ready to forfeit the advance amount given. Now after a month the land owners are threatening us to pay Rs 5 Lakhs or register the land (ie the amount they incurred for levelling and other expenses) or they say they will pursue the matter legally. The company is on verge of bankruptcy and cannot purchase the land as stated in the agreement. As an employee who handled this matter and signed the agreement as representative my job and career are at stake if the company isdrawn into a long legal battle.

Please help me and suggest a few legal options for our company and also comment on the legality of the unregistered document as well as if the land owners threat has to be taken seriously. Also our company is based in Mumbai and the land we intend to purchase is in Tamilnadu.


 3 Replies

Rajiv Thakur   06 December 2015

Hi there, Although conditions to agreement are not detailed by u here, still there is no need to panic. Usually such kind of contracts contain term for such kind of situations. In such case, advance amount given by you shall be deemed forfeited and you can't get it back. But prospective buyer can't drag u in the court successfuly with claim to buy land forcefully. In simplewords, advance amount given Iis the your maximum liability.

Dr J C Vashista (Advocate)     11 December 2015

Since the company can afford to engage a local lawyer, contact and consult with all relevant documents.

T. Kalaiselvan, Advocate (Advocate)     13 December 2015

Unregistered sale agreement is inadmissible before law.  Moreover, the conditions shall be that you shall forfeit the advance amount paid if you are not able to register the property as per agreement, the buyer cannot that to enforce the sale agreement, so nothing to panic on this issue, ask him to proceed, no case is maintainable. 

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