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ganeshkumar (Audit Officer)     22 June 2011

Cancellation of sale agreement

 

A property was divided amongst five siblings as per the court order specifying the length and breath of each portion.

 

Four out of five had singed (in the year 2006) a stamped receipt (Rs.10) specifying that “an amount of twenty five thousands only being received and the balance will be paid at the time of registration of so and so property having door no….at a place”

 

The stamped receipt does not have any other clause other than the above mentioned line.  The receipt does not specify the sale consideration, time limit etc…etc..that are essence of any contract.  The so called buyer neither turned up for full fledged agreement nor paid any further amount.  The four persons returned the amount by cash but the person now says that he never received any amount back from the four siblings.   What is the fate of this dealing?

 

The four siblings and a general power of attorney on behalf of fifth person singed a sale agreement with another buyer for sale consideration of Rs.1.05 crore out of which the buyer paid Rupees three lakh each totaling Rs.15 lakh to all five persons with a stipulation that that the remaining amount shall be paid within 120 days of this agreement and failing which the seller has right to terminate the contract and refund Rupees two lakh from each persons totaling Rs.10 lakh to the buyer.  The balance rupees five lakh will be forfeited as being the sum for breach of contract.  In the event of seller refuse to sell the property to the buyer and breach the contract, the total advance amount of Rs.15 lakh shall be refunded to the buyer.

 

The buyer, despite repeated attempt by the sellers over phone and in person, did not turn-up for registration and not paid the remaining sale consideration even after expiry of 120 days as stipulated in the agreement.

 

Under these circumstances, the sellers on being frustrated with the deal want to cancel the agreement.  What is the procedure to cancel the agreement?  Is it necessary to serve notice to advocate or by an advertisement in newspaper?  What is the procedure to come out of this deal(s)?



 12 Replies

ganeshkumar (Audit Officer)     22 June 2011

Continue...

 

Is it necessary to serve notice of cancellation through an advocate or by an advertisement in newspaper?

Kindly explain the legal procedure to get out of this deal(s)?

Apprentice (Associate)     22 June 2011

Please send a legal notice by registered post immediately - making time the essence of the contract and ask him to pay the balance amount within 1 week [or whatever limit you want], failing which you will terminate the Agreement.  After that termintate the agreement and through your lawyer, refund the advance payent as per the terms of the contract.

1 Like

ganeshkumar (Audit Officer)     22 June 2011

what about the fate of the first deal?

 

Cancellation through an advocate is mandatory?  or filing a case with a help of an advocate in the court of law is mandatory?

Ashok Yadav (Lawyer)     22 June 2011

you have not mentioned the date of execution of  agreement to sell, if the second agreement was executed more than three years ago from today then need not to worry the suit is time barred and the purchaser can not claim property from you.

If three years has not lapsed then You should sent a legal notice to the purchaser to complete the sale as per terms of the agreement, within 15 days. If the purchaser does not complete the sale by executing sale deed, then you should file a suit for specific performance of contract in the civil court against the purchaser. The court will decide the matter on merit.

1 Like

ganeshkumar (Audit Officer)     22 June 2011

The second deal was executed and registered in August 2010.

Ashok Yadav (Lawyer)     22 June 2011

Forget about the first deal that is time barred for the first purchaser , he can not claim any title etc. from you.

1 Like

niranjan (civil practice)     23 June 2011

Though 'student'opinion is good however on the terms of agreement you can cancel the agreement and also forfeit the earnest money,better do it through Advocate and send the regd.notice.Pl.emphasise that time was the essence of contract, and that he has failed to perform is his part of the agreement.

1 Like

SACHIN AGARWAL (ADVOCATE)     24 June 2011

Since the time was the essence of contarct, which has already passed away and the agreement has been terminated by efflux of time and now you can send a notice to the buyer for forfeiture of money paid in advance, if the agreement so provides and then you are free to sell the said proeprty to some new person.

 

However, the buyer has a right to file a suit for Specific Performance of Contract within a period of three years. But in that suit the buyer is required to prove that he was ready and willing to get the sale deed executed and was having sufficident funds for the same.

1 Like

ganeshkumar (Audit Officer)     01 July 2011

The agreement stipulates that "In case if the purchaser fails to register the Sale deed in his favour or his nominees with in the stipulated period (120 days) then the agreement stands will be automatically cancelled subject to clause 7 and the venduors will be at liberty to sell the property to whomsoever at their own wish."

Clause 7 provides that

7.1          In the even of the vendors on thier part committing breach of terms of this agreement, the puchaser shall be entitled to claim and receive a sum of rupees one lakh as liquidated damages and the vendors shall also be liable to refund the entire amount of advance received.

7.2         In the event of breach being on the part of the purchaser, the vendor shall be entitled to terminate the contract and claim a sum of rupees five lakh as liquidated damanges and the balance advance amount recieved (Rs.10 lakh) shall refund the balance sum to the purchasser.

7.3         In the event of either party to this agreement committing breach apart from clause 7.1 and 7.2, the aggrieved party shall be entitled to enforce specific performance of this contract and also recover all costs, expenses and losses incurred by the aggrieved party, as a consequence of such breach from the party committing breach.

 

In view of above,

1.  Since the purchaser did not turn-up for registeration and did not have bank draft(s) in favour of seller(s) and did not intimate their willingness and readyness for registeration and failed to register the property within 120 days, the agreement to sell stands cancelled automatically.

2.  The purchaser cannot go seek specific performance.

 

My questions:

1.   Is is absolutely necessary to cancel the "agreement to sell" registered in the sub-register office.  Since, the purchaser does not come forward to cancel the registeration of "agreement to sell"?

2.  Should seller file a case for compelling the purchaser to cancel the "agreement to sell"?

3.  Is there any illegality in selling the property to new purchaser?

4.  what precaution the new purchaser should take in this situation?

5.  How to return the advance money legally to that purchaser, since he does not come forward take back his advance?

Ashok Yadav (Lawyer)     02 July 2011

Answer:-

1. As per terms of the agreement the agreement cancelled automatically. But you should sent a legal notice to the purchaser to that effect and should publish it in the local news paper after that you can enter into new agreement with a new purchaser.

2. No need to file a case from seller to cancell the agreement in the present case, if the seller want to enforce the agreement he should file and suit for specific perfomance of the contract, if he choose to cancel the agreement then no need to go to court from his side.

3. After completing the said procedure there will be no illegality to selling the property to new purchaser, if no suit is filed by the said purchaser in the court.

4. The new purchaser should get it know that the previous purchaser has not filed any suit in the competent court of law related to the property and the procedure as per point 1 is followed.

5. In the legal notice call him to get back his amount and give him 1 month time to do that and if he does not come forward then  keep the amount with you and promise it to pay him on his demand as and when arises in future.

 

It is presumed that your title is flawless on the said property, if any defect found in your title then it will be ground for the previous purchaser to linger the matter in the court.

1 Like

G.Nagarajeshwar Rao (Advocate)     02 July 2011

Court can not go beyond the agreement of sale. The contents of the agreement of sale are to be seen while deciding the case. However it is compulsory to issue the notice to the party that the time is barred and the time is essence of the contract. The fundamental in this case is that other side has to prove that he is ready and willing to get the regular sale deed with the compliance of the sale agreement within its terms.
1 Like

Mahadeva Rao G (ADVOCATE)     05 August 2011

If  the  intention of the parties  is  serious  in agreeing  that  the  time  is  the essence of   this  contract,   and  if  a    clause  is mentioned  to that effect  expressly in the  Sale Agreement  only  then  they  can   claim  relief  under such clause.   Without  this  clause  in  the  Sale Agreement   u  cannot   come  into  some  conclusion   just like that  when ever  u feel   like  and  start  claiming  TIME  IS  THE  ESSENCE .   also   It is  a classic  example  how  people  are  misguided  by  hear say stories and they draw  their own  agreements   without   engaging   an  advocate.           Pls  engage  an  advocate    while entering  into  any contract  at least   in  future,  since  he  is  a  professional  he  will   have  sufficient  expertize  to  save u from  such  unwanted  nuisance.        An  advocate  can surely   safe guard  your  interest.  


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