Validity of a sale agreement
Querist :
Anonymous
(Querist) 15 June 2018
This query is : Resolved
I entered into an agreement to sell 1 acres of my land to a person @ 1CR. in 2016. I received 30 lac as advance, in the agreement it is mentioned that registration should be completed in 6 months after paying the reaming balance amount of 70 lac and if the other party fails to give the renaming balance with in the 6 months myself won't be liable to pay him back the advance of 30lac.
He (purchaser) fail to raise the remaining cash. Since I used this advance to buy another property and not in a state to return his 30 lac.We have a verbal agreement to return the amount of 27 lac either when my property is sold or whenever I manage to raise that amount. I am still willing to sell that property but he is making use of the dull market after demonetization. Am I legally liable to return the advance? Will the law turn up against me? I am still willing to sell the land to him on the agreed amount which he doesn't seems to be interested in. Just wondering what will be worst case if he goes to court?Thanks in advance.
Regards
Vimal
Guest
(Expert) 15 June 2018
If still willing to sell the land to him, why don't you extend the deadline for registration? No use in pretending that you are not in a state of returning money, if already agreed verbally.
Be sensible, nobody would like to get his huge money of 30 lakhs wasted and to see you enjoy. Plenty of unexpected troubles will be there for you in the future.
Guest
(Expert) 15 June 2018
If still willing to sell the land to him, why don't you extend the deadline for registration? No use in pretending that you are not in a state of returning money, if already agreed verbally.
Be sensible, nobody would like to get his huge money of 30 lakhs wasted and to see you enjoy. Plenty of unexpected troubles will be there for you in the future.
Guest
(Expert) 15 June 2018
If still willing to sell the land to him, why don't you extend the deadline for registration? No use in pretending that you are not in a state of returning money, if already agreed verbally.
Be sensible, nobody would like to get his huge money of 30 lakhs wasted and to see you enjoy. Plenty of unexpected troubles will be there for you in the future.
Guest
(Expert) 15 June 2018
If still willing to sell the land to him, why don't you extend the deadline for registration? No use in pretending that you are not in a state of returning money, if already agreed verbally.
Be sensible, nobody would like to get his huge money of 30 lakhs wasted and to see you enjoy. Plenty of unexpected troubles will be there for you in the future.
santhosh.g.
(Expert) 15 June 2018
As there is no specific clause for forfeitng earnest money in the agreement, you are bound to repay it. He can file civil suit for recovery of earnest money against you within 3 years limitation period
K Rajasekharan
(Expert) 15 June 2018
You are bound by the conditions in the contract and nothing more. If it says specifically that the deposit will not be paid in case of buyer’s failure after the due period, you are not bound to pay it back. The buyer’s right is only to enforce specific performance of the contract and nothing more. Here he is a defaulter and he cannot proceed against you if you have not violated any specific clause in the contract.
If the deposit is earnest money, rather than advance, no legal provision is there to get it back except on the conditions specified in the contract. Earnest money is a guarantee for the due performance of the contract. It can be forfeited when the transaction falls through due to the failure of the buyer. Unless there is any express condition on the contrary in the contract, the seller is entitled to forfeit the earnest money on default committed by the buyer.
But if the advance is part payment of purchase it cannot be forfeited. That means if the payment is made only towards part payment of consideration and not intended as earnest money then the forfeiture clause will not apply. This is what the apex court judgment in Civil Appeal No 7588 of 2012 says. It deals with this issue of earnest money refund or forfeiture.
Querist :
Anonymous
(Querist) 15 June 2018
Thank you Dhingra, Usha and Rajasekharan,
I am willing to sell it to the first party, but they are not willing to buy it.I assume it because of the property price fall after the demonetization. I really want to refund the money to them but I need time. So just wondering, what the worst case it could end up if things move to the court.
Best Regards
Vimal
K Rajasekharan
(Expert) 15 June 2018
Nothing more than what you intend to do will happen, even if they go to the court.
They can only claim for specific performance of the sale contract first. As you are willing to perform your part of the contract, it will end there.
On the alternate, that too only along with the plea for specific performance, they can claim for return of earnest money, if the deed and the events reveal that the money paid is “earnest money”.
The third scenario is they can ask for refund of advance, if the agreement and circumstances reveal that it is an “advance”.
This is an area where some confusion exists among high courts too because of some twists and turns in the approach of different courts towards advance/earnest money. Some judges are of the opinion that no legal provision in any law provides for refund of earnest money, even though some judgements are there on the contrary.
However you are not at any kind of disadvantage, it seems.
Dr J C Vashista
(Expert) 15 June 2018
1. Did you issue any notice (written) to the prospective buyer qua his/her failure to perform his/her contractual obligation intimating (your intention for ) forfeiture of the earnest money?
2. Whether there is any clause of forfieture of earnest money in the agreement to sell?
3. Did you ever speak to the buyer asking him/her the "undue" delay in making payment of balance of consideration and execution of Sale Deed, if 6 months time was agreed in the Agreement to Sell?
4. Consult a local prudent lawyer before taking any such decision.
Kumar Doab
(Expert) 15 June 2018
Pls post with your ID and not as AQ and you can get many replies.
Your ID does not mean your email id or phone number and don’t post these also.
Kumar Doab
(Expert) 15 June 2018
You want to invest the advance amount of Rs.30 lacs.
You may avoid IT.
You may revert to pertinent points raised above in 2nd last post.
You must have discussed with your own LOCAL senior counsels of unshakable repute and integrity specializing in Civil matters and well versed with latest citations, LOCAL applicable rules/laws/ … and having successful track record…. and worth his/her salt…..and shown the said agreement.
You may also post what is the view of your own counsel.
Guest
(Expert) 16 June 2018
The worst things cannot be anticipated, but experienced by going to court, when you would lose everything of yours, including mental peace, by sharing your money with the lawyers, wasting your precious time of years together in courts, losing several other opportunities due to your being preoccupied in your court case, not getting the property sold, and ultimately you become liable to pay back the money to the concerned party with unbearable huge amount of interest.
So, why not try your luck to gain some practical experience of going in to litigation?
But, don't forget one important aspect of law, punishment is the main feature of law, not to give relief in any way. Both the parties can only expect extensive sufferings from the hands of law due to one or the other reason No paid local lawyer would tell you this secret for the reason of losing his prospective valuable client.
Guest
(Expert) 16 June 2018
The worst things cannot be anticipated, but experienced by going to court, when you would lose everything of yours, including mental peace, by sharing your money with the lawyers, wasting your precious time of years together in courts, losing several other opportunities due to your being preoccupied in your court case, not getting the property sold, and ultimately you become liable to pay back the money to the concerned party with unbearable huge amount of interest.
So, why not try your luck to gain some practical experience of going in to litigation?
But, don't forget one important aspect of law, punishment is the main feature of law, not to give relief in any way. Both the parties can only expect extensive sufferings from the hands of law due to one or the other reason No paid local lawyer would tell you this secret for the reason of losing his prospective valuable client.
Guest
(Expert) 16 June 2018
The worst things cannot be anticipated, but experienced by going to court, when you would lose everything of yours, including mental peace, by sharing your money with the lawyers, wasting your precious time of years together in courts, losing several other opportunities due to your being preoccupied in your court case, not getting the property sold, and ultimately you become liable to pay back the money to the concerned party with unbearable huge amount of interest.
So, why not try your luck to gain some practical experience of going in to litigation?
But, don't forget one important aspect of law, punishment is the main feature of law, not to give relief in any way. Both the parties can only expect extensive sufferings from the hands of law due to one or the other reason No paid local lawyer would tell you this secret for the reason of losing his prospective valuable client.
Dr J C Vashista
(Expert) 19 June 2018
Dear Mr. PS Dhingra ji,
It would have been appropriate to appreciate mind of the queriest instead of giving "undue" moral advise, which is otherwise, against the professionalism, that you would agree with me.
Thanks & Regards
Dr J C Vashista
(Expert) 19 June 2018
Sh. PS Dhingra ji,
The author is still anonymous, non-responding to the queries raised by experts and concealing vital informations. In these circumstances it would be better to close this debatable thread.
Thanks & Regards
