What Happens If One Party Fails To Honour Sale Agreement?

An agreement to sell is a contract between the buyer and the seller of a property. Like any other contract, this deal, too, can go awry. This is why it is important for both the buyer and the seller to give due consideration while making or accepting offers. You must know your rights in case the other party fails to honour the agreement.

From the seller's perspective

If something like this happens, there are various scenarios in which you can act. Before deciding on what can be done, it is important to look back at the sale agreement and see if it had in its clauses. Here are a few things to check:

• What was the clause in the contract regarding the failure on the part of the buyer to make the payment? 

• Is there any clause which states that the balance money would be paid only after the buyer is satisfied with the title of the property? 

• Is there a clause that you can issue a legal notice to the buyer for cancellation of the agreement and seek damages? 

• Is there any clause stating that the buyer can renege on the agreement if he fails to get the home loan?

Also remember that if it is a registered agreement, a deed of cancellation will have to be executed by both the parties. Only then can the property be sold to the third party.

On the other hand, if the buyer refuses to agree for cancellation of a registered agreement, you can file a suit for specific performance to make the balance payment.

Also Read: Frequently Asked Questions On Property Registration

From the buyer's perspective

Here, too, the same set of rules apply. A buyer also has to refer to the sale agreement and look for the relevant clauses.

• What is the clause in the contract regarding seller backtracking from the deal?

• Is there any clause that states the seller can cancel the deal if certain conditions are not met from his side? 

• Can you issue a legal notice to the seller for cancellation of the agreement and seek damages?

In a nutshell, the buyer or the seller may seek breach-of-contract money damages when the other party fails to complete the sale. If a seller defaults, he must return all deposits, plus added reasonable expenses, to the buyer. The other party may also seek to compel the erring party to complete the deal under specific performance. From a buyer's point of view, it is advisable to get the sale agreement registered. 

Also Read: What Does A Sale Deed Look Like?

The specific performance

In real estate terms, specific performance means when either the buyer or the seller wants to complete the sale under the agreed terms and conditions in the agreement to sell. A buyer or seller who wants to compel the recalcitrant party to honour the agreement under already agreed-upon terms can plead injunction by seeking a court order to complete the sale. However, the court has the sole discretion to order a real estate sale through specific performance. 

With inputs from Shaveta Dua