To do or not to do….
What happens when a seller decides he no longer wants to sell his property or the buyer finds a more suitable property to purchase after an Offer to Purchase has been signed? Can a party simply walk away from the deal, or are there potential repercussions?
The short answer is yes, there can be major repercussions and, unfortunately, this can prove to be extremely costly for the responsible party.
Possible repercussions include the following:
- The aggrieved party could sue for out-of-pocket expenses;
- The conveyancing attorney could claim wasted costs for the work done on the transaction up to date of cancellation of the offer; and
- The estate agent can claim their full commission on the sale that has been cancelled, depending on the wording of the offer.
An Offer to Purchase is a written document that, once signed by both buyer and seller, becomes an Agreement of Sale. It is important that the parties keep in mind that an agreement of sale is a legal, binding document and both parties are required to fulfil their responsibilities as laid out in the agreement.
Cancelling an agreement of sale is only possible should there be a basis in law for doing so.
An agreement can be cancelled under the following circumstances:
- The agreement of sale can be cancelled based on a clause contained in the agreement. The said clauses can stipulate under which circumstances either party is allowed to cancel the contract. If a party can prove that cancelling the contract is in accordance with such a clause, there would be no penalties for cancelling the agreement and it would no longer be binding.
- The agreement can further include a suspensive condition. Only once a suspensive condition has been met, will the contract come into force. An example of such a suspensive clause is where the sale is dependent on the buyer obtaining bond finance. This condition protects the buyer from being liable for the purchase price without the backing of finance.
- A further way of cancelling the agreement is based on a party’s breach of contract. If one party to the agreement acted in a way that he contravened the agreement, the other party may lawfully cancel the agreement. The aggrieved party may also, claim damages from the party who was in breach of the contract, depending on the circumstances of the cancellation.
As noted above, cancellation of an agreement is a complicated matter with many possible repercussions. It is advisable to always seek legal advice before cancelling an agreement to ensure it is done in accordance with the relevant terms and based on merit.
