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Penalty charges in case the seller backs out from a sale agreement

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Penalty charges in case the seller backs out from a sale agreement

Last updated: November 29 2018
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  • Penalty charges in case the seller backs out from a sale agreement

    In Sale Agreement we generally find a penalty clause that if the buyer backs out from deal , the entire amount paid till then would be forfeited by the seller , but what should be the clause in case the seller backs out from the deal. Please help me with this query asap.
    Last edited October 9 2018, 11:28 AM.
  • #2

    #2

    Re : Penalty charges in case the seller backs out from a sale agreement

    You can always have an clause saying something like "that the seller would pay the buyer, double the amount given by the buyer to the seller at the time of agreement, if the seller fails to honor the agreement".

    This has to be be mutually agreed between the seller and the buyer and for exact legal language, contact some Lawyer.
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    • #3

      #3

      Re : Penalty charges in case the seller backs out from a sale agreement

      Originally posted by srishtivasudev View Post
      In Sale Agreement we generally find a penalty clause that if the buyer backs out from deal , the entire amount paid till then would be forfeited by the seller , but what should be the clause in case the seller backs out from the deal. Please help me with this query asap.

      The buyer should check for the clause regarding a scenario when the sellers backs off out of the agreement. He should ensure that there is a clause that explains if the seller can cancel a deal on the basis of some conditions mentioned in the agreement.
      Also, if there is a clause mentioning the possibility of taking a legal course of action and seek damages in case the buyer backs off.
      You may seek breach of contract if the seller fails to honour the agreement and get the deposits and other expenses back. In some case you may even compel the seller to complete the deal based on the clauses mentioned in the agreement. It is always advisable to consult a lawyer and get the sale agreement registered to be able to play a safe bet in case of such default.
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      • #4

        #4

        Re : Penalty charges in case the seller backs out from a sale agreement

        srishtivasudev Mostly sellers back out as they get a higher bid and hence the buyer has to be compensated for not just the money paid but also other loses that tag along not to forget the mental ordeal of losing on a deal of a dream home.

        There should ideally be a penalty clause stating that: the buyers gets to take the money back in case the seller backs out.

        The agreement should be registered as it then becomes a deterrent of sorts for the seller from backing off from the deal. However, it is all possible if there is a clause on the agreement in the first place.

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        • #5

          #5

          Re : Penalty charges in case the seller backs out from a sale agreement

          Originally posted by MANOJa View Post
          You can always have an clause saying something like "that the seller would pay the buyer, double the amount given by the buyer to the seller at the time of agreement, if the seller fails to honor the agreement".

          This has to be be mutually agreed between the seller and the buyer and for exact legal language, contact some Lawyer.
          The issue here is that most sellers will not agree for such a clause in the agreement. Ideally, the agreement should be fair to both the parties and such a clause should exist in the agreement.
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          • #6

            #6

            Re : Penalty charges in case the seller backs out from a sale agreement

            srishtivasudev: Are you able to sort out your query. If yes please let me what was your outcome.

            I am also facing the same issue, here I have made sale agreement in Rs.500 stamp paper and mentioned as "seller shall pay reasonable damages along with advance amount to the purchaser". Advance made in March 2018. Can I claim double the advance amount? Please advice.






            Last edited November 20 2018, 08:41 PM.

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            • #7

              #7

              Re : Penalty charges in case the seller backs out from a sale agreement

              Originally posted by MANOJa View Post
              Originally posted by MANOJa View Post
              You can always have an clause saying something like "that the seller would pay the buyer, double the amount given by the buyer to the seller at the time of agreement, if the seller fails to honor the agreement".

              This has to be be mutually agreed between the seller and the buyer and for exact legal language, contact some Lawyer.
              The issue here is that most sellers will not agree for such a clause in the agreement. Ideally, the agreement should be fair to both the parties and such a clause should exist in the agreement.
              I am also facing the same issue, here I have made sale agreement in Rs.500 stamp paper and mentioned as "seller shall pay reasonable damages along with advance amount to the purchaser". Advance made in March 2018. Can I claim double the advance amount? Please advice.

              Last edited November 20 2018, 08:41 PM.

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              • #8

                #8

                Re : Penalty charges in case the seller backs out from a sale agreement

                Originally posted by shankar.env View Post
                I am also facing the same issue, here I have made sale agreement in Rs.500 stamp paper and mentioned as "seller shall pay reasonable damages along with advance amount to the purchaser". Advance made in March 2018. Can I claim double the advance amount? Please advice.
                "Reasonable damages" - see Reasonable is a very subjective word and your wish of claiming double the advance amount paid would depend on the seller . Going to court with this agreement may also not fetch u what u r wishing for, so best would be to settle this mutually with the seller .
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                • #9

                  #9

                  Re : Penalty charges in case the seller backs out from a sale agreement

                  Originally posted by MANOJa View Post
                  Originally posted by shankar.env View Post
                  I am also facing the same issue, here I have made sale agreement in Rs.500 stamp paper and mentioned as "seller shall pay reasonable damages along with advance amount to the purchaser". Advance made in March 2018. Can I claim double the advance amount? Please advice.
                  "Reasonable damages" - see Reasonable is a very subjective word and your wish of claiming double the advance amount paid would depend on the seller . Going to court with this agreement may also not fetch u what u r wishing for, so best would be to settle this mutually with the seller .
                  Thanks for the quick reply Manoj. How would we go with reasonable damages based on percentage w.r.t. advance amount?

                  Also please refer the below link

                  https://economictimes.indiatimes.com/wealth/personal-finance-news/property-seller-can-forfeit-buyers-earnest-money-supreme-court/articleshow/16951468.cms

                  As per the supreme court order if seller fails to perform the contract.

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                  • #10

                    #10

                    Re : Penalty charges in case the seller backs out from a sale agreement

                    Originally posted by shankar.env View Post
                    Thanks for the quick reply Manoj. How would we go with reasonable damages based on percentage w.r.t. advance amount?

                    Also please refer the below link

                    https://economictimes.indiatimes.com...w/16951468.cms

                    As per the supreme court order if seller fails to perform the contract.
                    I know about the quoted article, but it would still be best to settle this mutually, since involving a Lawyer itself is a huge cost . Also, in Court, proving that reasonable damages amount to double the advance amount exchanged, may be an issue .

                    Not fully understand as to what u mean by "how would we go with reasonable damages based on percentage w.r.t. advance amount?". Can u explain ?
                    Last edited November 20 2018, 09:35 PM.
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