• Do we have to return advance money on a failed property transaction

My father had agreed to sell his house to a lady settled in Dubai. Her relatives visited the property and liked it. She sent a DD of Rs 5 lakhs and an agreement signed by her brother living in our hometown to buy the house within 3 months of time. My father signed the agreement with her brother, paid off the home loan of Rs 3lakhs on the property and showed him the passbook and original property deed. In the last week of the third month she sent me an email citing her inability to raise money for the purchase (which was a lie). My father had intended to sell the house and procure a seat for MD for his son in law. Therefore he had to sell the house as a distress sale at a very low amount than the market value to complete the admission procedures which ultimately failed too. After 3 more months, the said brother filed a civil case to return the advance of 5 lakhs. My father had no money to pay him back. The brother says he had wished to buy the home for himself and not for his sister and that we failed to complete the transaction and therefore should return the money. I have the copy of the lady's email saying it was for her and that she doesn’t want to buy it.
My questions are: 
1. Is my father liable to give back the advance money in full or part?
2. Is email considered as proof that it is she who failed to buy and not my father?
3. What could be the consequences of such a case?
Note: The agreement didnot contain a clause that advance money will be forfeited. But it did contain a statement that they would buy it within 3 months of time. There was no written letters (by post) from either parties.
Kindly advise
Asked 4 years ago in Property Law
Religion: Hindu

2 answers received in 10 minutes.

Lawyers are available now to answer your questions.

10 Answers

1) what were terms of agreement signed with lady

2) emails are admissible in evidence

3)if there is no forfeiture clause your father has to refund the advance amount received by him

Ajay Sethi
Advocate, Mumbai
87973 Answers
6207 Consultations

5.0 on 5.0

A suit for specific performance shall lie against either of the parties who fail to fulfill such obligations. The facts and circumstances has to be pleaded before the trial court to substantiate that you were ready and willing to perform your part of the contract and the purchaser was not.

Rajaganapathy Ganesan
Advocate, Chennai
2085 Answers
8 Consultations

4.9 on 5.0

1.The clause that they have to purchase the same in 3 months will make you liable to retain the advance, and you may claim the same as mesne profit.

2. Yes the -mail is considered to be a good prove in the court of law.

3. Such case will fall, they do not have any claim to demand the advance since they failed to purchase the property within the stipulated time.

Regards

Anilesh Tewari
Advocate, New Delhi
17940 Answers
377 Consultations

5.0 on 5.0

1) here the question does not arrive who made the payment but on whose name the agreement is done. Now you can transfer money to his brother account as the property is purchased on his name. Your father has to pay money fully or partly as he has.

2) email doesn't serve your problem as she is not partner or second or nominee mentioned in the agreement.

Ganesh Kadam
Advocate, Pune
12338 Answers
191 Consultations

4.9 on 5.0

1. If the sale agreement due to failure to complete the sale by the buyer then if the agreement so provides a part of the advance money as provided in the agreement can be forfeited. But in no circumstances whole consideration would be deducted.

2. Yes

3. Refund the money after deduction as per terms of the agreement.

4. If you have dearth of money then after cancellation make fresh agreement with a new purchaser and from that amount you can refund the previous buyer.

Devajyoti Barman
Advocate, Kolkata
22515 Answers
402 Consultations

5.0 on 5.0

Please check the agreement to sale and that must have a clause regarding the call off the deal and it's consequences. If as per the agreement buyer opts out of the deal then there should be some forfeiture clause of advance

If yes then the advance should be forfeiture.

Vimlesh Prasad Mishra
Advocate, Lucknow
6848 Answers
23 Consultations

4.9 on 5.0

If the brother entered into the sale agreement then that lady has no reason to cancel the sale agreement, therefore the claim by the brother at this stage is very much valid provided he had implicitly expressed that was ready and willing to perform his part of contract and requested your father to execute the sale deed and register it in his favor at his cost by receiving the balance of sale consideration amount.

However your father should not have sold the property without intimating the proposed buyer to a third party.

Your father should return the booking amount by deducting the minor amount spent towards stamp duty and other incidentals.

If he is not returning then he may file a recovery suit by which the court will direct your father to return the same with interest.

T Kalaiselvan
Advocate, Vellore
78131 Answers
1543 Consultations

5.0 on 5.0

1. When an agreement to sell is entered into it contains a clause providing for forfeiture of advance money paid to the seller if the buyer does not honour his promise. If this clause was not included in your agreement then it is attributable to clumsy drafting. It seems to me that your father did not get the agreement drafted or vetted by a lawyer before signing on the dotted line. Be that as it may, your father is bound to refund the amount paid to him, albeit he can file a suit for specific performance against the buyer to compel him to specifically perform his promise of buying the property.

2. It is not clear as to who was the person with whom the agreement to sell was executed? Was it the sister or brother? If the agreement was made between your father and the brother of this lady then unless the brother executed it in capacity as an agent of his sister the agreement was between your father and the brother only, in which event the email of this lady should have been ignored.

3. Furthermore, if the email was sent to your father then your father should have served a legal notice for cancellation of the agreement on the buyer.

Ashish Davessar
Advocate, Jaipur
30761 Answers
971 Consultations

5.0 on 5.0

1. Depends on the terms of the agreement to sell. Please reproduce the relevant clauses from the Agreement to sell, here.

2. yes. It is admissible in the court.

3. If the agreement is silent on the aspect of refund/forfeiture of advance deposit, it is to be deemed that the same was to be forfeited incase due to the faith of the proposed buyer the sale transaction couldn't be completed due to any reason whatsoever.

Vibhanshu Srivastava
Advocate, New Delhi
9426 Answers
245 Consultations

5.0 on 5.0

It generally depends on the terms of agreement. If agreement states that the amount will be forfeited then the money is not returned. Generally there is no law which specifies the same. It depends on the loss incurred by the seller due to failed promise of buyer. It depends on you to return or not.

Prashant Nayak
Advocate, Mumbai
27289 Answers
88 Consultations

4.4 on 5.0

Ask a Lawyer

Get legal answers from lawyers in 1 hour. It's quick, easy, and anonymous!
  Ask a lawyer