• Buyer defaulted in property purchase agreed MOU

I hope all is well with you.

Covid-19 virus situation is affecting our lives negatively as much as anyone's!

My friend (USA NRI) entered into a flat Sale transaction in mumbai, at distress rate with buyer,
1.seller made MOU on ₹100/- stamp paper (not notarized) on 22.02.2020 for transaction to be completed by 21.06.2020, 

2.buyer paid token of 7.5 lac to seller.

3. now buyer don't want to do deal he wants his whole token money back.
Seller suggested to give time 6-12 months to complete transaction (buyer refused)

4.Buyer told on call if Seller did not return full token back he will put Court Stay on property, and seller won't be able to sell the flat.

5.Whereas in MOU following clause is inserted duly signed by both parties:

It is agreed between the parties here to that the TRANSFEREES shall revert in 45 days time regarding title of the documents and if any defect is found it shall be rectified by the TRANSFERORS, failing which entire amount of Rs.7,50,000/- without any interest, shall be immediately returned to the TRANSFEREES, If the TRANSFEREES refuses to buy the SAID FLAT on account of all title clearance by concerned Bank/Financial Institution, this amount shall be forfeited And the TRANSFEREES shall have no claim on said property of any sort of and the TRANSFERORS will be free to sell the SAID FLAT to any party.

Kindly suggest Seller's legal stand on it :

A. Is MOU executed on ₹100/- Stamp paper legally valid in Court.

B. Seller has no money to return due to crises in USA, and wants buyer to buy flat.

C. Can buyer drag Seller in Court., What is remedy available to seller.

Kindly suggest

With regards
Asked 8 months ago in Property Law
Religion: Hindu

3 answers received in 30 minutes.

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14 Answers

MOU is valid and binding on parties


2) buyer can file suit seek orders to direct seller to refund his money seek injunction restraining sale of property by seller 


3) your defence should be you are willing to execute sale deed in favour of buyer at price agreed in contract 

Ajay Sethi
Advocate, Mumbai
80564 Answers
4945 Consultations

5.0 on 5.0

In this case seller needs to return the amount if the sale is deferred or cancelled due to him. Otherwise he can forfeit the same if it's buyers fault, If mou has terms of forfeiture. Buyer will not get any relief by court if the same is done due his fault. No stay or specific relief will be granted to him. Yes the said mou is valid for specific reliefs under the Act

Prashant Nayak
Advocate, Mumbai
23004 Answers
49 Consultations

4.4 on 5.0

Not valid but can be rectified by paying proper stamp duty.

Buyer committed default in paying left amount, seller entitle to forfeit advance.

Refuse to refund and sell the flat. And first send legal notice that MOU is expired due to non payment of rest amount by buyer on given time and therefore, agreement stands terminated and along with it,advance is forfeit.

Yogendra Singh Rajawat
Advocate, Jaipur
21422 Answers
31 Consultations

4.4 on 5.0

- As per Section 10 of the Indian Contract Act , all agreements are contracts if they are made by the free consent of the parties competent to contract, for a lawful consideration and with a lawful object and are not expressly declared to be void.

- Further , a MOU is a statement of understanding between two or more parties which when made has no enforcibility in the eyes of law , as such an agreement has no intention to create a legal bond between such persons. 

- But , when an MOU has been made as per section 10 of the Indian contract Act, then it is a valid agreement.

- Further , no stamp duty is required on MOU, but if the MOU for an agreement to purchase immovable property worth more than Rs. 100/- , then it is mandatory to be registered and stamped .

- Further, if the MOU contains its expiration , then it lost its value , otherwise , the limitation period to challenge an MOU is 3 years from the ate of its execution .

- Since, the said MOU with the buyer is not registered and stamped , hence it is not a valid document to be produced in the court. 

- Further since, there is already given an expiry period i.e.21.06.2020 in the MOU , then the buyer cannot cancel the said MOU and ask for the refund of the token amount , otherwise , as per the clause he will not be liable to get his money back legally. 

- Further , if the seller refused to transfer the property in the name of the buyer after receiving full amount, then the buyer will approach the court for the performance of MOU , after filing a suit for Specific performance, and in that eventuality , the court grant stay for selling to third person .

- But, as the buyer wants to cancels the deal himself , hence a suit for specific performance to perform cannot be filed by the buyer.   

- However, the said buyer can approach the court for the refund of the deposited amount within 3 years period of the execution of MOU against the seller. 

- The seller should send a legal notice to the buyer for cancelling the deal as given in MOU, and to forfeit the amount deposited by him . 


Good luck and dont forget to rating Positively

Mohammed Shahzad
Advocate, Delhi
5973 Answers
60 Consultations

5.0 on 5.0

1.  MOU is not an agreement or a contract. Hence it is legally not enforceable.

2. IF buyer or seller does not honor its commitment, THEN Token amount can be forfeited.  However the lockdown period shall be exempted and time period extended for purpose of forfeiting money.

Hemant Agarwal
Advocate, Mumbai
5545 Answers
25 Consultations

5.0 on 5.0

Get the MOU registered in back date "if you cam get it done" 

Otherwise seller have to return the token money or face the court.

Rahul Jatain
Advocate, Rohtak
5365 Answers
4 Consultations

4.8 on 5.0

1. Since its not registered if the party relies on this in court it would be impounded and penalty will have to be paid by him along with stamp duty and fees. 

2. Full forfeiture of booking amount is not allowed jn normal circumstances like yours. 

3. So to avoid the property to remain under litigation return his money after nominal deduction and get a deed of cancellation done. 

Devajyoti Barman
Advocate, Kolkata
22032 Answers
325 Consultations

5.0 on 5.0

If buyer fails to purchase the property with all clear title and no fault of seller,  his token money shall be liable to be forfeited .

Buyer can go to court but can not sustain his claim for refund .

100 rupees stamp paper is sufficient and legally valid for agreement. 


Kallol Majumdar
Advocate, Kolkata
2792 Answers
4 Consultations

5.0 on 5.0

MOU made on 100 rupees stamp paper can surely be valid if it fulfills all other conditions under the law and as per the law. But, if the agreement requires to be stamped and registered then it cannot be used as an evidence of proof before a Court of law.

Mohammed Mujeeb
Advocate, Hyderabad
18991 Answers
15 Consultations

4.5 on 5.0

A. It is valid. It is an agreement for sale. So it should be properly stamped. However if the buyer defaults in his obligations, then seller is not remediless. An unstamped document cannot be considered by court in evidence. However for interim relief such a document can always be looked into. At the highest the full duty can be paid and recovered from the buyer. Seller can always seek specific performance of contract

B. Seller also has the option to ask the buyer to get another buyer or seller can himself find another buyer. Thus that new buyer can return the token of the first buyer and balance consideration to you. 

C. He cannot. He has no legal ground. He is a defaulter. Court will throw him out. 


I suggest go for the second option


If you are ok, then i may be interested in purchasing this flat if its meets my criteria [depends in which area this property is situated apart from other considerations]

you can have my contact details from kanoon and book an appointment with me for a phone consultation

Yusuf Rampurawala
Advocate, Mumbai
5916 Answers
43 Consultations

5.0 on 5.0

1. The unregistered sale agreement if not enforceable in court of law, however since this acts as  receipt for the money received by the seller, the court may allow the plaintiff to file the suit for recovery of money.

2. The seller cannot say that he has no money, he is liable to return the money in the event of cancelling the sale agreement, the forfeiture clause is not valid in legal terms in this situation.

3. The buyer can very well drag the seller to court if the seller is not returning the amount received by him.

The seller has to arrange for return of the booking amount.

T Kalaiselvan
Advocate, Vellore
70617 Answers
986 Consultations

5.0 on 5.0

A. Is MOU executed on ₹100/- Stamp paper legally valid in Court.
Answer: Yes it is valid;

B. Seller has no money to return due to crises in USA, and wants buyer to buy flat.

Answer: COVID situation is worse. Everyone is watching the SC on this;

C. Can buyer drag Seller in Court., What is remedy available to seller.

Answer: Yes, he can drag the seller in court. But this is pursuant to the court reopening. The SC will have a big say on this matter.

Gowaal Padavi
Advocate, Mumbai
1920 Answers
5 Consultations

5.0 on 5.0

1. Yes MoU is legally valid and acceptable as evidence in court. 

2. Seller should refund the money to buyer in case of cancellation of agreement.

3. Yes buyer can file suit against seller.

4. Seller should send a notice for execution of sales deed by paying remaining consideration till last date of agreement.


Mohit Kapoor
Advocate, Rohtak
10685 Answers
7 Consultations

5.0 on 5.0

1. The document that you are referring to as MOU must be agreement to sell. It can be executed on a Rs.100 stamp paper and is not required to be registered.

2. Within the sweep of the clause extracted by you, the seller is entitled to forfeit the advance amount paid to him as the cancellation of agreement is not caused due to defect in title.

3. However, the seller should immediately send a lawyer's notice to the buyer to demand that he should come forward and complete the transaction as there is no defect in title found by the buyer and communicated to the seller.

4. If buyer files a suit against the seller then latter has to contest it.

5. Seller can file caveat in the competent civil court if he apprehends that buyer may walk away with an ex parte ad interim injunction against the alienation of property.

Ashish Davessar
Advocate, Jaipur
30295 Answers
880 Consultations

5.0 on 5.0

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