• Token money and part payment - cancellation of sale agreement

What does the law says about the token money and part payment made in case of cancellation of sale agreement as a buyer. Does law entails buyer the return of part payment made 2 months after the token money and sale agreement sign date?

Details:
We had come into a sale/purchase agreement of a property for Rs 86 lac in September as purchaser with earnest amount of Rs 10 lacs in September.
We also had paid Rs 10 lac on 4th November as part payment and rest 66 lac rs was to be paid on 4 th of December. 

What are the consequences of cancellation of deal to us as a buyer. Will the earnest amount and part payment are liable to be fortified or at least part payment is refundable according to the law? 

Reason of cancellation is limit on cash withdrawal after demonetization and the seller is not ready to take amount as cheque and is only demanding cash.
Asked 13 days ago in Property Law from Delhi, Delhi
Religion: Hindu
the terms of contract are sacrosanct 

2) you have not mentioned as to whether sale agreement contains a clause that in the event of failure of purchaser to  pay balance amount within stipulated period advance money paid would be forfeited

3)instead of cancelling agreement you should write to seller that you are willing to pay the balance amount of Rs 66 lakhs immediately  by cheque  and to execute registered sale deed in your favour . please note that your bank account should have the requisite funds as on date of sending letter or email 

4) the seller cannot insist on cash payment . let seller cancel the deal . if he cancels the agreement he would have to refund you the advance of rs 22 lakhs paid by you 
Ajay Sethi
Advocate, Mumbai
23151 Answers
1216 Consultations
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1. The cancellation of earnest money depends on the terms as mentioned in the sale agreement.
.2. So without seeing the sale agreement it is difficult to opine whether the seller can forfeit the earnest money paid by you.
3 In general circumstances there is no illegality if the seller forfeits a part of token money if the agreement so provides.
4. However such clause must not be repressive and it can no penalise the buyer by forfeiting whole amount ,more so, if the reason of cancellation was genuine.
5. So in your case if you feel deprived you can file case before the consumer forum seeking the refund and damages. Your reason of cancellation is valid.
Devajyoti Barman
Advocate, Kolkata
5179 Answers
54 Consultations
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The recital in the agreement for sale is very important. What will reflect in agreement with regard in the event of failure of purchaser to pay balance amount within stipulated period advance money paid would be forfeited or ___% is taken as cost for damages.

You send a legal notice with regard to the payment by cheque or bank transfer to his account. If he is not ready and willing to accept your deal then you should file suit for getting advance amount after the expiration of sale agreement.The seller cannot insist on payment by cash .
Ajay N S
Advocate, Ernakulam
1910 Answers
19 Consultations
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An agreement to sell is to be enforced like any other agreement. If buyers commits breach of the agreement and if terms of the agreement provide, the earnest money; which is defined as guarantee to  performance of agreement, would be forfeited. If there is breach on the part of seller, he has to compensate the buyer as per terms which usually is an equal amount added to earnest money. In some law cases such an amount was held to be liquidated damages, a term which is used to   describe pre-estimated damages and court would in case of breach would allow     maximum of such damages or less than that. But in the case of Satish Batra v sudhir Rawal, Sc ruled forfeiture of earnest money in case of breach. for reference you can follow the following link https://indiankanoon.org/doc/59682311/  . However the part payment which is not earnest money has to be returned to the buyer in case he commits breach. In your case it seems that seller is not ready to accept the cheque payment and therefore it is not a breach from your side. Write/ give notice to the seller that you are ready and willing  to perform your part of contract and on date fixed for registration approach the office of sub-registrar.   
H. S. Thukral
Advocate, New Delhi
514 Answers
125 Consultations
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1. The refund or forfeiture of earnest money is governed by the sale agreement executed between the seller and prospective buyer. If the agreement mandates forfeiture the seller can forfeit it, but if it does not then the buyer is entitled to the refund of it in entirety.

2. In your case as the reason of cancellation is the refusal of seller to take money through cheque, it follows that there is no unwillingness on your part to honour the agreement to sell. As a corollary thereto, you have the right to have the complete refund. Serve him a lawyer's notice to honour the agreement.
Ashish Davessar
Advocate, Jaipur
18061 Answers
447 Consultations
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The law is the conditions agreed on the sale agreement 

If the sale agreement says that the refund of advance amount t to be made without any deduction then you may get it automatically and if it is silent on this then you may have to fight to get this back. 





Reason of cancellation is limit on cash withdrawal after demonetization and the seller is not ready to take amount as cheque and is only demanding cash.

The vendor cannot refuse to accept the cheque payment and any demand made for payment by cash alone, he can be dragged to court or even a complaint can be lodged against him before the income tax department for his illegal demand. 
T Kalaiselvan
Advocate, Vellore
13948 Answers
127 Consultations
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1) it is necessary ti peruse agreement ti advice 

2) if there is no forfeiture clause amount paid by you would  be refundable 

3) if at all you decide on fresh agreement get it drafted by local lawyer to protect your interests 

4) it should provide for refund in case agreement cancelled
Ajay Sethi
Advocate, Mumbai
23151 Answers
1216 Consultations
5.0 on 5.0
I had sent you a link of SC judgment which clarifies most of your doubts it is clearly held in that case that "It is also the law that part payment of purchase price cannot be forfeited unless it is a guarantee for the due performance of the contract. In other words, if the payment is made only towards part payment of consideration and not intended as earnest money then the forfeiture clause will not apply." 
You have to take precautions in the new agreement to be arrived at that it clearly stipulates the further payment of 10 lacs or more is towards sale consideration and not earnest money. 
H. S. Thukral
Advocate, New Delhi
514 Answers
125 Consultations
5.0 on 5.0
The earnest money is also a part of the sale consideration amount. 
Hence it is also refundable. 

If you have taken extension of time then there is no need for a fresh agreement 
Your earnest money shall be refundable in the absence of any clause holding that money.


An agreement shall be always with the cancellation clause.
Cancellation can be done even without this clause.

T Kalaiselvan
Advocate, Vellore
13948 Answers
127 Consultations
5.0 on 5.0

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