What If Buyer or Seller Breaches Sale Agreement

What If Buyer or Seller Breaches Sale Agreement

Sale Agreement contains terms and conditions agreed to between the buyer and the seller for effecting the sale.

When the buyer or the seller acts in violation of these terms and conditions or does not act or refuses to act as required, there is a breach of sale agreement. There can be numerous examples of such breach such as:

  • Payment not made in stipulated time
  • Delivery of product not made as promised
  • Seller refuses to repair within the warranty period

Options with the party when other party breaches the sale agreement:

Also Read: How to save title of your property from illegal occupants?

When one party violates the sale agreement, the other party may give notice to the defaulting party to act as per agreed term. If the defaulting party fails to perform, the other party can

  • Cancel the sale agreement – as per the cancellation clause of the agreement, if any or through the court
  • Approach the court seeking directions to the defaulting party to perform as per the agreement – suit for performance
  • Approach the court to direct the defaulting party to compensate for the loss/damages caused to the party by the defaulting party – suit for damages
  • Ask for a refund of the advance payment made to the defaulting party – suit for the price
  • Retain the advance payment made by the defaulting party
  • Seek directions from court if warranty clause benefits not provided by the seller- suit for breach of warranty

Depending upon the nature of the agreement and its terms and conditions, all or any of the remedies mentioned above can be availed. It is the discretion of the court to grant a specific remedy as per law.

Read: Rights on mother’s property after her death

Specific remedies – (Governed by Indian Contract Act and Sales of Goods Act)

Remedies of Seller against buyer:

  • When the buyer refuses to pay – seller can file a suit for payment
  • When the buyer refuses to accept the goods – seller can file a lawsuit for damages, i.e. seller can recover loss caused to him based on the market price of the goods. The amount taken for calculating the loss is the price existing on the date of delivery of goods.

Remedies of Buyer against seller:

  • When the seller refuses to deliver – the buyer can file a suit for loss/damages caused to him by non- delivery of the product
  • When there is a breach of warranty by the seller-buyer can file a suit for recovery of purchase price or can seek damages. Buyer can also reject the goods but not always.

Remedy to seek interest for the loss – It is available both to the seller and the buyer to recover interest on the monetary loss, especially in suits for recovery of price.  It is the discretion of the court to allow or not. 

Read: Land Kabza- What to do?

Remedy if before the performance as per the agreement, one party clears its intention not to perform – Here the non-defaulting party can either consider it as a breach of the agreement and seek proper remedy or can wait for the defaulting party to perform on the due date.

If the buyer is in breach, the seller can

  • cancel the agreement
  • sue for damages
  • sue for price
  • Sue for claiming the goods if they are in possession of the buyer.

If the seller is in breach, the buyer can

  • Cancel the agreement
  • Sue for damages
  • Sue for performance
  • Reject the goods when delivered by seller if they are not in conformity with the agreed terms

Agreements are meant to be performed. The parties, however, are free to provide remedies in the agreement itself in case one party fails to perform its obligations. The remedies can be:

  • Cancellation Clause
  • Notice to be given or not
  • Advance to be retained or returned
  • Compensation/Damages –payment

Things to consider before giving property on lease/rent agreement

Lease or rent agreement

Rent has always been considered as a permanent source of income. Most Investment is made in immovable property with the objective of having secured returns in the future.

Many property owners who intend to rent/lease out their properties for generating income approach us with their related issues and we frequently deal with queries which are frequently raised by them are as follows:

What is the difference between the lease and rent agreement?

The lease agreement is an agreement between the parties where the rental period is extended. The lease period and the lease amount are fixed. The terms of the agreement can be revised only when it ceases to operate. After the end of the lease period, parties have to enter into a new lease agreement.

Rent agreement is an agreement between the parties where the rent is fixed for a short period, usually for a month. Every month the agreement expires, and a new agreement is entered into. The terms and conditions can be changed in every new agreement.

How to select the tenant?

The landlord must ascertain the credentials of the tenant. Police verification of the tenant is also a must as it helps to check any criminal record of the person. Tenant must supply his name, family details, place of work and other relevant information. Particulars can be cross-checked from employer or friends or earlier landlord if any.

Also Read: The powers and rights of landlords in India

How to fix the rent amount?

Rent amount depends upon various factors:

  • Purpose of renting out the property – residential or commercial
  • Location of the property
  • Prevalent rent in the particular area
  • Furnishings provided in the accommodation
  • Facilities provided to the tenant

What are the essential points to be taken care of in rent agreement/lease agreement?

Rent/Lease agreement is a legal document stipulating the rights and obligations of the parties, i.e. the landlord (lessor) and the tenant (lessee). Some of the essential points to be included in the rental agreement are as follows: (The list is not exhaustive)

  • Rent amount
  • Mode and time of payment of rent
  • Period of tenancy
  • Penalty if the tenant violates any condition of rent agreement
  • Liability of tenant in case of damage to the property
  • Mode of ending the tenancy – whether notice required or not
  • Notice period for vacating the premises
  • Charges which can be imposed if the tenant does not vacate the property in time
  • Change in rent amount on the periodical basis, if any
  • Renewal of lease, if allowed
  • Maintenance of Property

Rent agreement must be signed by both the parties and independent witnesses.

Also Read: Landlord Tenant laws – Step by Step Understanding

What about registration of rent/rent?

Only a registered agreement can be used as evidence in court in case of any dispute. Stamp duty has to be paid for registration of the agreements as per law. Registration of documents safeguards the interests of both the parties. Registration of rent/lease agreement is compulsory in case of the lease period of more than a year or year to year. If the rental period is less than a year, registration is optional.