Simon Says: Can an owner refuse to sell after signing a contract?
This is the thirty-fifth in a weekly series of legal advice provided in a short and entertaining story format.
每周轻松有趣法律常識故事系列 - 第35篇
Keywords: Contract, Purchase and Sale Agreement of Property, Deposit, Breach of Contract Term
Can an owner refuse to sell after signing a contract?
Jack and Jill are a newly-wed couple living in Hangzhou, China. Jack’s father decided to give them 5 million to choose a flat as a wedding gift.
After searching for a month, they found their perfect cozy little flat to live in. They signed a sale and purchase agreementwith the owner Alex, and paid him 0.5 million Yuan as initial deposit, and started decorating the house while waiting for completion of title registration. The fancy decoration costed the young couple another 0.5 million.
Half a year later, after the decoration was completed, they called Alex on change of the registration of title of the property and, of course, how to pay him the balance as well.
However, at that time, as Hangzhou’s property market was in a boom, the price of the flat has also risen by 1 million. Alex, knowing that the flat now values 20% more, did not want to sell it at 5 million anymore.
“I’ll give you guys a deal. We all know that it costs 6 million now, and there is no way I am selling it at 1 million less. How about you pay me the 5 million as promised, and I’ll keep the deposit as well. This way you guys get it 0.5 million cheaper.” Alex bargained.
“We signed the contract at 5 million, so 5 million is 5 million. You signed the contract at your own will and you have to be honest.” The couple argued.
Alex, “Then I am not going to go through the deal!”
Prof Simon Says:
Jack and Jill need not pay Alex an extra 0.5 million. Alex, being a seller, is in breach of the contract terms and shall have to compensate Jack and Jill one million if he decides not to perform the contract as signed. There is always a term in such agreement stating that if a seller decides not to go through the agreement, the seller need refund two times of the deposit the purchaser paid. Jack and Jill are de facto occupying the property as well as they have decorated the property already and it would be very difficult to vacate them without a court order. A court order may be granted on the condition that Alex has to compensate the time and efforts of Jack and Jill for the decoration of the property as well and it would be difficult to quantify their loss. Alex may suffer further loss to compensate the couple. Other than contractual rights, Jack and Jill have statutory right to claim for compensation under China’s Contract Law too.
China’s Contract Law
Article 107 If a party fails to perform its obligations under a contract, or its performance fails to satisfy the terms of the contract, it shall bear the liabilities for breach of contract such as to continue to perform its obligations, to take remedial measures, or to compensate for losses.
Article 108 Where one party express explicitly or indicates by its conduct that it will not perform its obligations under a contract, the other party may demand it to bear the liability for the breach of contract before the expiry of the performance period.
Article 113 Where a party fails to perform its obligations under the contract or its performance fails to conform to the agreement and cause losses to the other party, the amount of compensation for losses shall be equal to the losses caused by the breach of contract, including the interests receivable after the performance of the contract, provided not exceeding the probable lossescaused by the breach of contract which has been foreseen or ought to be foreseen when the party in breach concludes the contract.
The business operator who commits default activities in providing to the consumer any goods or services shall be liable for paying compensation for damages in accordance with the Law of the People's Republic of China on Protection of Consumer Rights and Interests.
For more about this or to contact Professor Simon Choi at www.acmeardent.com, firstname.lastname@example.org, +86 13823677853 or by WeChat: simonhkchoi.
About the Author: Professor Simon Choi
Prof Simon Choi, solicitor and linguist, is an international lawyer, qualified to practise law in England & Wales and in Hong Kong, China. Simon graduated from law schools of the Peking University, the University of London and the University of Hong Kong respectively, with an in-depth knowledge of Chinese laws and common laws and with more than 20 years experience in China practice and international trade, investment, finance, merger & acquisition. He is an adjunct professor of laws at the Zhongnan University of Economics and Law. Simon is the founding partner of Acme Ardent and can be reached at email@example.com or +86 13823677853.