Two contractual options for claims
How do the different options available to a vendor operate if a purchaser fails to complete a contract? When does the vendor need to choose between potential claim routes? The decision could be significant, as the process pursued will have an impact on the amount recovered.
The standard terms of the contract for sale of land give a disappointed vendor two options in claiming for the loss they suffer when a purchaser fails to complete.
After termination the vendor may keep or recover the deposit, keep certain funds paid under the contract for security and sue the purchaser through one of two options. If the vendor has resold the property under a contract made within 12 months after termination, they may recover the deficiency on resale, with credit for any of the deposit kept or recovered and after allowance for certain taxes recovered and the reasonable costs and expenses arising out of the purchaser’s failure to complete. The alternative is that the vendor may sue to recover damages for breach of contract.
Thus a disappointed vendor may claim either liquidated damages, or damages in accordance with common law.
A claim for liquidated damages would only arise at the date of the resale, while a claim for common law damages arises at the date of the breach. These would include consequential damages such as wasted auction and advertising fees and rent and removal expenses. Further, a claim for common law damages also attracts the operation of the rule where the failure to complete was likely to lead to some special loss of which the purchaser was aware, in which case the difference in damages may well be substantial.
The possible practical outcomes should be considered closely and the advice of a solicitor, including expert evidence on the property market, may be needed in preparing a claim.
Contact Blackwell Short Lawyers if you are in any doubt about your rights or liabilities concerning this article.