Remedies for breached property contracts

By Harold AyodoEven with a formal contract to purchase registered property, the deal may turn sour if one party fails to deliver their part of the bargain. A prospective investor may fail to complete payment of a home or land as agreed in the sale agreement over assorted reasons.There are also cases where the buyer pays the purchase price in full but the seller delays to transfer the property.Such cases end up in court as the aggrieved seek compensation.According to Section 3(3) of the Law of Contract Act, all contracts relating to property must be in writing to be enforceable.The Law Society of Kenya Conditions of Sale requires that transactions on property be completed within 90 days after signing of the contract. Buyers and sellers agree on the terms and period of payment before signing contracts especially when the payment is in installments.Lawyers of both parties must be involved and should negotiate to the best interest of their clients.Indian Transfer of Property Act (Section 54), applicable in Kenya, provides that contracts must be clear. The Law of Contract Act also reiterates that the terms of both the buyer and the seller must be contained in one document for clarity.The purchase price or value of the property must be written in both words and figures for clarity.There are, however, limitations on the period when an aggrieved party may move to court for compensation over failed contracts.RemediesThe Law of Limitations Act Section 4(1) (a) provides that actions may not be brought to court six years after the contract was allegedly breached.The restriction period to sue does not apply if there is a written contract not to plead limitation or if the law bars the person intending to plead limitation from doing so.Buyers should inform the seller if they are unable to complete payment as scheduled or pay up within 21 days after the expected date. The contracts will be invalid if there was no witness to attest to the signing of the agreement.Legal remedies in property transactions are statutory, equitable or obtainable under the Common Law. They include damages and rescissions: damages compensate the aggrieved party.The buyer or seller seeks compensation for the loss occasioned by the breach that may lead to non-completion of the transaction or completion with losses. The law on several occasions entitles the purchaser damages for loss of bargain when the seller delays the transaction.Purchasers seeking compensation in damages must establish, before the court, their ability to perform the contract.Another Common Law remedy for breach is rescission, which is the cancellation of a contract by either the court or aggrieved party. This may occur when the formation of a property contract is affected by factors such as fraud or when there is a misdescription or misrepresentation by one party or presentation of a defective title. Others are failure to complete the transaction on the agreed date or after notice to complete had been given.Equitable remedies to an aggrieved party are usually offered when damages may never constitute adequate compensation. Injunctions and specific performance are examples of equitable remedy whereby the court orders the failing party to perform their part of the bargain.Statutory remedies include rectification, mortgagee’s statutory powers of sale or appointment of a receiver, damages and forfeiture.Provisions for statutory remedies are entailed in the Registered Lands Act, Registration of Titles Act, Land Titles Act and the Government Lands Act. The Indian Transfer of Property Act also offers reprieves to affected parties. The writer is a lawyer and journalist with The Standard Group.

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