Cancelation of sale agreement for non payment.

Question

► I have executed sale agreement on 7th April this year for my flat. The buyer had paid me 10% & was to pay remaining amount through bank loan,but the loan has not been disbursed yet. In the agreement it's mentioned 'if buyer fails to pay remaining amount within 2 months of date of execution the seller has right to terminate this agreement by giving 15 days notice '. My question is if the buyer fails to pay remaining amount and I send notice for cancelation of agreement can the buyer challenge same in court?

Answer 1

Dear Client,

Even though your agreement contains a clause permitting termination upon non-payment within 2 months after giving 15 days’ notice the buyer can surely challenge the cancellation before a court. However, the success of such a suit will depend largely on the conduct of both the buyer and the seller. If the payment timeline was clearly stated in the agreement and sufficient opportunity was given to the buyer to make arrangements for the balance consideration, then you are within your rights to terminate the contract by issuing a proper legal notice in accordance with the agreed terms of the agreement. The buyer can file a suit demanding specific performance indicating his readiness and willingness to complete the transaction, if he can show sufficient cause that prevented the happening of the transaction earlier. Even still, the courts will examine whether the buyer genuinely took timely steps to secure the loan and whether time was intended to be the essence of the contract. Therefore, before cancelling the agreement ensure that the terms of the agreement are strictly complied with and maintain proof of all communications with the other party with regards to this transaction.

I hope this helps and if you have any further issues do not hesitate to contact us.

Answer 2

Dear Client, In case of the default of the buyer in paying the balance amount within 2 months of execution, you have a right to cancel by giving 15 days notice. The agreement contains a clear and unequivocal clause as to the same. This is a remedy which is mutual agreement between the parties and is enforceable as per section 55 (right and duties of seller and buyer) of the Transfer of Property Act and section 73 (duty to pay compensation) of the Indian Contract Act. In case 2 months passed from Apr 7, 2025 without any payment, you have full right to serve the 15 days cancellation notice. Send it by post registered with acknowledgement due at the address of the buyer as mentioned in the agreement.

Regarding your question about whether the buyer can challenge this in court, the answer is yes, any party can approach a court. But if the terms of the Agreement are unambiguous and the time limit has in fact expired, the buyer’s challenge would be very weak. The buyer may claim that the delay in loan disbursement was not in their control and ask for some more time. In some cases, courts have granted buyers short extensions where the delay was really due to bank processing issues, not the buyer's fault.” To protect yourself, make sure your notice is sent on the day after the 2 month period expires not before and keep all records showing that the buyer did not arrange payment within the stipulate period. Retain the 10% advance as liquidated damages under your agreement as it likely permits and be ready to defend the termination if it is challenged.

I hope this helps, and if you have any further issues, do not hesitate to contact us.

Cancelation of sale agreement for non payment.

2 Answers