a) Payment of Deposit
Deposit refers to money paid by the purchaser to the
vendor as evidence of his commitment and intention to complete the contract. It
is a security for the performance of the contract. BIYO v. AKU (1996) 1 NWLR (pt.
422) 1.
Payment of deposit is not essential to the formation of
complete and binding contract, therefore, where the parties intend the deposit
be paid by the purchaser, express provision must be made for it in the contract
for sale.
Specifically, in a formal contract, payment of deposit
clause is for the following reasons:
·
It
assures the vendor of the purchaser’s intention and commitment to complete the
contract;
·
It
binds the vendor to the contract unless a breach occurs on the part of the
purchaser;
·
If the
purchaser defaults in completing the contract, the vendor can forfeit the money
paid as deposit and can sue for damages for loss of bargain;
·
If a
breach is committed by the vendor, the purchaser is entitled to recover the
money paid as deposit, with interest. Soper
v. Arnold (1989) 14 App. Cas. 429 at 435; Chillingworth v. Esche (1924) 1 Ch.
97;
·
Where
deposit is paid and the contract is duly completed, then upon completion, the
money paid as deposit becomes part payment without more; and
·
Where
there is an agreement to pay deposit, the failure of the purchaser to pay the
deposit amounts to a breach which the vendor can treat as a discharge of the
contract and sue for damages.
Deposit is traditionally fixed at 10% of the
purchase price; subject, however, to increment or reduction by agreement of the
parties.
b) Balance and interest on unpaid purchase sum:
Where balance has not been paid, the vendor
is still entitled to possession of the property until completion because legal
interest in the property still remains with him. The Balance and Interest on
Unpaid Purchase sum clause is for the following reasons;
·
Where
part payment is made, the law implies that the balance will be paid upon
completion. Therefore, if the vendor intends that balance of the purchase price
be paid to him before completion or after completion, then a clause must be
provided in the contract to specify the time for payment of the balance;
·
Unless
otherwise agreed, if the purchaser is in default of payment of the balance of
the purchase price, the vendor is not entitled to forfeit the amount paid as
part payment. Therefore, it would be necessary to insert a clause in the
contract which will entitle the vendor to rescind the contract and forfeit the
amount paid as part-payment in the event of unreasonable delay by the
purchaser; and
·
Unless
the parties agree otherwise, interest on unpaid purchase price is usually fixed
at 4%. So, the contract should state the
amount of interest that the purchaser will in the event of default. Where it is
the vendor that is in default, no interest will be paid. ESDAILE v. STEPHENSON.
c) Capacity of the vendor(s)
This will provide for and expressly state the
capacity in which the vendor is conveying because the capacity of the vendor
determines the covenants for title that will be implied into the contract. The
vendor can convey as beneficial owner, mortgagee, settlor, trustee or personal
representative and in each case, different covenants for title are implied into
the contract. The covenants for title to be implied are as provided for under
Section 7(a) and (b) of the Conveyancing Act 1881, and Section 100(1) (a) and
(b) of the Property and Conveyancing Law, 1959. Where the capacity of the
vendor is expressly stated, then there is no need to provide for the covenants
for title as they are automatically implied by law.
d) Provision on Risk and insurance:
Upon the exchange of contracts, the risk and
responsibility for the property passes to the purchaser and the vendor is under
no duty to continue to insure the property. PAIN
v. MELLER (1801) 6 Ves 49. Even if the vendor insures the property in his
own name, the purchaser is not entitled to any share in the insurance money in
the event of a damage to the property. CASTELLIAN
v. PRESTON; RAYNER v. PRESTON.
Therefore, a clause on risk and insurance is included to
protect the purchaser. The contract would provide for an insurance policy by
the purchaser or in the joint names of both vendor and purchaser or that the
purchaser would contribute to the premium paid by the vendor so as to entitle
him to a proportionate share in the insurance money in the event of loss or
damage.
e)
Provision On Possession Before Completion
Unless the contract provides otherwise, the purchaser gets possession of
the property upon completion. Therefore, where it is intended that the
purchaser should take possession before the completion of the contract, then
parties would include a clause to that effect in the contract.
However, in drafting that clause, one would take caution
to ensure that the purchaser takes possession merely as a Licensee or a Tenant
at Will and would expressly states so in the Contract for Sale of Land, so that
in the event of a default, it would not be difficult to evict him from the
property.
f) Provision on Date of Completion
Generally, time is not of essence at this contract stage
but completion must be within reasonable time. It is advisable to be within
three months to avoid uncertainties. However when time is made essential to the
completion of the contract, failure to complete the contract may lead to
rescission of the contract except the vendor ratifies the delay. See section 68 PCL, and Olaniran v Adebayo.
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