Tennaro VMajorarch 2003

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[2003] EWHC 2601 (ChD). The intended buyer of three flats entered into the usual contract with the seller, under which the buyer had to pay a substantial deposit, and the depost would be forfeit to the seller in the event of the buyer's default. The transactions for the first two flats were completed; during the third the buyer suffered financial difficulties, and was unable to complete. The seller relied on the contract to retain the deposit. Eventually the buyer offered to buy the third flat, and had a higher price than the market value. The seller refused. The buyer applied to the court for return of the deposit under s.49(2) of the LPA1925. This subsection allows the court to order a return where it is necessary in the interests of justice. This power is rarely exercised, despite that fact that aForfeiture of deposit clause is effectively a penalty clause, and despite that the seller has suffered no financial loss (see omar v el wakil (2002)). In this case, however, the court held that the retention of the deposit was a cynical move on the part of the seller, to capitalise on the buyer's temporary difficulties. The fact that the buyer had offered to complete for a higher price than market value meant that allowing the seller to retain the deposit would be unjust.

Contract Law
Land and Property Law