Forfeiture of Deposits:
Punishing the Contract Breaker
D W McLauchlan
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A vendor of land validly cancels the agreement for sale and purchase for the purchaser's non-payment of the deposit. Despite the fact that the property is resold immediately at a much higher price, the vendor sues to recover the deposit. Do the courts have jurisdiction to grant relief to the purchaser under s 9 of the Contractual Remedies Act 1979? If so, is it in fact just to grant relief? Both questions were answered in the negative by the Court of Appeal in the recent case of Garratt v Ikeda [2002] 2 NZLR 577. In this article Professor McLauchlan criticises the Court's decision and the reasoning on which it is based.
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Forfeiture of Deposits: Enforcing Agreements
Peter Watts
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Professor Watts defends the result in Garratt v Ikeda, and most of the reasoning of the Court of Appeal, against Professor McLauch Ian 's attack in the foregoing article. Professor Watts argues that the forfeiture of a deposit that occurs when a contract of sale is cancelled for breach by the purchaser accords with the ordinary expectations of the parties, and that that is so even where the vendor on-sells the subject matter of the sale at a profit. The same result ordinarily follows where the contract is cancelled for non-payment of the deposit, and the vendor sues to recover the deposit, having already on-sold at a price higher than the contract price. These outcomes are established at common law, and there is insufficient reason to disturb them by attempting to exploit the provisions of the Contractual Remedies Act 1979.
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Forfeiture of Deposits:
A Reply
D W McLauchlan
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In the first sentence of his foregoing response to my article Professor Watts states that I "strongly criticised the outcome of Garratt v Ikeda, and the reasoning used to support it". That is true. Unfortunately, there is very little else in his response with which I can agree. Even his initial description of the Court of Appeal's ruling is not entirely accurate, from my point of view, because it fails to mention that the vendor recovered the deposit after cancelling the contract for its non-payment................. |
2002 PART I
