When a buyer signs an offer to purchase a property and the seller countersigns the offer, it becomes a binding agreement of sale.
What if one of the parties changes their mind? The buyer no longer wants to buy, or the seller no longer wants to sell. Is it possible to cancel the agreement of sale?
It all depends on the terms of the agreement and may have substantial financial implications. Basically, it’s important to study the agreement.
For example, a sales agreement automatically becomes void if the buyer is not able to raise finance. This usually happens early on, and the agreement automatically lapses. Once finance has been approved and a bank has issued the guarantee, there may be other suspensive conditions that, if not fulfilled, will cancel the agreement.
If one of the parties is in breach, for example, by not fulfilling a suspensive condition either in the time allocated or not being able to do so at all, this could be grounds to cancel the agreement. But it also depends on whether the agreement stipulates any remedies for such a situation.
On the other hand, new facts about the property may have come to the attention of the buyer that he feels the seller should have disclosed, which could put a spanner in the works. The seller may have knowingly concealed substantial defects, thinking he could rely on the voetstoots clause. But that isn’t always the case.
Of course, cancelling an agreement by mutual consent is always possible, depending on the situation. If the transfer process is already underway, it’s likely that the party who initiates the cancellation may be liable for legal and other fees.
Any one of these scenarios is possible, depending on the terms of the agreement:
There could be an agreed-upon cooling-off period stipulated in the agreement within which the buyer or seller could withdraw from the contract.
If either party breaches a specific clause of the agreement, the other party may be entitled to cancel the agreement.
The agreement may have conditions that must be fulfilled by a certain date. If these conditions are not met, the buyer or seller may be entitled to cancel the agreement.
Rescission of the sales agreement may be possible if there was fraud or misrepresentation by one of the parties, or if there was a mistake in the agreement.
The parties may agree to cancel the agreement by mutual consent. In this case, the terms of cancellation should be clearly agreed upon in writing and signed by both parties.
A party who wishes to cancel a sales agreement should consult a qualified legal professional who can explain their rights or obligations and advise on the best way forward.