SOLVED ASSIGNMENT 1 CODE 460 MERCANTILE LAW SPRING 2016
Aiou solved assignment 1 for the course code 460 mercantile law or business law for the semester spring 2016. This subject code 460 is offered to B.com students and it is solved assignment 1 for this course. The first page of this solved assignment is in hard copy while the remaining are in soft form, please share this one with your class friends.
SOLVED ASSIGNMENT 1 CODE 460 FOR B.COM
Have been expressly declared void are agreement in restrain of legal proceedings agreement in restraint of trade, agreement in restraint of marriage and agreement by way of wager.
Proper offer and its acceptance:- to create a valid contract, there must be two or more panics. One ‘who makes the offer and the other who accepts the offer? One person cannot make an offer and accept it. There must be at least two persons. Also the offer must be clear and properly communicated to the other party. Similarly acceptance must be communicated to the other party and the proper and unconditional acceptance must be communicated to the offerer. Proper offer and proper acceptance should be there to treat the agreement as a contract which is enforceable by law.
Free Consent: According to section 14. Consent is said to be free when it is caused by (i) coercion, (ii) undue influence (iii) fraud, (iv) misrepresentation, or (v) mistake. If the contract made by any or the above four reason, at the option of the aggrieved party it could be treated as a void contract. If the agreement induced by mutual mistake the agreement would stand void or canceled, an agreement can be treated as a valid contract when the consent of the panics is free and not under any undue influence, fear or pressure etc. The consent of the panics must be genuine and free consent.
Capacity of parties to contract Parties entering into an agreement must be competent and capable of entering into a contract. If “A” agrees to sell a Government property to B and B agrees to buy that property, it could not treated as a valid agreement as A is not authorized or owner of the property. If any of the party is not competent or capable of entering into the agreement, that agreement cannot he treated as a valid contract. According to Section I I of the Act which says that even, person is competent to contract who is (dike age 01 Majority according to the law to which lie is subject and who is of sound mind. and is not disqualified from contracting be ant. law to which he is subject. So it is clear that the party must he of sound mind and of age to enter into a valid agreement which can be treated as a valid contract.
Certainty of meaning: Wording of the agreement MUM be clear and not uncertain or vague. Suppose John agrees to sell 500 tons of oil to Mathew. Rut, what kind of oil is not mentioned clearly. So on the ground of uncertainty, this agreement stands void. If the meaning of the agreement can be made certain by the circumstances, it could be treated as a valid contract. For example, if John and Mathew are sole trader of coconut oil, the meaning of the agreement can he made certain by the circumstance and in that case, the agreement can be treated as a valid contract. According to Section 29 of the Contract Act says that Agreements, the meaning of winch is not certain or capable of being made certain, are void
Possibility of performance: As per section 56. if the act is impossible of performance, physically or legally, the agreement cannot be enforced by law. There must be possibility of performance of the agreement. Impossible agreements like one claims to run at a speed of I 000knehour or Jump to a height of I 00fect etc. would not create a valid agreement. All such acts which arc impossible of performance would not create a valid contract and cannot treat as a valid contract. In essence, there must be possibility of performance must be there to create a valid contract.
Lawful consideration: An agreement must be supported by a consideration of something in return. That is, the agreement must be supported by some type of service or goods in return of money or goods. However, it is not necessary the price should be always in terms of money. It could be a service or other goods. Suppose X agrees to buy books from V for S50. Here the consideration of X is books and the consideration of V is $50. It can be a promise to act (doing something) or forbearance (not doing something). The consideration may be present, future or can be past. But the consideration must be real. For example If John agrees to sell his car of S 50000 to Peter for S20000. This is a valid contract if John agrees to sell his car not under any influence or force. It can be valid only if the consideration of John is free. An agreement is valid only when the acts arc legal. Illegal works like killing another for money, or immoral works or illegal acts are cannot be treated as a valid agreement. So, illegal works will not come under the contract act.
Legal formalities: The contract act does not insist that the agreement must he in writing, it could he oral. But, in some cases the law strictly insists that the agreement must he in writing like agreement to sell immovable property must be in writing and should be registered under the Transfer of Property Act. 1882. These agreements are valid only when they fulfill the formalities like writing, registration, signing by the both the parties are completed. If these legal formalities are not completed, it cannot be treated as a valid contract.
Q2:- What are the parties competent to contract? Discuss various features of contingent and quasi contracts.
The parties to a contract should be competent to enter into a contract According to Section 11, every person is competent t000ntract if
(i)is of the aged majority, (ii) is of sound mind, and (iii) o not disqualified from contracting by any law to which he is subject. Thus, there may be a flaw in capacity of parties to the contract. The flaw in capacity may be due to minority, lunacy, idiocy, drunkenness or status if a party to a contract suffers from any of these flaws, the contract is unenforceable except uncertain exceptional circumstances.
WHO ARE COMPETENT TO CONTRACT?
Section 11 provides that every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject, thus, incapacity to contract may arise from: (i) minority, (ii) mental incompetence, and (iii) status.
According to Section 3 of the Indian Majority Att. 1875, a minor is a person who has not completed 18 years of age. However in the following two cases, a minor attains majority after 21 years of age:- (1):- Where a guardian of minor is person or property has been appointed under the Guardians and Wards Act, 1890, or (2) VI/here the superintendence of minor property is assumed by a Court of Wards.
MINORS CONTRACTS The position of minors contracts is summed up as foSows:1 A contract with or by a minor is void and a minor, therefore, cannot, bind himself by a contract. A minor is not competent to contract. In English taw, a minor is contract, subject to certain exceptions, is on to voidable at the option of the minor.
Features of contingent and quasi contracts. Contingent Contracts: 1. Definition: A “contingent contract” is a contract to do or not to do something, if some event, collateral to such contract, does or does not happen.
2. Enforcement of contingent contract on an event happing: Contingent contracts to do or not to do anything if an uncertain future event happens cannot be enforced by law unless and until that event has happened.
if the event becomes impossible such contracts become void.
3. Enforcement of Contingent Contract on an event not happing: Contingent contracts to do or not to doing anything, if an uncertain future event does not happen, can be enforced when the happening of that event becomes impossible and not before.
4. When an event on which contract is contingent, to be deemed impossible if it is the future of conduct of a living person. If the future event on which contract is contingent is the way in which person will act at an unspecified time, the event shall be considered to become impossible when such person does anything, which render it impossible that he should act within any definite time or otherwise than under further contingencies.
5. When contracts become void which are contingent on happening of specified event within fixed time: Contingent contracts to do or not do anything d a specified uncertain event happens within a fixed time become void at the expiration of the time fixed, such event has not happened or if, before the time fixed such event becomes impossible.
6. Agreement contingent on impossible event are void Contingent agreement to do or to not to do anything, if an impossible event happens, are void, whether the impossibility of the event is known or not, to the parties to the agreement at the time when it is made.
Quasi Contract or Contracts Implied by law:
1. Definition: Implied contacts or quasi contracts are contracts by which one party is bound to pay money in consideration of something done or suffered by other party. They are not founded on actual promises but arise when a party has so conducted himself that be must be deemed to have made a promise although in fact he has not. Though no contract has been made by the parties, law makes out contracts for them and such a contract is termed a contract implied in law.
2. Claim for Necessaries supplied to person incapable of contracting or on his account:-
a) If a person who is incapable of entering into contract, or b) Anyone who he is legally bound to support. Is supplied by another person with necessaries suited to his condition in life, the person who has furnished such supplies is entitled to be reimbursed Pram the property of such incapable person.
3. Reimbursement of person paying money due by another in payment of which he in interested (5.69): a) When a person, who is bound by law to make a certain payment, b) And another person who is interested in such payment being make c) And a payment has been made by such last mentioned person, Such person is entitled to be re-immersed by the other
4. Obligation of person enjoying benefits of non-gratuitous act: Where a person (A) lawfully does anything (or (B), not intending to do so gratuitously, and the other person (B) enjoys the benefits of the same, the latter is bound to compensate the former (A) for the thing so done.
Q.3 Describe legal provision regarding performance of contract. Also explain legal remedies available under the law in case of breach of a contract.
Performance of Contracts
According to the performance the contracts can be divided as:
Contracts on the Basis of Creation On the basis of creation, the contracts may be classified as under:
(a) Express Contract Express contract is one which is made by words spoken or written.
Example: X says toy “Will you buy my car for Rs 1,00,000?” y says to X”1 am ready to buy your car for Rs 1,00,000.” It is an express contract made orally
(b) Implied Contract: An implied contract is one which is made otherwise than by words spoken or written. It is inferred from the conduct of a person or the circumstances of the particular case.
Example: A transport company runs buses on different routes to carry passengers. This is an implied offer by Transport Company. X hires a bus. This is an implied acceptance by X. Now, there is an implied contract and X is bound to pay the prescribed fare.
(c) Tacit Contract: A tacit contract is one which is inferred from the conduct of parties.
Example: Withdrawing cash through ATM
contracts on the Basis of Execution On the basis of execution, the contracts may be classified as under :
(a) Executed Contract: It is a contract where both the parties to the contract have performed their respective obligations under the contract.
Example: X offers to sell his car to Y for Rs 1,00,000. Y accepts X offer X delivers the car to Y and Y pays Ks 1,00,000 to X. It is an executed contract.
(b) Executory Contract: It is a contract where both the parties to the contract have still to perform their respective obligations.
Example: X offers to sell his car to Y for Rs. 1,00,000. y accepts X’s offer. If the car has not yet been delivered by X and the price has not yet been paid by Y, it is an executory contract.
(c) Partly Executed and Partly Executory Contract: It is a contract where one of the parties to the contract has performed his obligation and the other party has still to perform his obligation.
Example: X offers to sell his car to Y for Rs. 1,00,000 on a credit of one month. V accepts X’s offer. X delivers the car to Y. Here, the contract is executed as to X and executory as to Y.
(d) Unilateral Contract: An Unilateral contract is one sided contract in which only one party has to perform his promise or obligation to do or forebear.
(e) Bilateral Contract: A Bilateral Contract is one in which both the parties have to perform their respective promises or obligations to do or forebear.
Contracts on the Basis on Enforceability On the basis of enforceability, the contracts may be classified as under:
(a) Valid Contract: A contract which satisfies all the condition, prescribed by law is a valid contract
Example: X offers to marry Y. Y accepts X’s offer. This is a valid contract.
(b) Void Contract: Section 2(j) of the Indian Contract Act, 1872, “A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.” In other words, a void contract is a contract which was valid when entered into but which subsequently became void due to impossibility of performance, change of law or some other reason.
Example: X offers to marry Y. Y accepts X’s offer. Later on V dies. This contract was valid at the time of its formation but became void on the death of Y.
(c) Void Agreement: According to Section 2(g), “An agreement not enforceable by law is said to be void.” Such agreements are void-ab-initio which means that they are unenforceable right from the time they are made.
Example: An agreement with a minor or a person of unsound mind is void-ab-initio because a minor or a person of unsound mind is incompetent to contract.
Thus, a void agreement never matures into a contract.
(d) Voidable Contract: According to Section 2(i) of the Indian Contract Act, 1872, “an agreement which is enforceable by law at the option of one or more of the parties thereon but not at the option of the other or others”, is a voidable contract. In other words, “A voidable contract is one which can be set aside or repudiated or avoided at the option of the aggrieved party.” Until the contract is set aside or repudiated by the aggrieved party, it remains a valid contract. For example, a contract is treated as voidable at the option of the party whose consent has been obtained by coercion or undue influence or fraud or misrepresentation.
Example: X threatens to kill 1′ if he does not sell his house for Rs 1,00,000 to X. Y sells his house to X and receives payment. Here, Y’s consent has been obtained by coercion and hence this contract is voidable at the option of v, the aggrieved party. If Y decides to avoid the contract, he will have to return Rs 1,00,000 which he had received from X. If y does not exercise his option to repudiate the contract within a reasonable time and in the meantime, 1 purchases that house from X for Rs 1,00,000 in good faith, V cannot repudiate the contract.
(e) Illegal Agreement: An illegal agreement is one the Object of which is unlawful. Such an agreement cannot be enforced by law. Thus, illegal agreements are always void ab.initio (i.e. void from the very beginning).
Example: X agrees to pay Y Rs 1,00,000 if Y kills Z. Y kills Z and claims Rs 1,00,000. Y cannot recover from X because the agreement between X and Y is illegal as its object is unlawful.
(f) Unenforceable Contract: It is a contract which is actually valid but cannot be enforced because of some technical defect (such not in writing, under stamped). Such contracts can be enforced if the technical defect involved is removed.
Example: An oral agreement for arbitration is unenforceable because the law requires that an arbitration agreement must be in writing. if the oral agreement for arbitration is reduced to writ it will become enforceable.
The Breach of Contract:- The breach of contract refers to violation of any of the agreed-upon terms and conditions of a binding contract. This breach could be anything from a late payment to a more serious violation, such as failure to deliver a promised asset. A contract is binding and will hold weight if taken to court; however, proof of the violation is imperative.
A breach of contract is a failure to fulfill the duties under the contract terms. A contract can be breached in the following ways:
• One party does not perform as he or she promised • One party does something that makes it impossible for the other party to perform the duties under the contract • One party makes it clear that he or she does not intend to perform the contract duties Contracting party’s actual failure or refusal to perform (or a clear indication of its intentions to not perform) its obligations under the contract. A breach could be effected by
(1) Repudiation of obligations before the beginning of the contract, (2) Repudiation of obligations before its completion, or (3) A conduct that prevents the contract’s proper performance (such as Interfering with the other party’s performance). Breach of a major term (condition) of the contract (called ‘fundamental breach’) entitles the aggrieved party to (1) Treat the contract as discharged, (2) Consider Itself free from its own obligations under the contract, and (3) Sue the offending party fur damages arising from the breach.
Breach of a minor term (warranty) allows for suing for damages arising from the breach, but does not allow any party to treat the contract as discharged except where terms of the contract override this implied legal-provision. In contrast to ‘rescission of contract, a breach of contract does not operate retrospectively.
Damages for Breach of Contracts
When one party has breached the contract, the party who has performed is entitled to various remedies for the breach. One of the more common remedies for a breach of contract is a damages award. This is monetary compensation that must be made by the breaching party to compensate the other party for losses and other expenses connected with the breach. A damages award may include:
Consequential damages this requires the breaching party to pay the non-breaching party an amount that puts the non-breaching party in the same position they would have been in if the contract was performed
Punitive damages Courts can force the breaching party to make a payment as a punishment for the breach of contract
Liquidated damages – The parties agree, at the time they make the contract, that if one party breaches the contract, the breaching party should pay a specified sum. Thus, this is an amount written in the contract
Nominal damages • This is a minimal amount provided to the non-breaching party if that party won the case but did not financially lose much.
What are the Remedies for Breach of Contract?
There are several remedies for breach of contract, such as award of damages, specific performance, rescission, and restitution. In courts of limited jurisdiction, the main remedy is an award of damages. Because specific performance and rescission are equitable remedies that do not fall within the jurisdiction of the magistrate courts, they are not covered in this tutorial.
What Damages Can Be Awarded?
There are two general categories of damages that may be awarded if a breach of contract claim is proved. They are: Compensatory Damages: Compensatory damages (also called “actual damages’) cover the loss the non-breaching party incurred as a result of the breach of contract. The amount awarded is intended to make good or replace the loss caused by the breach. There are two kinds of compensatory damages that the non-breaching party may be entitled to recover:
A. General Damages. General damages cover the loss directly and necessarily incurred by the breach of contract. General damages are the most common type of damages awarded for breaches of contract.
Example: Company A delivered the wrong kind of furniture to Company B. After discovering the mistake later in the day, Company B insisted that Company A pick up the wrong furniture and deliver the right furniture. Company A refused to pick up the furniture and said that it could not supply the right furniture because it was not in stock. Company B successfully sued for breach of contract. The general damages for this breach could include:
• refund of any amount Company B had prepaid for the furniture: plus • reimbursement of any expense Company 8 incurred in sending the furniture back to Company A; plus • Payment for any increase in the cost Company 8 incurred in buying the right furniture, or its nearest equivalent, from another seller. B. Special Damages. Special damages (also called “consequential damages”) cover any loss incurred by the breach of contract because of special circumstances or conditions that are not ordinarily predictable. These are actual losses caused by the breach, but not in a direct and immediate way. To obtain damages for this type of loss, the non-breaching party must prove that the breaching party knew of the special circumstances or requirements at the time the contract was made.
Example: In the scenario above, if Company A knew that Company B needed the new furniture on a particular day because its old furniture was going to be carted away the night before, the damages for breach of contract could include all of the damages awarded in the scenario above, plus:
• Payment for Company B’s expense in renting furniture until the right furniture arrived.
Punitive Damages: Punitive damages (also called “exemplary damages”) are awarded to punish or make an example of a wrongdoer who has acted willfully, maliciously or fraudulently. Unlike compensatory damages that are intended to cover actual loss, punitive damages are intended to punish the wrongdoer for egregious behavior and to deter others from acting in a similar manner. Punitive damages are awarded in addition to compensatory damages.
Punitive damages are rarely awarded for breach of contract. They arise more often in tort cases, to punish deliberate or reckless misconduct that results in personal harm.
Q.4 Describe different types of contracts which need not to be performed. Explain also six kinds of bailment.
Under this heading, we shall discuss the principles of Novation, rescission and Alteration and Remission. The law is contained in Sections 62 to 67 of the Contract Act. Section 62 is reproduced below:
“If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it. the original contract need not be performed”
• Effect of novation: The parties to a contract may substitute a new contract for the old If they do so it will be a case of novation. On novation, the old contract is discharged, and consequently it need not be performed. Thus it is a case where there being a contract in existence some new contract is substituted for it either between the same parties or between different parties the consideration mutually being the discharge of old contract. Novation can take place only by mutual agreement between the parties. By novation, the liability under a contract may be transferred to a third party with the consent of the party entitled to benefit thereby. For example, a owes 13 Rs. 100 A, B and C agree that C will pay B and he will accept Rs. 100 from C in lieu of the sum due from A. A’s liability thereby shall come to an end and the old contract between A and B will be substituted by the new contract between B and C. When on a dissolution of a partnership, some of the partners continue the business and take upon themselves the liability of the old firm is transferred to the new firm by novation. • Effect of rescission: A contract is also discharged by rescission. When the parties to a contract agree to rescind it, the contract need not be performed. In the case of rescission, only the old contract is cancelled and no new contract comes to exist in its place, it is needless to point out that novation also involves rescission. Both in novation and in rescission, the contract is discharged by mutual agreement. Parties enter into a contract by mutual agreement so by mutual agreement alone they can come out of it. Where the contract is executor the consideration for an agreement to rescind is the discharge by each party of the other from his liabilities. The agreement for rescission may be implied, Non-performance of a contract by both the parties for a long period without complaint being made, may amount to an implied rescission. • Effect of alteration of contract: As in the case of novation and rescission so also in a case where the parties to a contract agree to alter it, the original contract is rescinded, with the result that it need not be performed. In other words. a contract is also discharged by alteration The terms of contract may be so altered by mutual agreement that the alteration may have the effect of substituting a new contract for the old one. In other words, the distinction between novation and alteration is very slender. Section 62 of the Act speaks of alteration by mutual agreement. On the contrary, if a material alteration is made in written by one party without the consent of the other, such an alteration would make the whole contract void, for example, where the date of a bond has been altered by the creditor, while it is in his custody or in the custody of his agent. Novation and alteration: The law pertaining to novation and alteration is contained in Sections 62 to 67 of the Indian Contract Act. In both these cases the original contract need not be performed. Still there is a difference between these two. 1 Novation means substitution of an existing contract with a new one. Novation may be made by changing in the terms of the contract or there may be a change in the contracting parties. But in case of alteration the terms of the contract may be altered by mutual agreement by the contracting parties but the parties to the contract will remain the same 2 In case of novation there is altogether a substitution of new contract in place of the old contract But in case of alternation it is not essential to substitute a new contract in place of the old contract. In alteration may be a change in some of the terms and conditions of the original agreement.
• Promise may waive or remit performance of promise: The law on the subject is contained in Section 63 reproduced below: •
“Every promise may dispense with or remit, wholly or in part, the performance of the promise made to him, or may extend the time for such performance or may accept instead of its any satisfaction which he thinks fit”. In” other words, a contract may be discharged by remission. Thus where A, a party to a contract, has done all that he was required to do under the contract and the time for the other party, X, to perform his promise has not yet arrived, a bare waiver of his claim by A would be an effectual discharge to X Similarly a creditor may wholly waive his claim against the debtor, in the case, the debt will be discharged or the creditor may give full discharge to the debtor by accepting smaller amount than the amount due.
It should be noted that novation, rescission or alteration cannot take place without consideration. But in the case of partial or complete remission, no consideration is required.
The promise can dispense with performance without consideration and without a new agreement.
The promise under the Act can also extend the time for the performance of the promise Time can be extended only for the benefit of the promisor and not for the benefit of the promise. Thus, where a date is fixed for the delivery of goods and the seller fails to deliver on the appointed date. The buyer who is the promise cannot, of his own accord give further time so as to claim damages on the basis of the price prevailing on the date originally fixed
Six kinds of bailment
The main types of bailment are given below: 1. Gratuitous Bailment: Where the Bailee does not charge nay thing for the bailment it is called gratuitous bailment. 2. Bailment for Reward: When the bailer charges anything for his services it is called bailment for rewards.
3. Bailment for Use:
When the bailor delivers an article to the bailee for use by the later in any general or specific-way, this is called a bailment for use. Illustration X delivers his watch to Y for the latter to use it for one month. Here bailment is bailment for used. 4. Bailment of safe custody: If valuable goods or even coins or notes in box are deposited for protection, it is called bailment for sale custody. Illustration X gives his watch to Y for the latter to keep
5. Bailment for Mutual Benefit:
it in safe custody for two months.
When the bailer delivers his articles to another for repair or gives his goods to carrier for carriage, It is known as bailment for mutual benefit.
6. Bailment for Pledge:
It is a contract whereby an article is deposited with a lender as security for the payment of a loan or performance of a promise.
Q 05:- How is a contract for sale performed? Explain with the help of suitable examples the effects of a contract for sale. Contract for sale?
Ans:- A contract of sale is a legal contract an exchange of goods, services or property to he exchanged from seller (or vendor) to buyer (or purchaser) for an agreed upon value in money (or money equivalent) paid or the promise to pay Name. It is a specific type of legal contract. An obvious ancient practice of exchange, in many common-law jurisdictions it is now governed by statutory law. Sec commercial law.
Contracts for sale involving goods are governed by Article 2 of the Uniform commercial Code in most united States and Canadian jurisdictions, however in Quebec such contracts are governed by the Civil code of Quebec as a nominate contract in the hook on the law of obligations. Suits available in case of breaching a sale contract: A real estate purchase agreement or contract of sale contains many terms and conditions of sale I i the seller or buyer fails to comply with the terms or conditions, such as the seller failing to provide deal title to the property, that party is said to have breached or defaulted on the agreement, and the other party may have a legal claim against the bleaching party. If one of the parties fads to meet a contingency of the contract, such as the buyer lading to obtain financing, the parties will he released from the contract. II’ there is a dispute between the parties, they must use the dispute resolution process indicated in the contract, which May require the panics to resolve the dispute without going to court. Terms and Conditions Purchase agreements and contracts of sale contain many 10111S and conditions that the parties lime agreed to meet, such as: • The purchase price • The date the sale will be finalized (“closed”) and the date the buyer will move in • items to be included in the sale, such as carpeting, lighting fixtures, appliances and so forth • Items not included in the sale • A legal description of the property • A guarantee that the seller will provide clear title to the home, through an abstract of title, certificate of title or a title insurance policy • A provision that the seller is responsible for paying house •related expenses through the closing date
If the party who is responsible for complying with the specific term or condition tails to comply, that party has breached or defaulted on the contract. For instance, if the seller fails to provide an abstract of title showing clear title to the property, the seller has breached the agreement Also, if the seller takes lighting fixtures which he had agreed to leave, the seller has breached the agreement. The buyer can agree to a modification of the contract as to the title or the lighting fixtures and the price, or the buyer can offer to Naomi under the contract and then file a claim against the seller for breach of contract. If the parties can’t agree on how to resolve the Mafia, the parties must use the dispute resolution process if one has been included in the contract. Usually, this is arbitration, mediation or small claims court. Such alternative methods for resolving disputes are usually less costly and more efficient titan tiling a traditional lawsuit. The parties submit the matter to the arbitrator, mediator, or judge, and that person decides which party bi cached the contract. Contingencies Purchase agreements and contracts of sale typically contain several contingencies Mat must be met in order for the sale to proceed. These contingencies can include. • A satisfactory inspection report for the property • the buyer getting a mortgage or other financing • The buyer selling his current house lithe contingencies of sale are not met, the buyer can withdraw his offer and get a refund of his deposit. For example, if the buyer can’t obtain financing as described in the sales contract, for example, a loan for a specified amount and interest rate within a set time period, the contingency of the buyer obtaining specified financing has not been met and the buyer can withdraw his offer. The seller is then supposed to refund the buyer’s deposit. If there is a dispute between the parties on the matter of contingencies, the parties must use the dispute resolution moves specified in the contract. The arbitrator, mediator or small el court judge will decide the matter according to the provisions of the contract. Dispute Resolution Purchase agreements and contracts of sale often contain provisions specifying the kinds of dispute resolution that the parties agree to follow II they disagree on the performance of the sales contract. These kinds of dispute resolution can include: • Arbitration. This process involves the parties submitting their dispute to an individual, the arbitrator, who is not a court officer and who decides the matter; this alternative method to resolving a dispute is often required by the terms of the parties’ contract. In “binding arbitration” the parties are bound by the arbitrate ration award and are not entitled to a court’s review of arbitrator’s decision, except under extremely limited circumstances. • Mediation. This is a process in which a third party guides disputing parties and helps them find a mutually agreeable solution to their problem. Mediators provide this service in many places and in various areas of law. • Small claims court. This is a division of a county court in most places, and it has authority over lawsuits in which the amount in dispute is less than a set figure, such as 5 3,000. If the contract does not include dispute resolution provisions, the parties can agree to settle their dispute through arbitration or mediation, or they can tile a lawsuit in civil court. If you have any questions about disputes concerning a real estate purchase agreement or a contract of sale, contact a real estate attorney in your area. Questions fig Your Attorney • What happens if the seller of property fails to fulfill his promise to provide clear title to the property? • Can the seller require me to apply for financing from certain lenders in order to meet the financing contingency of the sales contract?
• Is suing the seller over the return of my security deposit worth the costs and efforts of a lawsuit? If the matter can be settled in small claims court, am I allowed to have a lawyer help me?