Why is specific performance common for property but rare for goods?

Because each piece of land is treated as legally unique, damages are often an inadequate substitute for the actual property. Courts are therefore far more willing to order specific performance of a sale of land than of ordinary goods, which can usually be bought elsewhere. It remains discretionary: a buyer who has not paid what he owes, or who delays, may be refused.

If a buyer backs out after paying the deposit, can the seller keep it?

Generally yes. A deposit at the customary level is an earnest for performance and can be forfeited on the buyer's default, whatever the seller's actual loss. The seller may also claim damages for further loss, with the deposit set against it, subject to the duty to mitigate. A sum far above the customary level may be treated as a penalty.

Can a seller cancel the sale if the buyer is a few days late in completing?

Not straight away. In a sale of land time is not of the essence for completion unless the contract makes it so. The seller's remedy for delay is late-completion interest under the contract and a Notice to Complete; only if the buyer ignores an effective notice may the seller forfeit the deposit and resell.

What happens if the buyer does not exercise the option?

The option lapses and the buyer loses the option fee, commonly 1% of the price. Nothing more is owed, because the option bound only the seller to keep the offer open; the buyer never promised to buy.

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Paper 1 · Law of Contract & Agency · 12 min read

Remedies for Breach of a Property Contract

Practise this section (163 questions) → · 2.1 Law of contract, in sets of about 30

Must-know for the exam

Damages are available as of right and put the innocent party where performance would have left them, limited by remoteness (Hadley v Baxendale), mitigation and causation.
The party in breach must prove a failure to mitigate; contract damages never punish, and a debt claim for a sum due needs no mitigation.
A pre-agreed sum is liquidated damages if a genuine pre-estimate at contracting, else a penalty; Singapore applies this test only to breach-triggered sums (Denka, [2020] SGCA 119).
Specific performance is discretionary and readily granted for land; the claimant must be ready and willing, and a buyer who obtains it keeps her right to damages.
Time is not of the essence for completion unless made so; after a missed date the remedy is a Notice to Complete (21 days under the Law Society's Conditions of Sale).
If a buyer ignores an effective Notice to Complete, the seller may forfeit the deposit and resell, but cannot then also seek specific performance.
After an anticipatory breach, the innocent party may accept it and sue at once, or affirm and keep the contract alive.
On frustration, money paid is recoverable and sums payable cease, subject to the court's allowance for expenses (Frustrated Contracts Act 1959 s 2).
Under the Law Society's Conditions of Sale 2020, a buyer solely to blame for late completion pays 8% a year on the price less the deposit, and risk stays with the seller.
Rescission unwinds a contract from the start for a vitiating factor; termination ends future obligations for breach and preserves accrued rights and damages.

On this page · 8 sections

The Option to Purchase, the sale and purchase agreement and the tenancy agreement are all contracts. When one side breaks one, the law offers a menu of remedies, and Paper 1 tests whether you can match the remedy to the facts: who broke what, when, and what the innocent party has already done. Property adds its own twists: land is unique, completion dates are not always binding, and the option fee and the deposit follow different rules.

Damages: the default remedy

Damages are available as of right for any breach. They put the innocent party, so far as money can, where they would have been had the contract been performed (the expectation measure). Four limits shape what is recovered:

Remoteness — the party in breach pays for loss arising naturally from the breach, and for other loss only if he knew the special circumstances when the contract was made (Hadley v Baxendale).
Mitigation — the innocent party cannot recover loss he could reasonably have avoided, such as by reselling or re-letting. The party in breach must prove the failure to mitigate.
Causation — the breach must actually have caused the loss claimed.
No punishment — contract damages compensate. Punitive damages are never awarded for breach of contract, however cynical.

Worked figure. A buyer contracts to buy a condominium unit for $1,500,000 and refuses to complete. After proper marketing the seller resells for $1,420,000, spending $15,000 on the resale. The loss is $80,000 plus $15,000, so $95,000. If the seller has forfeited a $75,000 deposit, it is set against that loss, so the further claim is $20,000; the seller cannot recover the same loss twice.

Debt is different. Where the contract makes a sum payable on a stated event, such as rent falling due, the claim is for a debt. The claimant proves the event, not a loss, and the duty to mitigate does not apply.

Liquidated damages vs a penalty

The parties can pre-agree a sum payable on breach. Singapore keeps the traditional test: the sum is enforceable as liquidated damages if it was a genuine pre-estimate of the likely loss, judged when the contract was made, and an unenforceable penalty if it is extravagant compared with the greatest loss that could follow. The Court of Appeal declined to adopt the newer English 'legitimate interest' test, and held that the rule applies only to sums triggered by a breach (Denka Advantech Pte Ltd v Seraya Energy Pte Ltd [2020] SGCA 119). A penalty is struck out, but the innocent party can still prove and recover its actual loss.

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A $1,500,000 buyer defaults; resale fetches $1,420,000 with $15,000 costs; $75,000 deposit forfeited. What further claim remains?Show answer
$20,000. Loss = $80,000 shortfall + $15,000 costs = $95,000. The forfeited $75,000 deposit is set against it, because the seller cannot recover the same loss twice.
Under the Conditions of Sale 2020, on what base is late-completion interest charged for a late buyer and a late seller?Show answer
8% a year. A late buyer pays on the price less the deposit and sums paid; a late seller pays on the full price, less any notional rent. If both or neither are at fault, no interest is payable.
A buyer solely at fault completes 30 days late on a $2,000,000 sale with $100,000 paid. What interest is due?Show answer
$12,493. Working: 8% × ($2,000,000 − $100,000) = $152,000 a year; $152,000 × 30 ÷ 365 = $12,493.
A buyer misses the completion date. May the seller end the contract at once?Show answer
No. Time is not of the essence unless made so. The seller serves a Notice to Complete; under the Conditions of Sale completion is then due within 21 days, and if ignored he may forfeit the deposit and resell.
How does rescission differ from termination?Show answer
Rescission unwinds the contract from the start, for a vitiating factor such as misrepresentation. Termination ends future obligations only, for a repudiatory breach, and accrued rights and the damages claim survive.

Common questions

Why is specific performance common for property but rare for goods?: Because each piece of land is treated as legally unique, damages are often an inadequate substitute for the actual property. Courts are therefore far more willing to order specific performance of a sale of land than of ordinary goods, which can usually be bought elsewhere. It remains discretionary: a buyer who has not paid what he owes, or who delays, may be refused.
If a buyer backs out after paying the deposit, can the seller keep it?: Generally yes. A deposit at the customary level is an earnest for performance and can be forfeited on the buyer's default, whatever the seller's actual loss. The seller may also claim damages for further loss, with the deposit set against it, subject to the duty to mitigate. A sum far above the customary level may be treated as a penalty.
Can a seller cancel the sale if the buyer is a few days late in completing?: Not straight away. In a sale of land time is not of the essence for completion unless the contract makes it so. The seller's remedy for delay is late-completion interest under the contract and a Notice to Complete; only if the buyer ignores an effective notice may the seller forfeit the deposit and resell.
What happens if the buyer does not exercise the option?: The option lapses and the buyer loses the option fee, commonly 1% of the price. Nothing more is owed, because the option bound only the seller to keep the offer open; the buyer never promised to buy.

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