Deposit: where sums are described as a deposit but the ‘escape’ clauses in the provisional agreement have been deleted

In Best Linkage Ltd v Marbella Garden Ltd ([2015] HKEC 167, CFI) the parties had entered into a provisional agreement for the sale and purchase of the plaintiff’s property. The agreement required the defendant to pay $200,000 as an initial deposit and then provided for a further deposit (to take the total of the deposits to 10% of the purchase price) on the signing of the formal agreement. Two clauses had been deleted from the standard form of provisional agreement signed by the parties. One was the clause entitling the seller to forfeit the deposit (and still pursue its other remedies) in the event of the buyer’s default. The other was the ‘escape’ clause entitling the seller to terminate the contract by refunding the initial deposit and making a further payment to the buyer of an equivalent amount. The buyer later wrongfully refused to proceed with the purchase. The seller later sold to another party at a very much higher price. The seller sought, and was granted, declarations that the buyer had wrongfully repudiated the agreement and that the seller was entitled to forfeit the initial deposit.

Although the clause expressly entitling the seller to forfeit the deposit had been deleted, the parties still intended the payment to be a deposit and the nature of a deposit is now well settled (see Polyset Ltd v Panhandat Ltd) ([66]). Where there was an ambiguity, deletions have a limited role to play in interpreting a contract but there was no ambiguity here. Even if there were an ambiguity, it is not legitimate to infer from a deletion (of the clause entitling the seller to forfeit the deposit) that the parties intended the reverse proposition to govern their agreement (that the deposit could not be forfeited (see The Golden Leader)).

Michael Lower

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