Archive for the ‘Repudiation’ Category

Failure to pay deposit by stipulated date: the seller did not waive the breach by cashing a cheque for the deposit after communicating an intention to treat the agreements as terminated

February 11, 2017

In Fast Happy Ltd v Lee Chun Pong Bruce ([2017] HKEC 121) the plaintiffs entered into provisional sale and purchase agreements (‘the agreements’) for the sale of land by the plaintiffs to the defendants. The initial deposit was to be paid in two instalments on dates specified in the agreements.

The cheque for the first instalment was not honoured when presented. The cheque for the second instalment was proffered after the date specified in the agreements. Time was of the essence for making the payments.

The sellers’ solicitors sent an email and a letter to the estate agents handling the transactions terminating the agreements on the grounds of the buyers’ breach. The plaintiffs’ bank then re-presented the cheque for the first instalment of the deposit and it was honoured.

The defendants registered the agreements at the Land Registry and the plaintiffs sought the vacation of these registrations. The defendants argued that the plaintiffs had waived the breach by presenting the cheque for the first instalment of the deposits after the defendant’s breach.

The defendant’s argument failed. The sellers were entitled to cash the deposit cheque and to forfeit the deposit without waiving the breach. This was especially the case since the sellers had by then given clear notice of their intention to treat the agreement as having come to an end.

This was a case where the estate agents were acting for both parties and not only for the sellers. Thus notice of termination given to the agents was an effective way of giving notice to the defendants.

Michael Lower

Was an agreement for lease binding?

September 14, 2012

In Tang Wai Man v Fotosky Investment Ltd ([2006] HKEC 2358, CFI) F owned the basement of a commercial building. It sent T a letter of agreement containing the terms of a proposed letting of the basement to T for use for the parking of motor vehicles (not headed ‘subject to contract’ but providing for a later formal tenancy agreement). When T then advertised for customers for the car park, F argued that the agreement was that the basement was to be used as a vehicle showroom and not for parking vehicles. F ran a vehicle parking business on other basement floors of the same building and T’s rates undercut its rates. F argued that T’s agent had misrepresented the use to which the property would be put, that in any event there was no binding agreement or (if there was) T’s use amounted to a repudiatory breach which F had accepted.

F succeeded. Although a preliminary agreement could be binding (even if a later formal agreement was envisaged) this was not the parties’ intention in this case ([69]). If there was an agreement then, despite the wording of the agreement, the parties’ shared intention was that the property was only to be used as a showroom ([62]). F had accepted a repudiatory breach.  of this term. The agreement did not properly identify the intended tenant ([72]). Although the agreement was not subject to contract, the phrase had been used by T’s agent at the outset and never been expunged ([76]). Alternatively, if there were an agreement, it had been induced by a misrepresentation ([81]).

A lease can be brought to an end by acceptance of a repudiatory breach

January 20, 2012

A lease is a contract and like any other contract can be brought to an end by acceptance of the other party’s repudiatory breach. Statutory and contractual provisions affecting the right to recover possession apply in such cases as they do to forfeiture.

In Hussein v Mehlman ([1992] 2 EGLR 87) H was the tenant of a house. The landlord was in serious breach of the repairing covenants implied by statute. H sought to bring the lease to an end by accepting the landlord’s repudiatory breaches. He did this by returning the keys and giving back possession of the property. It was held that, as with any other contract, acceptance of a repudiatory breach of a lease brings it to an end. The right to end the lease in this way is subject to the statutory and any relevant contractual provisions that would apply to forfeiture.

Issue and service of a writ for possession is an election to forfeit the lease

April 27, 2011

In Po Wai Ching v Pfeifer ([1983] 1 HKC 204, CA) a landlord issued and served a writ for possession. The Court of Appeal pointed out that this is an election to forfeit the lease and it is not possible to rely on any alleged repudiatory breach after that since there is no longer a contract in existence.