Archive for the ‘rescission’ Category

Delay in accepting repudiatory breach.

June 27, 2013

In Cheung Ching Ping Stephen v Allcom Ltd ([2010] 2 HKLRD 324, CA) S and P entered into a provisional sale and purchase agreement. P paid an initial deposit of $1 million. The agreement provided that if S were to fail to complete it would refund the deposit and pay a further $1 million as liquidated damages.

S failed to complete on time. P wrote twice to S, reserving its rights but seeking information as to S’ progress in dealing with the matters that had to be attended to before completion could take place. After two months, P wrote to S to withdraw from the transaction. P sought the return of the deposit and the further sum of $1 million by way of liquidated damages.

The first question was whether P had lost the right to accept the repudiatory breach by waiting for two months. It was held that this delay did not mean that it had lost the right to accept the breach. The question was whether the delay was only consistent with an affirmation of the contract (or perhaps whether something material had happened in the interval between the breach and the acceptance of it) ([21]). P was entitled to accept the breach despite the delay.

P was not entitled to the $1 million by way of liquidated damages. There was nothing to show that this was a genuine pre-estimate of the damage caused by S’ breach. This was an application for summary judgment. There was to be an enquiry as to damages and the question as to whether $1 million was a genuine pre-estimate could be argued at that enquiry.

Michael Lower

Rescission: misrepresentation and presence of unauthorised structures

December 5, 2012

In Yili Concepts (HKG) Limited v Lee Wai Chuen ([2000] HKEC 1043, CFI) the agents acting for sellers of a flat made negligent misrepresentations as to the size of the flat and that the area that they had given could be used as the basis for determining the price or valuation. The buyer entered into a provisional agreement but later refused to proceed when he learned the truth about these matters and that there were unauthorised structures. He sought to rescind and recover his deposit relying on the misrepresentations and further arguing that the presence of the unauthorised structures amounted to a defect in title.

The court decided that the agents had been acting with the seller’s authority with regard to one of these misrepresentations but not the other. The buyer had relied on them. The misrepresentations had been the cause of the collapse of the transaction. The misrepresentations entitled to the buyer to rescind.

There was a real risk of enforcement action in respect of at least some of the unauthorised structures. Even if casual mention had been made of the works that had been done, this was not enough to amount to a waiver of the contractual right to a good title. Hence they amounted to a defect in title giving the buyer a right to rescind and recover his deposit.

The agreement had not been stamped and was not admissible in evidence. The agreement was still enforceable as the defendants had acknowledged the existence of a signed, written agreement in the pleadings.

Despite the fact that they had been sole authors of one of the misrepresentations, the agents were entitled to claim their full commission from the sellers. This did not amount to such a breach of their duties as would allow the principal to refuse to pay the remuneration due under the provisional agreement.