Cheque Bounced

Case Studies

Cheque Bounced

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Condo buyer failed to have Option declared valid .

Cheque bounced because of GIRO deduction!

(Straits Times 14 August 1996)

A Bank Officer has lost his case to get the owner of a $1.158m condominium unit to sell him the property in Ewe Boon Road, off Bukit Timah Road.

Mr Seah Kiat Seng also lost his $15,800 option fee when Amtel Exports, the owner, forfeited the sum. He had issued a POSBank cheque for $142,200 on Feb 5, the last day of the option. The cheque was dishonoured.

Mr Seah then had $153,222 in his account. He said the bounced because of a Giro deduction for his income tax. Further, his wife's cheque for $8,000 did not clear as it was supposed to.

Amtel then treated the option as having expired without being exercised and forfeited the option fee. Mr Seah, however, insisted he had excercised the option and that there was a binding and enforceable contract for the sale and purchase of the property. He took the case to High Court, which dismissed his application with costs. He is appealing.

In his grounds of judgment last Thursday, Justice M.P.H. Rubin found Mr Seah's arguement that a cheque, once given, was to be treated as cash was not according to the principles laid down in law.

Mr Seah's assertion, he said, that the dishonouring of the cheque was beyond his control contracdicted his earlier stand that his bank did not follow his instructions to transfer funds from his savings to his current account. The judge said Mr Seah had not convinced the court that the dishonouring was beyond his control. But once it had happended, Mr Seah could not, in law, be said to have accepted the offer according to the terms of the offer, he said.

Justin Rubin said there could not be any binding contract between the parties when the option holder had faialed to comply with an agreed essential term of the option within the set time.

He said: " The irrevocable offer made by the vendor lapsed by the failure of the option holder to underpin the cheque issued with the required funds."

In his judgment, he said, time was of the essence in making the payment and in this case, "the time allowed could not be extended be reference to any equitable principle".

1) Make sure you have sufficient fund when you issued a cheque.

2) Double check to ensure that no deduction of fund is in the process!

3) Best to separate the Fund for property purchase from other Giro /

Credit card services.

Developers Have Right to Forfeit 20% of the Purchase Price When Purchasers Default…
Court of Appeal decision - 4 November 1998

On 27 March 1996, the purchaser obtained an option to purchase a flat in a development. The purchaser paid 5% of the purchase price as booking fee. The purchaser exercised the option the same day.

The Sale and Purchase Agreement (the "Agreement"), which was in the old Form E, was executed on 27 April 1996. Clause 3 of the Agreement provided the schedule for progress payments towards the purchase price. Under Clause 3(1)(a) of the Agreement, the first instalment of 20% of the purchase price was due within eight weeks from the date of the option.

As 5% of the purchase price was already paid by the purchaser, the balance of the first instalment, amounting to 15% of the purchase price, was to be paid by 22 May 1996. The purchaser did not pay that balance.

The developers then terminated the Agreement and commenced action to recover the balance of the first instalment, amounting to 15% of the purchase price, and to forfeit the entire 20% of the purchase price.

Decision on the issues:

1. Where a contract was terminated, the termination did not extinguish any rights of the parties that had accrued under the contract before the termination.

2. The developers' entitlement to the sum of 15% of the purchase price and interest was based on the express terms of the Agreement.

3. Forfeiture of 20% of the purchase price was to be 'from the instalments … previously paid by the purchaser' according to the Agreement. Even though the purchaser did not "previously pay" the full 20 %, the developers were entitled to forfeit the 20 %. The express terms of the Agreement merely served to indicate the source of funds to which the developers were entitled to have recourse for the purpose of satisfying any claims thereunder. They did not restrict the developers' rights to recover the amounts to which they were entitled.

4. On a true construction of the express terms of the Agreement, the first instalment was not a deposit but a part payment towards the purchase price. The purchase price was to be paid by multiple instalments. These instalments are linked to the progress of the development.

5. The developers were therefore entitled to be paid 15% of the purchase price and interest.

6. The Court also found that the contract was in a form prescribed by statute. The purchaser was not entitled to say that certain provisions of the Agreement, or the operation of such provisions, was 'extravagant and unconscionable'.

7. The developers were therefore entitled to forfeit 20% of the purchase price.

Our Ref :141/4-11, 202/2-01 & 202/2-02

Date: 18 Dec 2001

Fax: 321 6596

President

Real Estate Developers' Association of Singapore

190 Clemenceau Ave #07-01

Singapore Shopping Centre

Singapore 239924

President

The Law Society of Singapore

39 South Bridge Road

Singapore 058673

Dear Sirs

AMENDMENT TO CLAUSE 7.4(C) OF THE PRESCRIBED SALE AND PURCHASE (S&P) AGREEMENT

The Controller of Housing has received requests from some developers offering deferment of part of the 20% cash downpayment to amend Clause 7.4(c) of the S&P Agreement to provide for the recovery of the balance of the 20% cash downpayment from the purchaser in the event that the S&P Agreement is annulled before the balance is paid.
Please bring to the attention of your members the enclosed Annex A which contains the pre-approved amendment to Clause 7.4(c) of the S&P Agreements prescribed in Forms D and E of the Housing Developers Rules and Form D of the Sale of Commercial Properties Rules. It can be adopted without obtaining further approval from the Controller for those who are offering the deferment of part of the 20% downpayment.
If you or your members have any queries concerning this circular, please contact Ms Low Kien Lay at Tel: 329 3511 or Ms Tan Puey Choo at Tel: 321 6580. Your members may like to note that this circular is also accessible in our website http://www.ura.gov.sg.

CHUA CHOR HOON (MS)

DEPUTY CONTROLLER OF HOUSING
SINGAPORE

Annex A

PRE-APPROVED AMENDMENT TO CLAUSE 7.4(C)

Forms D and E of the Housing Developers Rules and Form D of the Sale of Commercial Properties Rules

7.4 Once this Agreement is annulled, the Vendor has the right to -

resell or otherwise dispose of the Unit as if this Agreement had not been entered into;

recover from the instalments (excluding interest) previously paid by the Purchaser all interest owing and unpaid at the date of annulment; and

forfeit and keep 20% of the Purchase Price from the instalments (excluding interest) previously paid by the Purchaser.

Provided that if the instalments (excluding interest) previously paid by the Purchaser are not sufficient to cover the amounts referred to in Clauses 7.4(b) and 7.4(c), the Vendor has the right to claim and recover from the Purchaser any shortfall of the said amounts. The costs and expenses (including legal costs) incurred by the Vendor in such claim and recovery shall be paid by the Purchaser


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