Contract Terms Altered in Deed of Sale
Thursday 08 August 2019
A French property buyer who signed a sale and purchase agreement refuses to sign the deed of sale as the terms had been changed.
In a case recently heard in the French Supreme Court, the Cour de Cassation, buyer and seller signed a sale and purchase contract (compromis de vente) for a house and ancillary buildings in 4 hectares of land in Normandy, for the sum of €360,000.
The deposit payable by the buyer was 5% of the sale price, equivalent to €18,000, with signing of the deed scheduled for a date several months later.
Completion was subject to three standard conditional clauses contained in the contract: that the search enquiries to be carried out by the notaire were satisfactory; that the pre-emption rights were ‘purged’, and that there was satisfactory title.
Sewerage treatment and disposal at the property was by means of a septic tank system.
At the time of signature of the sale and purchase contract the statutory survey of the installation (état de l'installation d'assainissement non collectif) had not been carried out.
However, the agreement stated that the seller had initiated the process with the local council, and the report would be available prior to completion.
The contract also stated that should the report state that installation was non-compliant the sellers undertook to replace it within a year, notwithstanding the sale.
It is most unusual to for the seller to accept such an obligation, and it seems quite likely that the clause had been poorly drafted, and that the sellers did not fully understand it. There are indications from the court reports that the seller and their notaire fell out over it.
Prior to signature of the deed of sale the error was corrected, with the deed making it clear that the responsibility for any non-conformity of the septic tank system would lie with the buyer.
This is more in line with the law, which states that on a change of ownership, if the septic tank is found not to be complaint the owner must replace it within a year. However, clumsy drafting of the contract seemed to leave this responsibility to the seller.
The potential implications on septic tank renewal for a new owner are one very good reason why buyers should see all the statutory survey reports (diagnostics immobilier) prior to signature of the sale contract and not wait until completion to receive them.
With the buyer now having engaged his own notaire, and the responsibility for renewal of the septic tank more clearly place with them, he refused to complete on the sale.
As a result, the seller brought an action for damages, as specified in the contract, for the sum of €36,000, being 10% of the sale price.
When the case was considered by the lower courts, including the court of appeal, the judges decided that, in the absence of proof of fraud, or of an error as to the substantial qualities of the property being sold, the refusal by the buyer to complete on the sale was invalid. The buyer was therefore liable for damages to the sellers.
On appeal, this was not accepted by the Cour de Cassation, who ruled that the buyer was entitled to refuse to complete as the deed was contrary to the sale contract, by placing an obligation on the buyer concerning the septic tank system.