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August 03, 2022

Seller Ordered To Complete Sale After Buyer Exercised Electronic Option

By Lee Heng Eam, Assistant Vice President, PropNex

Imagine this: you sold your HDB and bought a condo as your next home, and the seller renege on the sale exposing you to the risk of being homeless! It is the stuff of nightmares and that was exactly what happened to a couple who had sold their HDB flat and exercised an Option-to-Purchase (OTP or Option) for a resale condo, only to have the seller backed out on them. The case went to court and the seller was eventually ordered to sell the condo to the couple who had exercised a WhatsApp copy of OTP. PropNex’s Assistant Vice President, Lee Heng Eam – who is legally trained – breaks down the chain of events and shares some key takeaways from this case for property buyers and sellers.

What Happened?

The couple offered to buy the seller’s condo at $1.058m, and the seller agreed on 10 March 2022. The seller agent (Lee) sent the Option to the seller around 11 March 2022. The seller who was in Myanmar then, signed and sent the endorsed OTP to Lee via WhatsApp on 18 March 2022. In exchange of the Option, the couple transferred 1% option money via PayNow to the seller on 19 March 2022.

On 22 March 2022, Lee informed the couple’s agent (Swan) that the seller had sent over the original Option. The couple did not receive the original Option, and instructed their lawyers to exercise the WhatsApp copy of the Option.On or about 6 April 2022, the couple’s lawyer delivered the Option and exercise fee to the seller’s lawyers, but was told by the latter that it had not been engaged by the seller to act in the sale.

On 11 April 2022, the couple’s lawyer issued a letter of demand to the seller to instruct his lawyers to accept the Option and complete the sale in accordance to the Option. The seller was trying to stop the couple from exercising the Option. He wanted to frustrate the sale.

What did the High Court say?

The parties could not resolve the dispute resulting in the couple applying to the Court for specific performance to compel the seller to sell the condo in accordance to the Option.

Certainty of Contract

The Court observed that the Option contained essential particulars:
(a) buyers’ names;
(b) description of the condo;
(c) option money amount;
(d) exercise fee amount and date;
(e) whom the exercise fee was to be paid to; and
(f) the date of completion.
There is therefore certainty of contract as the parties and subject property had been clearly identified.

Intention to sell is clear

The Judge did not accept the seller’s claim that he was pestered by Lee into signing the Option, and that he signed the Option to get Lee “off his back”, based on WhatsApp messages between the seller and Lee. The seller also signed the Option twice because the first one was unclear. The seller was also given sufficient time to consider the offer before issuing the Option on 18 March 2022.

The seller’s claim that he had not agreed to accept the Option money via PayNow and wanted a cheque instead, and he did not know the couple would transfer the Option money unilaterally was also not accepted. Documentary evidence showed otherwise, and militate against the seller’s claim; the seller also took active action to link his NRIC details to his POSB account in order to enable the transfer of the Option money via PayNow.

Alleged failure of due diligence of agent would not frustrate sale

The seller further alleged that Lee failed to do his due diligence before advising the seller to sell the condo because the seller discovered another condo in the same development was sold at a higher price. The Judge opined that this did not affect the sale, and the seller’s remedy, if any, would be against Lee.

Son’s autism known to seller

The seller’s reliance on his son’s autism as a reason to call off the sale, and for the Court to instead award compensation to the couple, was also unsuccessful. This was because the seller wanted to sell the condo and agreed to sell it with full knowledge despite knowing his son’s condition.

Lessons from this case

When an Option is issued in the normal course of event i.e. after negotiation and agreement on the price and other essential terms of the sale, the party intending to back out of the sale would unlikely succeed. More importantly, the innocent party is entitled to apply to Court for specific performance to compel to the other party to complete the transaction (as what the couple did in this case and succeeded).

Also, attempts to frustrate a sale by (i) not providing the name of seller’s law firm for the exercising of the Option or (ii) instructing the seller’s law firm not to accept the exercised Option and exercise fee or (iii) withdrawing/cancelling the instructions to seller’s lawyer to act, will not be of use if the buyer is willing, ready and able to exercise the Option (as is in this case). The law will not allow a party to take advantage of his own breach.

A further note is this case did not directly address the validity of the “electronic copy” of the Option which was delivered via WhatsApp to the seller’s agent, Lee, and Lee in turn sent the same to Swan. It could well be that a challenge was not raised by the seller who represented himself in the proceedings, but even assuming it is raised, such a challenge would unlikely succeed based on the facts and also the decision of the Court of Appeal in Joseph Mathew and another v Singh Chiranjeev and another [2010] 1 SLR 338.

Upholding A Binding Contract

Specific performance for contract relating to interest in land is more readily granted by the Court, and a word of caution to parties intending to frustrate a transaction: that party may be compelled to complete the transaction, ordered to pay the costs incurred by the innocent party, and also pay his own costs.

In conclusion, sellers should always issue an Option only when they are very sure of their decision to sell, as they can be compelled by the Court to sell the property. Similarly, buyers should always pay the Option money when they are certain about the purchase because they risk the forfeiture of their Option money should they decide to back out from the transaction. When in doubt, always consult a trusted real estate salesperson registered with the Council for Estate Agencies.

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