Monday, April 22, 2013
SC: "Letter of Intent is not an agreement to sell, hence the same cannot be specifically enforced in laws"
Pronouncing a common judgment in the matters of CIVIL APPEAL NO. 4509 OF 2007 along with other two similar nature civil appeals for the relief of specific performance of a contract in respect of selling flats in the city of Mumbai, the Division Bench of the Hon'ble Supreme Court of India, recently dismissed all the three appeals with an important caution against the prevalent treads of properties transactions by way of executing Letters of Intent for sale and purchase of real estates like flats and bungalows, more particularly in metropolitan areas, as such that " The letter of intent cannot be said to be an agreement to sell for the simple reason that according to the contents of the letter of intent, only upon payment of the entire purchase price, the Developer and the plaintiffs (proposed purchasers) were to enter into an agreement with regard to sale of the flats. This fact clearly denotes that no agreement to sell had been entered into between the plaintiffs and the Developer and in absence of such agreements, in our opinion, there cannot be any right in favor of the plaintiffs with regard to specific performance of any contract. Thus, in our opinion, the High Court did not commit any error while coming to the conclusion that there was no binding contract or agreement in existence between the plaintiffs and the Developer and therefore, the trial court could not have decreed the suit for specific performance. Looking to the rising price and inflationary trend in the country, a direction to the Developer to return the amount of the purchase price received from the plaintiffs was only modified in fine from 9% p.a. to 12% p.a by the Hon'ble Apex Court in favor of the said plaintiffs.
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