EAA Publications
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| The Freshman |
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| A provisional agreement is
binding only after the parties have executed it |
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Mr Chan viewed a flat introduced
by an estate agent and liked it. Before he reached any agreement
on the terms with the vendor, he signed a provisional agreement
for sale and purchase and handed over a deposit of $50,000 to
the agent. He thought he could count on the agent to persuade
the vendor to accept his offer. Two days later, Mr Chan received
a phone call from the agent saying that the vendor had sold
the flat to a higher bidder and told him to take back his deposit.
Feeling cheated, Mr Chan thought that the vendor had breached
the agreement causing him loss in time and leaving him with
no suitable accommodation. He therefore demanded compensation
from the vendor. However, the vendor refused on the ground that
he had not signed the provisional agreement for sale and purchase.
Mr Chan suspected that the agent deliberately withheld the provisional
agreement from the vendor while introducing a higher bidder
to the vendor. He then demanded compensation from the agent
and also lodged a complaint with the Estate Agents Authority.
Since Mr Chan had not reached any agreement with the vendor
on the purchase, the provisional agreement for sale and purchase
unilaterally signed by him had no binding force on the vendor.
Thus, the vendor could not be said to have breached the agreement.
As to whether the agent was to be blamed, it depends on whether
he had informed the vendor of Mr Chan's offer immediately. If
he had not, then he would have breached the provisions in the
Practice Regulation. However, if it was only because the vendor
had not made a decision immediately, or had assumed an attitude
of wait-and-see, putting off a decision in the hope of a higher
offer coming along, then the agent should not be held responsible.
Mr Chan did not suffer financially. He only missed the chance
of buying a flat to his liking. Actually, this unpleasant incident
could have been avoided if the agent had explained clearly to
Mr Chan, before he unilaterally signed the provisional agreement
for sale and purchase, that it was only an offer of the purchaser
and was subject to the vendor's acceptance. The agreement would
only come into force after it was properly executed by the vendor.
It will of course be better to arrange for the purchaser and
the vendor to sign the agreement simultaneously, a sure way
to reduce unnecessary disputes.
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