Conditions of contracts are applicable on all parties

Parties to a contract are bound by the conditions they agree to when signing

Contractual law dictates that parties to a contract are bound by the conditions they agree to when signing. This is held in a Small Claims Tribunal decision between Sebatian Davies -v- Noyleen Zammit, decided on 31 October 2018 by Dr Claudio Zammit.

The plaintiff of this case, Sebastien Davies was claiming a refund of €2950, as part of a deposit he paid on the price of a property he intended to purchase. In the promise of sale agreement, the defendant Noyleen Zammit, guaranteed that the property was built according to Planning Authority permits.

In May 2016 both parties extended a promise of sale agreement and added a condition that if the bank’s sanction letter was not issued, Davies would lose 10% of the deposit he had paid to secure the property.

In the meantime, he discovered that the property had a number of irregularities and was not built according to the approved plans. When the plaintiff’s bank was informed of this, it withdraw its interest to finance the purchase.

The plaintiff also claimed a further €705 in bank charges. The sale did not take place and the defendant kept the 10% of the deposit.

Zammit replied quoting the conditions of the promise of sale, which allowed her to hold onto the sum. The law provides that the agreement is binding on all the parties

Dr Zammit, analysed the testimony of a number of witnesses. The original promise of sale agreement held that the seller, who is the defendant, confirmed that the property was built according to all permits.

In the extension, the parties added the deposit of 10% of the purchase prices was being released, however, they agreed that 10% of that deposit was to be kept in reserve.

This amounted to €2950 and was to be kept if the sanction letter was not issued by the bank. The plaintiff interpreted this to mean that the defendant was to keep this sum if the sanction  letter would not be issued owing to his fault.

The defendant held that there was no such qualification. Furthermore, she told the court that she had informed the plaintiff of these irregularities and also informed his architects. On expiration of the promise of sale, the bank refused to issue the sanction letter and the promise of sale fell through.

The defendant’s parents testified that once she received the news that the sanction letter was not gong to be issued, she decided not to sell the property. They convinced their daughter to continue with the sale as long as she kept the €2950.

The Tribunal pointed out that the clause allowing the defendant to keep the €2950, does not specify under which circumstances the sanction letter is refused.

The only reference to the sanction letter refers to it being refused by the bank. The parties signed the extension in May and the plaintiff had ample time to verify if the sanction letter was going to be issued.

The Tribunal agreed with the defendant that the indication showed that when the extension took place, the plaintiff was already aware that the bank was not going to hand over the sanction letter.

The defendant said that the plaintiff had informed her that his architects were working to regularise the property.

The Tribunal confessed that it found it strange that on the extension of the promise of sale, the plaintiff asked for the refund of the deposit it had paid originally and this indicates that the plaintiff was unsure that the sale would go through. Therefore, the Court believed more the defendant’s version of events.

The Tribunal took into consideration the parties’ actions. Notwithstanding this the Tribunal had to apply the agreement to the letter.

The Tribunal made reference to the judgement Mario Vella -v- Malta Industrial Parks decided by the First Hall of the Civil Courts on 30 September 2004, the Court said that it has to apply the clauses for the contract to be respected.

The Tribunal concluded by upholding the pleas of the defendant and reject the claims of the plaintiff.