An Offer to Purchase (“OTP”) sets out the details of the sale and ensures that there is clarity about the property being sold, its conditions, and any other important considerations. This agreement is signed by the purchaser making an offer, and then signed by the seller if the offer is accepted. Once parties have signed the OTP, it becomes a legally binding contract and both parties become obligated in law to fulfil their responsibilities as set out in the contract. As with any other legally binding contract, cancelling an OTP is only possible should there be a basis in law for doing
The OTP can contain any suspensive conditions that should be met in order to make the agreement binding and enforceable. Common suspensive conditions include the purchaser obtaining a bond before a specified date or the
seller selling another property first (prior sale).
An OTP can only be legally cancelled if one or more of the suspensive conditions are not met or if the contract provides that either party may cancel the contract within a certain period of time. If the suspensive conditions in an OTP are not fulfilled, the entire contract becomes null and void. Both seller and purchaser can agree to waive the suspensive conditions by way of a written addendum. Any other reason for cancelling the sale is regarded as a breach of the contract. The party in breach will be liable for
Cancelling the OTP as a result of breach of contract
If either party contravened the agreement in any way, the other party may lawfully cancel the contract and claim damages.
Liability for a cancellation
If the purchaser is in breach of the OTP and remains in default for a certain period (normally 7 days) after written notice has been given by the seller, then the seller and the estate agency shall be entitled to claim damages from the purchaser.
The purchaser would be liable for the agent’s commission. The damages also include a portion (as determined by law) of the conveyancing attorneys’ transfer fees. If one party commits a breach of contract, the other party may elect not to accept the cancellation of the agreement
but instead insist that the sale proceed as per the OTP (this means to claim specific performance). This route is more complicated in that a court order is usually required to this effect.
Should the purchaser and seller agree to cancel the sale, both would be liable jointly and severally to pay the estate agent’s commission and the conveyancing attorneys’ transfer fees.
Should a purchaser decide to terminate the OTP unilaterally after all suspensive conditions have been fulfilled, this amounts to breach of contract and the purchaser will potentially face numerous claims. Breach of contract is a costly affair! For this reason, both parties should obtain legal advice before signing an OTP to ensure a clear understanding of all the terms and conditions.
Our conveyancing team at Brookes Attorneys will gladly provide both parties with legal assistance before signing the OTP or in the case of breach thereof.