Can a seller who withdraws from a sale be compelled to complete it?

The legal position

Specific performance. Specific performance is an order requiring the defendant to perform its obligations in accordance with the terms of the contract. It is a discretionary remedy and is ordinarily granted only where damages would be inadequate. For that reason, it is most commonly granted in contracts for the sale or lease of land. It is granted only exceptionally in contracts for the sale of goods, principally where the goods are rare or not otherwise obtainable. It will not be granted to compel the performance of personal services, or where performance would require the continuous supervision of the court.

The court will refuse specific performance in several circumstances:

• damages would be an adequate remedy;
• the claimant has not come to court with "clean hands", because the claimant has acted unfairly or is itself in breach;
• the claimant has been guilty of unreasonable delay;
• the order would cause undue hardship to the defendant; or
• the promise was gratuitous, being unsupported by consideration.

The requirement of writing. A contract for the sale of land cannot be enforced by action unless the agreement, or a memorandum or note of it, is in writing and signed by the vendor or by a person lawfully authorised by the vendor (Conveyancing and Law of Property Act, s 4). The memorandum may consist of several documents read together. A letter from the vendor declining to proceed and returning the deposit may itself form part of it. Where there is no writing, the doctrine of part performance may assist in some cases, for example where the purchaser has been let into possession.

Unilateral withdrawal. A vendor who announces that it will not proceed does not thereby bring the contract to an end unless the purchaser accepts that repudiation. The contract subsists. A subsequent conveyance of the land to a third party does not necessarily defeat the purchaser's claim.

Time. The four-year limitation period does not apply to a claim for specific performance (Limitation of Certain Actions Act, s 3(3)). Unreasonable delay may nonetheless defeat the claim, since equity assists those who act promptly. A claim for damages, or for the return of the deposit, remains subject to the four-year period.

Practical implications

A vendor who has received a more favourable offer may seek to withdraw by tendering the return of the deposit. The purchaser is not obliged to accept that withdrawal. Care should be taken before cashing or depositing a returned deposit. Unless the purchaser has first stated in writing that it does not accept the withdrawal, doing so may be treated as acceptance of the repudiation.

The purchaser must be in a position to complete. It must have the necessary finance approved or the funds available, and must have performed its own obligations under the agreement.

In a sale of goods, such as a motor vehicle or equipment, the purchaser will ordinarily be confined to damages. Those are ordinarily measured by the difference between the contract price and the market price at the time when the goods ought to have been delivered.

Recommended steps

The purchaser should obtain legal advice without delay. It should then write to the vendor, through the vendor's attorney-at-law where one has been retained, stating that it does not accept the purported withdrawal and remains ready, willing and able to complete.

The purchaser should seek advice immediately on the steps available to protect its interest in the land pending resolution of the dispute, so that the vendor cannot dispose of the land to a third party in the meantime.

The purchaser should assemble the agreement for sale, the receipts for the deposit and any other payments, all correspondence, and evidence of its ability to complete.

The purchaser should act promptly. The longer the delay, the stronger the vendor's argument that relief should be refused, and the greater the risk that a third party acquires rights in the land.