The Agreement provides that completion shall take place at the offices of the Vendor’s solicitors at No. 3, Pump Yard, Admiralty, Hong Kong, or as they may direct, on the 15th day of December 2007.
Assuming that Rachel tendered a Banker's Draft for the balance of the purchase price at 6.00 pm on the 15th of December, would Janice be entitled to forfeit the deposits on the ground that the balance of the purchase price was paid too late?
Janice would not be entitled to forfeit the deposits on the ground that the balance of the purchase price was paid too late. The payment made by Rachel using a Banker's Draft was made on the date agreed upon the parties, which is on the 15th of December. There was no time specified by the parties so that it appears that the exact time of payment is not deemed as important in determining compliance with payment. In applying equity, it should be considered whether the time of payment was reasonable. In the given case, the agreed place of payment was at the office of the Solicitors of the Vendors. As such, the reasonable time of payment is within office hours. This means that if 6.00 pm constitutes past the reasonable or common office hours for Solicitors, then Janice could forfeit payment because payment was delayed. However, it should also be considered that if the time of payment was of due importance to the vendor, this could have been included as a term of the provisional agreement. Since there was no term in the provisional agreement giving Janice the right to forfeit payment upon non-payment within a particular time, then Janice cannot forfeit deposits because the purchase price was not paid on time. Valid reasons for the forfeiture of the deposits, when the provisional agreement does not specify an exact time limit for payment, include bouncing cheques or the unreasonable time of payment such as payment at midnight of December 15th when Solicitors offices are expected to be closed. Moreover, a Bank Draft can be considered as equivalent to cash so that payment within a reasonable time, provided that 6.00 is can be considered a reasonable time with the agreed day would constitute effective payment by Rachel so that Janice cannot forfeit the deposit on account of late payment.
(b) Would your answer to (a) differ if Rachel had tendered a personal cheque?
Yes, the answer would be different if Rachel had tendered a personal cheque. Cheques in general are considered as conditional modes of payment that constitute effective payment only when honoured. However, there is a difference between a Bank Draft and Personal Cheque, with the former providing lesser risk because the cheque is drawn against the bank's account instead of the personal account of the buyer. As such, except in exceptional cases of the bankruptcy or closure of the bank against whom the Bank Draft was drawn, the parties receiving payment through a Bank Draft has a greater chance of being paid. In the case of personal cheques, there is greater risk because the payer's account with the bank may not be sufficient to pay the amount contained in the cheque. A Bank Draft is commonly considered as akin to cash while a personal cheque is not. In terms of the time of payment, a personal cheque is subject to the acceptance or acquiescence of the vendor so that if the vendor accepts the cheque as payment, then payment is deemed to have been made within the day subject to clearing. Since payment by cheques constitutes common practice, the receipt of the cheque by the vendor within the specified time or reasonable time within the given day of payment constitutes compliance with the time of payment but subject to clearing. The time of payment depends either on the time of receipt of the cheque or the clearing of the cheque so that in the given case, payment can be considered as validly made during the appointed day but claims or remedies in relation to payment such as the forfeiture of deposit depends upon the clearing of the cheque. This is in addition to the lack of a clear and explicit term in the provisional contract that would support the importance of time in payment.
(c) For the purpose of this question only, assume that the Agreement provided for completion to take place on the 15th day of December at or before 5.00 pm. Rachel tendered a Banker's Draft for the balance of the purchase price at 6.00 pm.
Janice has terminated the Agreement and forfeited the payments made by Rachel. The order is rising and Rachel wishes to complete the transaction. Is Rachel entitled to an order of specific performance?
Rachel is not entitled to an order of specific performance for a number of reasons. One, the parties has not signed the formal purchase contract, which means that the parties are governed by the provisional contract, which provides their respective responsibilities for executing the agreement intended to pursue the signing of the contract. As such, without a formal contract, Rachel does not have the right to make claims for the completion of the sale by seeking an order of specific performance from the courts. Another reason is that Rachel was not able to make payment on or before 5.00 pm of December 15th. Although Rachel was able to offer a Bank Draft on that day, this was made at 6.00 pm so that Janice has the right to forfeit the deposits and not proceed with the signing of the formal contract. In this instance, time was considered important since it was specifically contained in the provisional agreement. As such, Rachel should have complied with the time limit to prevent the forfeiture of the deposit and ensure the signing of the formal contract of sale.
Assuming that Rachel tendered a Banker's Draft for the balance of the purchase price at 6.00 pm on the 15th of December, would Janice be entitled to forfeit the deposits on the ground that the balance of the purchase price was paid too late?
Janice would not be entitled to forfeit the deposits on the ground that the balance of the purchase price was paid too late. The payment made by Rachel using a Banker's Draft was made on the date agreed upon the parties, which is on the 15th of December. There was no time specified by the parties so that it appears that the exact time of payment is not deemed as important in determining compliance with payment. In applying equity, it should be considered whether the time of payment was reasonable. In the given case, the agreed place of payment was at the office of the Solicitors of the Vendors. As such, the reasonable time of payment is within office hours. This means that if 6.00 pm constitutes past the reasonable or common office hours for Solicitors, then Janice could forfeit payment because payment was delayed. However, it should also be considered that if the time of payment was of due importance to the vendor, this could have been included as a term of the provisional agreement. Since there was no term in the provisional agreement giving Janice the right to forfeit payment upon non-payment within a particular time, then Janice cannot forfeit deposits because the purchase price was not paid on time. Valid reasons for the forfeiture of the deposits, when the provisional agreement does not specify an exact time limit for payment, include bouncing cheques or the unreasonable time of payment such as payment at midnight of December 15th when Solicitors offices are expected to be closed. Moreover, a Bank Draft can be considered as equivalent to cash so that payment within a reasonable time, provided that 6.00 is can be considered a reasonable time with the agreed day would constitute effective payment by Rachel so that Janice cannot forfeit the deposit on account of late payment.
(b) Would your answer to (a) differ if Rachel had tendered a personal cheque?
Yes, the answer would be different if Rachel had tendered a personal cheque. Cheques in general are considered as conditional modes of payment that constitute effective payment only when honoured. However, there is a difference between a Bank Draft and Personal Cheque, with the former providing lesser risk because the cheque is drawn against the bank's account instead of the personal account of the buyer. As such, except in exceptional cases of the bankruptcy or closure of the bank against whom the Bank Draft was drawn, the parties receiving payment through a Bank Draft has a greater chance of being paid. In the case of personal cheques, there is greater risk because the payer's account with the bank may not be sufficient to pay the amount contained in the cheque. A Bank Draft is commonly considered as akin to cash while a personal cheque is not. In terms of the time of payment, a personal cheque is subject to the acceptance or acquiescence of the vendor so that if the vendor accepts the cheque as payment, then payment is deemed to have been made within the day subject to clearing. Since payment by cheques constitutes common practice, the receipt of the cheque by the vendor within the specified time or reasonable time within the given day of payment constitutes compliance with the time of payment but subject to clearing. The time of payment depends either on the time of receipt of the cheque or the clearing of the cheque so that in the given case, payment can be considered as validly made during the appointed day but claims or remedies in relation to payment such as the forfeiture of deposit depends upon the clearing of the cheque. This is in addition to the lack of a clear and explicit term in the provisional contract that would support the importance of time in payment.
(c) For the purpose of this question only, assume that the Agreement provided for completion to take place on the 15th day of December at or before 5.00 pm. Rachel tendered a Banker's Draft for the balance of the purchase price at 6.00 pm.
Janice has terminated the Agreement and forfeited the payments made by Rachel. The order is rising and Rachel wishes to complete the transaction. Is Rachel entitled to an order of specific performance?
Rachel is not entitled to an order of specific performance for a number of reasons. One, the parties has not signed the formal purchase contract, which means that the parties are governed by the provisional contract, which provides their respective responsibilities for executing the agreement intended to pursue the signing of the contract. As such, without a formal contract, Rachel does not have the right to make claims for the completion of the sale by seeking an order of specific performance from the courts. Another reason is that Rachel was not able to make payment on or before 5.00 pm of December 15th. Although Rachel was able to offer a Bank Draft on that day, this was made at 6.00 pm so that Janice has the right to forfeit the deposits and not proceed with the signing of the formal contract. In this instance, time was considered important since it was specifically contained in the provisional agreement. As such, Rachel should have complied with the time limit to prevent the forfeiture of the deposit and ensure the signing of the formal contract of sale.
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