Effect of Price Hike in Sale Agreement: Legal Impact & Buyer Protection
Introduction
A sale agreement establishes a binding contract between parties, defining the terms of the transaction, including the price. Disputes often arise when external factors, such as market fluctuations, lead one party to question the agreed price after the contract's execution. A key question is whether an increase in the property’s market value after the signing of the purchase agreement can justify altering the agreed price or denying the enforcement of the contract.
Background
Contracts, including sale agreements, are governed by the principle of sanctity, emphasizing that parties are bound by the terms they voluntarily agreed upon. Specific performance, a remedy under contract law, allows one party to enforce the contract as written, compelling the other party to fulfil their obligations.
In property transactions, the market value may fluctuate between the time the sale agreement is signed and the actual execution of the sale deed. When the value of the property increases significantly, sellers may attempt to renegotiate or even rescind the agreement, citing hardship due to the inadequacy of the originally agreed price.
However, courts have consistently upheld that market changes or a perceived inadequacy of price do not constitute grounds to deny specific performance. Such changes are considered normal business risks that both parties accept when entering into a contract.
Legal Perspective on Price Increase
The Supreme Court has clarified that an increase in property prices after the date of the contract does not qualify as "hardship" sufficient to deny specific performance. The rationale is that the contract's terms are fixed at the time of signing, reflecting the mutual understanding and agreement of both parties.
In one case, the court ordered the payment of an amount exceeding the agreed price, acknowledging market realities but emphasizing that this decision was based on exceptional circumstances. Typically, the agreed price remains sacrosanct, and attempts to renegotiate post-contract are discouraged to preserve the certainty and enforceability of agreements.
Conclusion
Contracts are the foundation of fair and predictable transactions, particularly in property sales. While market fluctuations may create perceived inequities, the principle of upholding agreements as written ensures that parties can transact with confidence. The legal framework protects buyers and sellers alike, emphasizing that price increases after signing a purchase agreement cannot be used to deny specific performance. This approach reinforces the importance of honouring commitments and maintaining the integrity of contractual obligations, ensuring stability in commercial and real estate transactions.