Court decision acts as a warning to Buyers who may need to rescind a contract…
In Cadogan Petroleum Holdings Ltd v Global Process Systems LLC [2013] EWHC 214 (Comm) the court was asked to decide whether the seller of two gas plants was entitled to keep instalments paid by the buyer and to receive the outstanding purchase price, even though the seller had rescinded the contract and property in the plants had not passed to the buyer.
The Court decided that, on a proper construction of the sale agreement, the seller was entitled to keep the instalments and the outstanding sums. The Buyer claimed relief against forfeiture but the Court held that they were not entitled to such relief.
This shows that where a sale agreement has been rescinded before title in property has passed to the buyer, the forfeiture of instalment payments may be particularly unfair to a buyer. A buyer should protect its interests by ensuring that, where a contract is rescinded, the sale agreement will release the buyer from its accrued obligations and will give it the right to claim back any instalments paid before termination.
The Court unfortunately did not deal with the issue of the jurisdiction of the Court in granting relief from forfeiture beyond extending the time to pay. Therefore uncertainty remains following the differing views expressed by Denning LJ and Romer LJ in Stockloser v Johnson [1954] 1 QB 476.