Legal Updates

When the language of the contract aligns with its commercial logic it will be construed according to the plain meaning of its wording

March 17, 2020

In an agreement for the purchase of an apartment for housing purposes, which had no building permit, it was set that if the purchaser will not be able obtain a mortgage due to the bank's refusal, the downpayment will be reimbursed. The purchaser was refused mortgage by three banks but the seller refused to repay the downpayment contending that a mortgage for other uses could be obtained.
The Court accepted the claim and held that the seller is to repay the downpayment and also pay liquidated damages for not repaying the downpayment as required under the contract. An agreement will be construed according to the plain meaning of its wording, especially when such aligns with its commercial logic. Termination of a contact and a repayment of the downpayment do not block the way to demand liquidated damages under the contract. Here, the construction that aligns with the word "mortgage" in an apartment sale agreement is of a mortgage for housing purposes and thus, when the purchaser was unable to obtain such, the seller was obligated to repay the downpayment, even if it might have been possible to obtain a mortgage for other uses. Because the seller refused to repay the downpayment, the seller is to pay the liquidated damages set in the contract.