Legal Updates

Contractor may foreclose ‘registration fees’ upon termination of negotiation in bad ‎faith

July 2, 2017

A contracting company refused to refund registration fees paid to it upon the execution of an application form for the purchase of an apartment in a residential project contending that the purchasers terminated the negotiations in bad faith and under the application form it may foreclose the registration fee as liquidated damages if the purchaser decides not to purchase the unit or fail to execute the contract.

The Court held that the application for the purchase of an apartment is an offer for a contract. Under law, an offeror may withdraw the offer by notice to the offeree, provided that the withdrawal notice was delivered to the offeree before it gave an acceptance notice. The contracting company accepted the offer by way of conduct, by providing the purchaser with a draft agreement, enabling them to submit comments to the agreement and even inviting them to an execution meeting. The purchasers, however, acted to undermine the agreement in bad faith by not agreeing to negotiate on the controversial issues in a serious manner, avoiding execution of the agreement by various reasons and even asked for immediate termination of the negotiations. Under such circumstances, there was no problem with forfeiting the registration fees.