Legal Updates

Seller of land that does not terminate an agreement upon failure to receive payments may lose the right to terminate

December 15, 2017

Purchasers of land ceased paying the consideration to the sellers, after they paid only the first installment. A few years later, the purchasers turned to the Court to extend the time for performance of their obligations. The sellers, however, sought to declare the termination of the agreement in the light of a fundamental breach by the purchasers.

The Court held that the payment schedule is a fundamental element of a purchase of land agreement but the conduct of the injured party and the lack of action on its part will turn a fundamental provision to a non- fundamental provision. In this case, the sellers did not take any action in response to what they perceived as a fundamental breach of the agreement and therefore the breach that was fundamental became a non-fundamental breach, so that the use of the right of termination is contingent on the purchasers’ rights to receive a prior warning. However, because in this case the purchasers continued to breach their obligations and did not pay the consideration even after a warning was given to them, the Court saw this as a fundamental breach and ordered the termination of the purchase agreement.