When you’re in the process of buying or selling property, one of the most critical documents you’ll encounter is the offer to purchase. This document serves as the agreement between the buyer and seller, outlining their respective rights and obligations. Within this agreement, certain clauses require careful attention, particularly those related to breaches and penalties. Understanding these clauses is vital for ensuring a smooth and transparent transaction that protects the interests of both parties involved.


Breach of Contract Clause:

Once the offer to purchase is signed by both parties, it becomes a legally binding contract governed by contract law. A standard provision within this agreement is the breach of contract clause. This clause comes into play if either party fails to fulfil their obligations without a valid reason.

In the event of a breach, the affected party usually has options outlined in the breach clause. They may give the defaulting party an opportunity to remedy the breach. If the defaulting party fails to do so, the aggrieved party can typically choose to cancel the contract and seek damages or pursue legal action for specific performance, which compels the defaulting party to fulfil their obligations. If the aggrieved party opts to cancel the contract, they must consider the Conventional Penalties Act of 1962 when quantifying damages.


Forfeiture Clause (Penalty) or Non-Refundable Clause:

There’s a common misconception that if a purchaser breaches the contract, the seller automatically gets to keep the deposit. However, a forfeiture clause may not entitle the seller to retain all the funds automatically. The Act stipulates that penalties must be proportionate to the prejudice suffered by the aggrieved party due to the breach. Courts have the authority to reduce penalties deemed excessive.

Estate agents should be cautious about creating false expectations regarding non-refundable deposits. Conveyancers, too, must follow legal guidelines when distributing funds in cases of contract cancellation due to breach.


Rouwkoop Clause:

Occasionally, an offer to purchase may include a rouwkoop clause, distinct from forfeiture clauses. Rouwkoop, meaning “regret purchase,” allows a party to withdraw from the contract by paying an agreed-upon sum. Unlike forfeiture clauses, the rouwkoop clause doesn’t require the withdrawing party to be in breach.

The key difference between forfeiture clauses and rouwkoop clauses lies in the circumstances under which they’re invoked. While forfeiture clauses apply to breaches, rouwkoop clauses apply to voluntary withdrawals.



It’s essential to understand the nuances of breach and penalty clauses in property agreements to avoid misunderstandings and legal disputes. By grasping these provisions, buyers, sellers, and agents can navigate property transactions with clarity and confidence, ensuring fair treatment for all parties involved.