Introduction
In a recent legal dispute between a buyer and a real estate development company in Muscat, the issue of whether a deposit in a sales contract is truly non-refundable was brought before the courts. This case, which escalated to the Supreme Court, highlights significant interpretations of legal provisions related to deposits and advance payments in real estate transactions. The following article explores the details of the case, the judgments at various court levels, and the Supreme Court's final ruling, thus focusing into the legal aspect on non-refundable deposits in sales contracts.
Background of the Dispute
This case involves a dispute between a buyer and a real estate development company over a property purchase agreement in Muscat. The buyer initially paid 3,000 OMR as a deposit to reserve the property, followed by the remaining deposit, OMR 21,900, to make up 10% of the total contract value. The buyer was unable to complete the remaining installments due to various reasons, including the significant impact of the COVID-19 pandemic on the economy and his employment. As a result of the pandemic, the buyer lost his job, directly affecting his income and ability to pay the remaining purchase amount. Consequently, the buyer requested the cancellation of the contract and the return of the paid amount, but the developer refused and considered the amount as a non-refundable deposit.
First Instance Court Judgement
The buyer filed a lawsuit at the Seeb Primary Court, requesting the developer be ordered to refund the amount of 24,900 OMR. He argued that this amount was paid as an advance payment for the property. Conversely, the developer filed a counterclaim, requesting to retain the amount as a deposit and demanding the buyer pay additional interest and maintenance costs.
The developer argued that the buyer agreed to pay 10% of the purchase price as a non-refundable deposit, split into two installments: one upon signing the reservation document and the second within 10 working days. The Sale and Purchase Agreement confirmed this obligation and specified that the developer would retain the deposit if the buyer failed to complete the payment.
The Seeb Primary Court rejected the buyer's original claim and upheld the developer's right to retain the amount as a non-refundable deposit. The court also dismissed the developer's counterclaim regarding interest and other expenses.
Court of Appeal Judgement
The buyer appealed the judgment before the Commercial Court of Appeal in Seeb. The Court of Appeal upheld the Seeb Primary Court's ruling, affirming the developer's right to retain the amount as a non-refundable deposit.
Supreme Court's Opinion and Interpretation
The buyer then filed a cassation appeal with the Supreme Court. After deliberation, the Supreme Court issued a judgment that includes an important interpretation of the legal provisions related to deposits and advance payments in sales contracts.
The Supreme Court relied on Articles 165 and 166 of the Civil Code, which stipulate that contracts should be interpreted to reflect the mutual intention of the parties, noting that any ambiguity should be interpreted in favor of the debtor. Article 84 of the Civil Code considers the payment of a deposit as evidence that the contract has become binding.
The Supreme Court clarified that a deposit is a small amount paid at the time of contract formation relative to the total value of the contract. If the deposit represents a significant portion of the total payment, it is not considered a non-refundable deposit.
Furthermore, the Supreme Court says that the law and customary practices do not support the notion of multiple deposits for the same contract. Since the buyer paid 3,000 OMR as the initial deposit and then 21,900 OMR as an advance payment, the court determined that only the 3,000 OMR could be considered a non-refundable deposit. Therefore, the Supreme Court ruled that the developer must refund the 21,900 OMR to the buyer and retain the 3,000 OMR as a non-refundable deposit.
Questions for Further Consideration
- What is the appropriate percentage for a deposit in a real estate sales contract?
- Can the deposit be paid in installments, or must it be a single payment as suggested by the Supreme Court?
- How should contracts address the issue of deposits to avoid similar disputes in the future?
- What is the impact of customary practices in real estate transactions on legal interpretations of deposit agreements?
As specialists in real estate disputes, you can contact Bait Al Qanoon for further assistance and legal consultation