Seller claims mora interest for delays caused by Buyer | Legal Articles

 

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Seller claims mora interest for delays caused by Buyer

When a party fails to do something they are supposed to do as per the sales agreement then the transfer of property could be delayed. 

Usually the party at fault is the buyer, however sales agreements typically have a clause in place to prevent the buyer from causing such delays. The clause referred to is the mora clause which basically means delay. 

Mora Clause - Sales agreement

The Mora Clause in Sales Agreements

Thanks to this clause, the seller will be entitled to claim penalty interest against the buyer if a delay in the transfer process is caused by the buyer. 

Is the seller allowed to claim mora interest from the buyer in situations that aren’t covered by the sale agreement? 

This question was considered in the case of Crookes Brothers Limited (seller) v Regional Land Claims Commission for the Province of Mpumalanga and others (buyer) of 2013. 

As a means of settlement for land claims made by various communities, Crookes Brothers Limited sold a number of farms to the State who was represented by the Regional Land Claims Commission for the Province of Mpumalanga and the National Department of Land Affairs.

The Chief Land Claims Commissioner was supposed to secure the purchase price by means of a written undertaking and the amount would be paid no later than 10 days after the date of transfer of the property. 

Within 14 days of the seller’s Conveyancers making a written request, the undertaking was to be provided by the State, however this took several months instead resulting in a delay. 

Only after the Crookes instituted legal proceedings against the state did it provide the written undertaking. As is the norm for sale agreements, a mora clause was in place which entitled the seller to claim the mora interest in the event of the full purchase price not being paid. The buyer would then be charged interest on any outstanding amount. 

Seller demands payment of Mora interest

Once the transfer had been registered and the purchase price paid in full, the seller demanded that the buyer pay the mora interest for the duration of time the transfer of property took. 

This demand of payment was refused by the buyer who claimed that the mora clause only made them liable for interest in the event that any portion of the purchase price was not paid within 10 days of the date of transfer. 

The State refused to pay the interest because, in terms of the mora clause in the sale agreement, it was only liable for mora interest if any portion of the purchase price was not paid within 10 days after the transfer date.

However, as was held by the court both the of the states obligations to provide the undertaking and pay the purchase price were dependant on each other and so the were liable for mora interest. 

It was also held that the buyer would be liable for mora interest even if the clause wasn’t in the agreement or if the date when the buyer was to perform an obligation wasn’t specified. 

In such a case all the seller has to do is send a letter of demand for performance and the buyer would be liable for mora interest from the date the buyer was required to perform in terms of the demand. 

Van Deventer & Van Deventer Incorporated - Conveyancers Cape Town & Johannesburg

Contact us for expert legal advice.

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