You can only sell what you have

A promise of sale agreement could not have been entered into because the seller did not yet own the property. This was held in John Paul Darmanin vs Fiona CNG Laycy decided on 6 June 2023, by the First Hall of the Civil Court presided by Mr Justice Francesco Depasquale.

The Plaintiff filed a sworn application explaining that in June 2018, the parties entered into a promise of sale agreement where he bound himself to purchase a property in Hamrun. He paid the deposit. The agreement expired in March 2019, but was extended to July 2019.

There were amendments to the address of the property. The plaintiff also applied for a loan. In June 2019, he filed a judicial letter calling upon the Defendant to sign the final contract of sale, but she did not. The Plaintiff asked the Court to order that the sale proceed. Alternatively, the deposit should be refunded.

The Defendant filed a statement of defence stating that the sale could not take place because of an impediment, which she had no control over. The Defendant stated that the Plaintiff was well aware of the impediment to proceed with the sale. There are a number of court cases concerning this property and therefore, it cannot be transferred and the sale cannot proceed.

The Court held that the notary’s testimony was the most important testimony, who confirmed that the deposit was paid on the promise of sale agreement and that the notary still has the deposit in his hands. The contract did not take place because there were pending cases on the property. The Defendant had not yet purchased the property and therefore, was not in a position to sell it. The Court pointed out that this was the situation when the promise of sale agreement took place. The Seller had bound herself to sell the property when it was not hers. The promise of sale agreement did not reflect this situation.

The Court held that both Parties had bound themselves to sell and purchase the property in Hamrun. The fact that the Plaintiff knew that the Defendant was not yet the owner of the property is irrelevant, as the Parties were bound by the terms of the promise of sale agreement.

The Court quoted Article 1357(2) of the Civil Code, which reads:

“(2)  The effect of such promise shall cease on the lapse of the time agreed between the parties for the purpose or, failing any such agreement, on the lapse of three months from the day on which the sale could be carried out, unless the promisee calls upon the promisor, by means of a judicial intimation filed before the expiration of the period applicable as aforesaid, to carry out the same, and unless, in the event that the promisor fails to do so, the demand by sworn application for the carrying out of the promise is filed within thirty days from the expiration of the period aforesaid.”

In a previous judgment, Maria Bianchi et vs JMA Development Ltd et, decided on 28 March 2003 by the First Hall of the Civil Court, the effects of a judicial letter is to extend the promise of sale agreement by one month. If the one month term expires and no action is instituted the property would have the same status as before the promise of sale agreement was signed.

With regard to the present case, the property was acquired in December 2019 by the Defendant.

The Court pointed out that the principle is that a contract should be entered into in good faith. Therefore, one cannot sell a property when that property was not of the seller to sell. The fact that the Defendant subsequently purchased the property is irrelevant because at the time the promise of sale agreement was signed, she was not the owner of the property. She had no title over the property. The Court agreed with the Plaintiff who insisted that the plans of the property attached to the promise of sale agreement binds the parties.

In the light of this reasoning the Court turned down the claims of the Plaintiff forcing the Defendant to enter into the contract of sale but held that as a consequence the Plaintiff should have his deposit refunded.

As to the claim for damages, the Plaintiff listed the expenses he incurred, which included the interest on the deposit, loan processing legal fees and the notary’s fees, amongst others. The Plaintiff claimed loss of profit, from the resale of the property. However, the Court turned down this last claim since there was no indication that the Plaintiff intended to resell the property. The Court limited the award of damages to €5,136.