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What is a “rouwkoop” clause and when does it apply?

Written by  Smith Tabata Buchanan Boyes
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What is a “rouwkoop” clause and when does it apply What is a “rouwkoop” clause and when does it apply

A ‘rouwkoop’ clause included in a sale agreement provides for the purchaser to pay a deposit to the seller, which deposit may be retained by the seller should the purchaser decide to withdraw from the agreement. This does not constitute breach of the agreement, but is a mechanism whereby the purchaser legally buys his way out of the agreement.

Most sale agreements providing for the payment of a deposit, also contain a provision that this deposit will be forfeited should the purchaser breach the agreement. The Conventional Penalties Act of 1962 does however provide the purchaser with a remedy if the penalty exceeds the damages, as a Court may be approached for a refund of the difference between the penalty amount and the amount of the actual damages suffered.

The inclusion of either a penalty clause or a ‘rouwkoop’ clause in the sale agreement are effective methods for the seller to ensure that he is dealing with a serious purchaser.

Smith Tabata Buchanan Boyes

Smith Tabata Buchanan Boyes

Smith Tabata Buchanan Boyes

Website: www.stbb.co.za/