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Rescinded Contracts & Instalment Payment Protection | High Court Decision

The High Court has considered whether the seller of two gas plants was entitled to keep installments paid by the buyer and to receive the outstanding purchase price, even though the seller had rescinded the contract and property in the plants had not passed to the buyer. The court decided that, on a proper construction of the sale agreement, the seller was entitled to keep the installments and the outstanding sums. It also found that the buyer was not entitled to relief against forfeiture. The decision is a reminder that, where a sale agreement is rescinded before title in goods or property passes from seller to buyer, the forfeiture of installment payments may be particularly unfair to a buyer.

A buyer should protect its interests by ensuring that, if a contract is rescinded, the buyer is released from its accrued obligations and has the right to claim back any installments paid before termination. On a more abstract note, there is uncertainty whether the court has jurisdiction to grant relief against forfeiture beyond simply extending a party's time to pay after a contract has been terminated (following the differing views expressed by Denning LJ and Romer LJ in Stockloser v Johnson [1954] 1 QB 476.) It is unfortunate that the judge considered it unnecessary to resolve this long-running debate in this case. (Cadogan Petroleum Holdings Ltd v Global Process Systems LLC [2013] EWHC 214 (Comm))

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