'ROUWKOOP' CLAUSE : WHEN DOES IT APPLY?

from our legal team

A 'rouwkoop' clause included in a sale agreement provides for the purchaser to pay a deposit to the seller which 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.

Contact our professional team at allison@riviganpg.co.za should you require any assistance.