Compensation is to be paid for any delay caused. Besides compensation, common law also lays out rules for payment of interest. The following discusses the different provisions mentioned in Standard Conditions. These are often considered inadequate and hence parties refer to Standard Conditions 7.2 provisions.
According to the provisions mentioned in the SC, compensation is to be paid irrespective of the fact that loss is caused or not. When the loss that is caused is more than compensation that is payable, a claim for breach of trust can be made to recover this additional amount. This compensation must be taken in account in a claim for breach of contract.
Standard conditions 7.2
According to the provisions of SC 7.2 compensation should be paid at the contract rate as defined by SC 1.1.1 (e) as being ‘The Law Society’s interest rate in force from time to time. The parties are also allowed to choose a different rate of interest by a special condition, if required. This interest is to be paid on the purchase price or when the buyer is the person paying interest- on the purchase price minus the deposit money already paid.
Calculating compensation
Calculating compensation depends on the events mentioned under SC 4.3.1 and 4.3.2 to establish if the delay was caused due to the fact that a procedural step that was to be carried out, was not. A delay before completion is assessed by reference of a definition of ‘working day’ as contained in SC 1.1.1.
But this definition is not applicable after date of completion, after which every day counts towards assessing liability for compensation. After having determined the delay, the party that is most responsible for the delay is held liable for compensation. This compensation is either paid for the period by which his delay exceeds the delay of the other party, or for the actual period of delay, if it is less.
Compensation payable under SC 7.2 is neither additional nor in substitution for the common law damages. Although, the calculation of delay is rather complicated, it does not take in account the fact that the delay may not be because of a fault of the defaulting party. For instance, the defaulting party’s delay may be caused by a delay in a chain transaction. These are further compounded by the fact that the timetable mentioned under 4.3.1 and 4.3.2 are based on traditional practice of title being deduced after exchange which is rarely the case.
Also, the timetable is based on a minimum period of 15 working days between exchange and completion. However, in practice, completion takes place earlier than 15 days after exchange.
Deemed late completion
According to SC 6.1.2 and SC 6.1.3 when the sale is of vacant possession and the consideration money is not paid before 2 pm on the actual date of completion, completion is said to have taken place on the next working day. This consideration is for the purpose of calculating compensation provisions, only.
However, the seller also has to arrange for vacant possession by 2 pm on the date of completion. Under such circumstances, the buyer will have to pay compensation for delay. For instance, if the buyer was able to arrange money only by 2.15 pm on a Friday, the seller can treat completion as not having undertaken until the following Monday and can claim compensation irrespective of the actual loss.
The definition of working day is contained in SC 1.1.1 (m) and it ceases to apply once completion takes place. The seller would thus be able to apply rate of interest for three days; viz. Friday, Saturday and Sunday.
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