On Account Of Damages: Doesn't Always Mean That Damages Must First Be Proven

A recent decision of the British Columbia Court of Appeal, released February 5, 2013, has held that where a buyer has paid a deposit with respect to the purchase of real property and then subsequently fails to complete the transaction, the deposit will be forfeited by the buyer without the seller needing to prove damages provided the contract states that the deposit will be forfeited "on account of damages."

In Tang v Zhang,1 the sellers entered into a standard form contract used by the Greater Vancouver Real Estate Board to sell a residential property for $2,030,000. The contract contained the following provision:

"TIME: Time will be of the essence hereof, and unless the balance of the cash payment is paid and such formal agreement to pay the balance as may be necessary is entered into on or before the Completion Date, the Seller may, at the Seller's option, terminate this Contract, and, in such event, the amount paid by the Buyer will be absolutely forfeited to the Seller in accordance with the Real Estate Services Act, on...