Zhejiang Property Resale Dispute: Property & Real Estate Court Ruling

A real estate dispute arose when a seller in Zhejiang Province entered into a property contract to sell a home, accepted nearly full payment, and then sold the same property to a third party without refunding the buyer. In 2011, the buyer and seller signed a formal property contract for a residential unit located in Pinghu City, with a total price of 295,000 yuan. The buyer paid a 20,000 yuan deposit on the contract date and an additional 265,000 yuan on February 15, 2011, leaving only a 10,000 yuan balance due at the notarization closing. The contract explicitly stated that the seller must deliver the property upon full payment and assist with transfer procedures, with a 20% penalty for breach. However, before the buyer could take possession, the seller sold the same property to an unrelated third party, triggering a lease violation of the contractual terms.

The buyer initiated legal proceedings after discovering the seller had transferred the property to another person without notice or refund. During the trial, the seller argued that the parties had mutually agreed to cancel the contract via text message exchanges, claiming one message stating “if you cannot handle it, just return the principal” constituted a valid termination agreement. The seller also contended that because the buyer failed to provide a bank account number, the purchase funds could not be returned, and sought to offset any interest liability through claims of unjust enrichment. The buyer, however, maintained that no formal cancellation had occurred and demanded both the return of the 285,000 yuan paid and the contractually stipulated 59,000 yuan penalty. The lower court found the seller’s text message evidence insufficient to prove a mutual rescission, noting that contract termination for significant real estate transactions requires clear, written confirmation. The court adjusted the penalty to 40,000 yuan based on actual losses and equitable principles, while ordering full refund of the purchase price.

The appellate court affirmed the lower ruling, holding that the seller’s unauthorized resale constituted a clear breach of the property contract. The court emphasized that a party cannot unilaterally assume contract termination based on ambiguous text messages, especially in real estate disputes where substantial sums are involved. A critical legal principle emerged: when a contract is terminated due to one party’s fault, the non-breaching party may still claim contractual penalties because liquidated damages serve to sanction wrongful conduct and guarantee performance, independent of the contract’s continued existence. This ruling underscores that even after contract rescission, a breaching seller cannot escape liability for agreed-upon penalties, reinforcing the binding nature of properly executed real estate agreements and the high standard of proof required for claims of mutual contract rescission.