Utusan Malaysia today reported that some of the Housing Developers have requested (government intervention) to raise up house selling price that they have agreed before with the buyers in the Sale and Purchase Agreement. Their reason is simple, they claimed that the hike of construction material is unbearable.
Needless to elaborate further, the Minister however refused the request.
My post is only to discuss on whether the developer may raise the selling unilaterally or not under the rule of contract.
Under the rule of contract, the basic principle of offer, acceptance and consideration must be understand carefully before we discuss further. In such sale and purchase agreement, generally everyone could claim that the three elemnets of contract have been fulfilled.
There are an offer made by the developer to sell the house, the buyer accepted the offer and then the buyer paid the purchase price (either by cash or with the help of any financier), though the purchase price has not been paid in full but that is among all part and partial of the sale and purchase agreement that the purchase price be paid in progress.
So, generally the agreement may not be change unilaterally, not only regarding the purchase price but also the quality of the building constructed (may be reduced in order to cover developers' lost).
How then the developer raise or change the purchase price?
Simple, but entering new novation agreement with the buyers. What is novation agreement?
Novation agreement in simple (despite other defination towards its usage in different area), it is a simple agreement between the existing parties of the original agreement or with new party to vary the original terms and conditions of sale and purchase agreement.
Now, remenber such novation agreement may not be in full form of printed contract that we usually think, it may be in simple letters that the buyer may not aware of it, so be careful. Even a spiece of letter can be regarded as binding and lawfull.
may be on the next post I can discuss in detail regarding this topic.