The deposit on a promise of sale agreement with specific reference to the distinction between ‘kapparra’ and ‘akkont’ in light of recent Maltese judgements

Abstract

1.1 The Promise of Sale Agreement: The ‘Promise of Sale’ (“POS”) agreement, is the agreement by which a prospective vendor and prospective purchaser conduct in writing ad validatem, a promise to sell and to purchase a particular property for a fixed, pre-arranged price. The said agreement is done to secure a property until the required searches, documents and funding is set for the sale to go through. A deposit is therefore given as to secure the POS agreement and mark the conclusion of a bargain, which can be given in different modes. As described in Art. 1357 of our Maltese Civil Code, the ‘promise to sell’ agreement is attaching the parties to sell a fixed thing for a fixed price, which “shall not be equivalent to a sale; but, if accepted, it shall create an obligation on the part of the promisor to carry out the sale, or, if the sale can no longer be carried out, to make good the damages to the promisee”. 1.2 Aims and objectives: The principal objective of this Professional Report is to analyse the current positions of Maltese jurisprudence concerning deposits on POS agreements and how they have been developing over time, with specific reference to the different options clients have when deciding on which form of deposit is most adequate for their situation. This report will thus, make specific reference to the two types of deposit which are made use of, being the payment made by way of deposit on account of the selling price, also known as ‘akkont’ and payment made by way of earnest, which is also known as ‘kapparra’. Besides ‘akkont’ and ‘kapparra’ it was certainly crucial to discuss also the newly developed ‘forfeitable deposit’ which is not a notion which is dealt with in the Civil Code as yet, however, still commonly used in POS agreements and has many issued arising out of such as will be seen later in this paper. The main aim, is, therefore, to examine the differences in nature between the institute of earnest and deposit on account of price, while also considering the legal implications that they bring along. This will not be a simple analysis, since our laws regarding deposits are very limited and local judgements are also conflicting with each other. The lack of sufficient legislation is, therefore, the main drawback which has been found when carrying out this study, however, it is the reason why it is believed by the reporter that such a report is crucial to be carried out. […]