Buyer Backed Out After Paying Bayana: What You Can Keep and Claim

Bayana disputes are among the most common property disagreements in Pakistan, and both sides usually hold a confident but wrong belief - the seller that forfeiture is automatic, the buyer that the money must always come back. The answer depends on the agreement, the reason for the failure, and what loss the seller actually suffered.

What bayana actually is

Earnest money paid on an agreement to sell serves two purposes: it is part payment of the price, and it evidences the buyer's seriousness. Its treatment on default depends on what the agreement says and on general principles of compensation.

The last row is the most common problem in practice. Bayana paid on a handshake, with no written agreement, leaves both parties arguing about what was agreed. If you take or pay earnest money, write the agreement down, however well you know the counterparty.

Can you simply keep it?

Not automatically. Even with a clear forfeiture clause, a court asks whether retaining the sum represents reasonable compensation for the loss actually caused.

Factors that support forfeiture:

• A clear written clause agreed by both parties.
• Actual loss - the property was off the market, a better offer was lost, prices fell.
• The buyer's default was unjustified - they simply changed their mind.
• The sum is proportionate to the transaction rather than extravagant.
• You were ready and willing to complete throughout.

Factors against:

• No loss suffered - the property resold quickly at the same or a higher price.
• The sum is disproportionate to any conceivable loss.
• The seller contributed to the failure - title problems, delay, refusal to complete.
• The buyer's failure was caused by something the seller concealed.

The seller's three options

1. Forfeit and resell. Simplest commercially. Serve notice terminating the agreement, then resell. Document the loss - the period off the market, marketing costs, any price difference.
2. Claim damages. Sue for actual loss, typically the difference between the contract price and the resale price plus reasonable costs. Requires evidence of both.
3. Sue for specific performance. Compel the buyer to complete. Less common for sellers than for buyers, but available where you want the sale enforced rather than the money back.

Before reselling, terminate the first agreement formally by written notice. Reselling while the first agreement is still on foot creates competing claims, and a buyer who later sues for specific performance can complicate the second sale badly.

If you are the buyer

Buyers are not without arguments, particularly where the failure was not entirely their fault.

• Was the seller ready and able to perform? Title defects, an unresolved mutation or missing co-owner signatures may excuse you.
• Was anything concealed - an encumbrance, litigation, or a defect in title?
• Was time genuinely of the essence, and was any extension agreed?
• Is the forfeiture disproportionate to any loss the seller actually suffered?
• Did you communicate your difficulty and seek time in writing?

Where the seller could not have completed anyway - because a co-heir would not sign, or the property was not mutated - the buyer's position is considerably stronger. See selling inherited property for the common title problems.

Evidence that decides it

• The written agreement and any variations or extensions.
• Receipts for the bayana and any further payments.
• Correspondence - notices, requests for extension, reasons given.
• Evidence of readiness - the seller's title documents, the buyer's funds.
• Attendance records - who attended the sub-registrar and when.
• Resale evidence - marketing, offers received, the eventual price.
• Market evidence of price movement over the period.

The single most useful document is a written notice calling on the other side to complete by a stated date, sent before the deadline passes. It establishes your readiness, puts the other party in default clearly, and is far more persuasive than a recollection of phone calls.

Drafting to avoid the dispute

For future transactions, on either side:

1. Put it in writing, always, with both parties' full particulars.
2. Describe the property precisely with record details.
3. State the price, the bayana and the balance, and the payment schedule.
4. Fix a completion date and state whether time is of the essence.
5. Say what happens on default by each party, with a figure that is a genuine pre-estimate of loss.
6. Record the seller's title warranties and what happens if title proves defective.
7. Provide for extension by mutual written agreement.
8. Take payment traceably - bank transfer, not cash.

The fifth point is where most agreements are weakest. A round figure with no reasoning attracts scrutiny; a sum explained as reflecting the property being off the market for a stated period is far more defensible.

Acting in time

Both sides lose position by waiting. A practical sequence for a seller once the buyer misses a deadline:

1. Immediately: write recording the default and calling for completion by a stated date.
2. Keep proof of service of that notice.
3. On expiry: serve formal notice terminating the agreement, if that is your decision.
4. Document your loss - the period off market, marketing costs, offers declined.
5. Then resell, keeping evidence of the price achieved.
6. Take advice before forfeiting a substantial sum, since the reasonableness test applies.

For a buyer whose seller has defaulted, the sequence is similar but the priority is different: seek an injunction restraining onward transfer before anything else, because once the property is sold to a third party the position becomes far harder - see remedies and injunctions.

Frequently asked questions