[Case Summary]This case is a second-instance housing sales contract dispute triggered by changes in the purchase restriction policy. In 2017, Wen * purchased a house in a certain residential area of Langfang and paid the deposit and down payment. However, due to the introduction of the purchase restriction policy in the local area, Wen * was subject to purchase restrictions and was unable to complete the transfer of ownership. The first-instance court rescinded the "Deposit Contract" and ordered the seller to return the down payment of 1.8 million yuan. The seller appealed against the judgment and demanded that the buyer pay a breach of contract penalty of 1.5 million yuan. Wen * entrusted Beijing Henglu Law Firm to handle the case.Chen PingThe attorney represented the defendant in the litigation and argued that both parties agreed to terminate the contract, and that the buyer, being subject to the purchase restriction policy, could not fulfill the contractual purpose and should not bear breach of contract liability. The second-instance court adopted the attorney's opinion, ruled to dismiss the appeal and uphold the original judgment, and ordered the transferor to bear the second-instance litigation fees. The core dispute: the termination of the contract and the assumption of breach of contract liability when the transfer of ownership is impossible due to the purchase restriction policy. Applicable legal provisions: the relevant provisions of the Civil Code on contract termination, force majeure, and breach of contract liability.

I. Review of the Case

Many home buyers are searching for "After signing the purchase contract, if the purchase restriction policy is implemented and the transfer of ownership cannot be completed, what should I do?"..."When buying a house, if the down payment and deposit are not allowed to be refunded due to the purchase restriction policy, what should I do?"Who is in breach of contract in the case of the purchase restriction on second-hand houses?When it comes to signing a "deposit contract", people often get stuck in similar dilemmas. On March 31, 2017, the defendant, Xu * (the transferor), and the plaintiff, Wen * (the transferee) and Wu * (the intermediary) signed a "deposit contract", stipulating that the house located in Building 105 of a certain residential complex in Langfang City (the house property certificate was obtained on May 21, 2020) with a construction area of 160.53 square meters would be sold at a price of 3.3 million yuan. The defendant collected a deposit of 500,000 yuan from the plaintiff, and the plaintiff paid a service fee of 5,000 yuan to the intermediary on the signing date and the remaining 45,000 yuan on the date of online signing. The contract also stipulated the liability for breach of contract. On the same day of signing the contract, Wen *'s wife, Wang *, transferred 500,000 yuan as a deposit to Xu * and paid a service fee of 5,000 yuan to Wu *. Subsequently, on April 28, 2017, Wen * transferred 1.3 million yuan as a down payment to Xu * via bank transfer. After receiving the house in question, Wen * did not renovate it and only used it as a warehouse. Later, the local government issued a purchase restriction policy, and Wen * failed to meet the purchase qualifications and became subject to the purchase restrictions. Due to misunderstandings about the impact of the policy and the fact that the house had not yet obtained a property certificate at the time of signing the contract, the transfer and payment of the remaining purchase price were affected. Now, Wen * is unable to complete the transfer and cannot achieve the purpose of the contract, so he sued Xu * and Wu * in court. Xu * counter-sued, demanding that Wen * pay a breach of contract penalty of 1.5 million yuan. The first-instance judgment: Resolve the "deposit contract"; Xu * shall return the down payment of 1.8 million yuan to Wen * within ten days, and Wen * shall return the house to Xu * within ten days; Wen * shall pay Xu * a breach of contract penalty of 800,000 yuan within ten days. Xu * appealed against the judgment, and the appellee, Wen *, entrusted Henglu Law Firm to handle the case.Chen PingThe lawyer represents the client in court and defends against the lawsuit.

II. The focus of the case

  • Focus 1: The purchase restriction policy results in the inability to transfer ownership. Should the contract be terminated, and who should bear the consequences of the termination?It concerns the distribution of the return of the down payment and the liability for breach of contract.
  • Focus Two: Whether the buyer, as a person subject to purchase restrictions, should bear breach of contract liability for the termination of the contract.It involves the failure to achieve the contractual objectives and the determination of fault liability.
  • Focus Three: Whether the liquidated damages of 800,000 yuan determined in the first instance and the liquidated damages of 1.5 million yuan claimed in the second instance are reasonable.This needs to be judged based on the changes in the value of the house and the compensation for the losses.

III. Professional intervention by Hengluo Law Firm

The appellant (the transferor) claimed that:Xu * appeals to revoke the first-instance judgment No. 367, remand the case for retrial or change the judgment to dismiss Wen *'s claims in the first instance and support his counterclaim; and alleges that the first-instance court omitted a necessary co-litigant, Wang *, violated the procedure, failed to determine whether Wen * enjoyed the statutory right of rescission, wrongly determined that Wen * agreed to rescind the contract, and applied the law incorrectly in setting the contractual penalty at 800,000 yuan.

The appellee's (the buyer's) position:Wen * claimed that both parties agreed to terminate the contract, and that he was subject to the purchase restriction and unable to transfer the ownership of the house, which resulted in the failure to achieve the purpose of the contract. Therefore, he should not bear the liability for breach of contract and requested to maintain the original judgment.

Hengluo Lawyer's Representation Opinion:Chen PingThe lawyer pointed out that: First, whether or not Wang * is added as a defendant does not infringe upon Wang *'s own rights, and it also has no impact on the substantive judgment result; Second, both parties to the transaction in this case agreed to terminate the contract and no longer perform the obligations under the contract; Third, after the parties signed the deposit contract on March 31, 2017, they were affected by the purchase restriction policy. Wen * was subject to the purchase restriction and could not handle the transfer formalities, so the contractual purpose could not be achieved. Therefore, Wen * should not bear breach of contract liability for terminating the contract; The first-instance court's discretionary breach of contract penalty plus interest income is nearly 1 million yuan, which is sufficient to compensate for the appellant's losses; The original judgment determined the facts clearly, the litigation procedures were legal, and the applicable laws were correct. It is requested to reject the appeal and maintain the original judgment.

IV. Outcome of the case

After the second-instance court heard the case, it found that the facts established by the first-instance court were consistent and adopted the opinions of Hengluo Law Firm, ultimately dismissing Xu's appeal. The court held that the respondent enjoyed the right to rescind the contract; furthermore, according to the transcript of the first-instance trial, when the court asked the appellant whether he would continue to perform the contract, the appellant explicitly agreed to rescind the contract; the appraisal report submitted by the appellant proved that the market value of the involved house before the second-instance trial was 1,364,505 yuan, with a huge difference from the transaction price of 3.3 million yuan agreed upon in the deposit contract; however, the appraisal report was unilaterally commissioned after the first-instance trial and was not accepted by the court. Regarding the amount of the breach of contract penalty, since neither party timely claimed to rescind the contract during the performance, the loss caused by the decline in house prices due to market regulation should not be entirely borne by one party. In summary, in accordance with relevant legal provisions, the judgment is as follows: dismiss the appeal and maintain the original judgment; the second-instance acceptance fee of 15,510 yuan shall be borne by Xu. The buyer's right to withdraw from the contract and obtain a refund is given final protection.

5. Hengluo Law Firm's Reminder

If the transfer of ownership cannot be completed due to factors beyond the control of both parties, such as the purchase restriction policy, and the contractual purpose cannot be achieved, the buyer can usually claim to terminate the contract and refund the paid amount, and the buyer may not necessarily bear the liability for breach of contract. This case is handled by Beijing Henglu Law Firm.Chen PingThe lawyer (practice license number: 11101201411619680, subject to the document issued by the judicial administrative organ) acts as the agent. It is recommended to verify your own eligibility for purchasing a house, the ownership of the house, and the status of the house being subject to a sales restriction before purchasing a house. It is also recommended to clearly stipulate in the contract the assumption and release of risks related to policies such as the purchase restriction, as well as the refund terms. In the event of a dispute, it is recommended to promptly entrust a professional lawyer to safeguard your rights and interests based on the contract and the facts of the policy.

VI. Common Questions and Answers about Purchasing Disputes under the Restrictive Purchasing Policy

  1. Q: After signing the purchase contract, the local government introduced a purchase restriction policy. Who will be considered in breach of contract if the transfer of ownership cannot be completed?
    A:If the buyer indeed loses the eligibility to purchase a house due to the purchase restriction policy and the contractual purpose cannot be achieved, it is usually a reason that cannot be attributed to either party. The buyer can claim to rescind the contract and return the payment, and may not necessarily bear the liability for breach of contract.
  2. Q: If I encounter purchase restrictions when buying a house, can I get back the deposit and the down payment I've already paid?
    A:In the case where the policy results in the inability to transfer ownership or the termination of the contract, the transferor shall return the deposits, down payments, and other funds already received, but this shall be determined in accordance with the contract provisions and the circumstances of the fault.
  3. Q: The seller has backed out and claimed that I breached the contract, demanding that I pay a high penalty fee. What should I do?
    A:Evidence such as purchase restriction policies, eligibility for purchasing a house, and communication records should be collected to prove that the contractual purpose cannot be achieved due to reasons beyond the buyer's control, and to argue that the penalty for breach of contract is excessively higher than the actual losses.
  4. Q: If the property rights certificate for the house hasn't been issued when signing the contract, what risks might arise?
    A:There are risks in unlicensed housing transactions, such as the inability to transfer ownership in a timely manner, being sealed up, or policy changes. Therefore, the contract should stipulate the deadline for ownership transfer, the allocation of policy-related risks, and the liability for breach of contract.
  5. Q: If the first-instance court awards a breach of contract penalty, can the other party appeal and get a higher penalty awarded in the appeal process?
    A:The second-instance judgment shall be based on facts and laws. If the claim for the breach of contract lacks sufficient evidence (such as unilateral entrustment and an evaluation that does not conform to the market value), the court may disregard it and maintain the original judgment.