Earnest money forfeiture upheld where a purchaser defaulted and the contract showed the payment secured performance.

Earnest money may be forfeited when a purchaser defaults in completing an immovable property sale if the contract and surrounding intention show the payment was meant to secure performance rather than operate as a mere advance. Where the agreement expressly provides for cancellation and forfeiture on the purchaser's failure to fulfil the conditions, the seller may retain the entire earnest money. The Court applied settled principles that earnest money is paid at the time of contracting, forms part of the purchase price on completion, and is liable to forfeiture on the purchaser's default. The purchaser's refund claim failed, and the contrary view was set aside.

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Issues: (i) Whether the seller was entitled to forfeit the entire earnest money when the purchaser defaulted in completing the sale of immovable property.

Issue (i): Whether the seller was entitled to forfeit the entire earnest money when the purchaser defaulted in completing the sale of immovable property.

Analysis: The agreement expressly provided that if the prospective purchaser failed to fulfil the conditions, the transaction would stand cancelled and the earnest money would be forfeited. The law on earnest money was examined with reference to settled principles that earnest money is paid at the time of contracting, serves as a guarantee for performance, forms part of the purchase price when the transaction is completed, and may be forfeited when the transaction falls through because of the purchaser's default. The Court held that the character of the payment and the parties' intention, as reflected in the contract, showed that the amount was not merely an advance but earnest money meant to secure performance.

Conclusion: The seller was entitled to forfeit the entire earnest money. The purchaser's claim for refund failed and the High Court's contrary view was set aside.

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