Earnest money forfeiture and no novation of sale contract where later payment terms were only an accommodation.

Later cheques and a receipt were treated only as a payment accommodation for the purchaser's convenience and did not amount to novation or abandonment of the original sale contract, which therefore remained in force. Where the purchaser failed to complete the bargain, the stipulated earnest money was forfeited because earnest forms part of the price only if the transaction proceeds; once the purchaser defaults, it is not recoverable. Only the balance of any money paid beyond the forfeited earnest was refundable.

---

---

Issues: (i) Whether the original contract of sale was superseded by the later payment arrangements; (ii) whether the purchaser, having failed to complete the contract, was entitled to recover the earnest money.

Issue (i): Whether the original contract of sale was superseded by the later payment arrangements.

Analysis: The later cheques and receipt were treated only as a financial modification made for the purchaser's convenience. They did not show an agreement by the owner to abandon or replace the original bargain, which continued in force with the modified payment arrangement.

Conclusion: The original contract was not superseded.

Issue (ii): Whether the purchaser, having failed to complete the contract, was entitled to recover the earnest money.

Analysis: Earnest money forms part of the purchase price when the transaction proceeds, but it is forfeited when the transaction falls through because of the purchaser's fault or failure. Since the purchaser was unable or unwilling to complete the bargain, the stipulated earnest was lost, and only the balance of the money paid was refundable.

Conclusion: The earnest money was forfeited and was not recoverable by the purchaser.

Final Conclusion: The purchaser's challenge failed, and the respondent's entitlement to retain the earnest money was upheld.

Ratio Decidendi: Where a purchaser defaults on a sale contract, a stipulated earnest payment is forfeited, and later accommodation in payment terms does not amount to novation unless the original contract is clearly abandoned.

---