Law on forfeiture of earnest money 

Case Law ;Goutam Roy V/S Avolon Projects 

CC No 1941 of 2018 ,Decided on 24.01.2023 (NC)

Builder and Home buyer signed an agreement having forfeiture clause.  In case of cancelling the booking by Home Buyer, 20% of total basic sale price shall be forfeited.

Question before the National Commission was as to how much deduction is reasonable and justifiable 

National commission while referring to number of SC cases on the issue relied upon section 74 of 1872 Contract Act that in case of breach of contract actual damage is to be proved for penalizing the other party. In such matters cancelling the booking flat or property by the buyer, the property remains with builder only and there is hardly any loss to the builder 

National commission ordered for forfeiture of 10% of the total sale cost of the property 

Cases Referred:

Moula Bux V/S Union of India 1970 SC

Sirdar K B Ram Chandra Raj URS v/s SC 2015theory of actual damage as per section 74 of contract act