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Rouwkoop vs Liquidated Damages: The Break-Up Clauses of an Offer to Purchase

Dec 3, 2025

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Property deals can feel a bit like dating: everyone’s excited, everyone’s hopeful, and everyone’s pretending they’ve read the fine print. But possibly hidden in your offer to purchase are two very important relationship management tools – the Rouwkoop clause and the liquidated damages clause. Think of them as the legal equivalent of, “It’s not you, it’s me,” versus “You’re paying for this!”

1. Rouwkoop Clause: 

A Rouwkoop clause (derived from the Dutch words meaning “regret and purchase”) is basically a classy, contractual breakup. It lets a party, usually the buyer, walk away from the deal without being labelled “the villain”, as long as they’re willing to forfeit a predetermined sum of money. No tantrums, no dramatic texts, just a quiet exit and a little financial apology left behind.

It’s not a breach; it’s more like saying, “I’ve changed my mind, here’s some cash to soften the blow.”

2. Liquidated Damages Clause:

A liquidated damages clause, on the other hand, kicks in when someone breaches the agreement. This isn’t the polite breakup; this is the “you didn’t show up, and now I’m invoicing you for my inconvenience.”

This amount is a pre-agreed estimate of the innocent party’s loss. It must however be reasonable. Sellers are sometimes sold on the idea of including a non-refundable deposit clause (or liquidated damages clause) in the offer to purchase. More often than not, sellers are under the impression that they will be entitled to all of the non-refundable deposit or monies already paid to the conveyancer on account of the purchase price if the purchaser breaches an offer to purchase, and such breach results in its cancellation.

In terms of our case law and the Conventional Penalties Act 15 of 1962 (“the Act”), any penalty or liquidated damages contained in a contractual obligation shall be subject to the provisions of the Act which affords a court the discretion to, on hearing a claim for a penalty or a non-refundable deposit, find that it might be out of proportion to the prejudice suffered by the innocent party, and the court may reduce the penalty to such extent as it may consider equitable under the circumstances, taking in due consideration the interests of all concerned.

This means that any forfeiture stipulation resulting from the cancellation of an agreement of sale, including “non-refundable deposits”, as well as the retention of certain monies already paid by a purchaser as liquidated damages, will be subject to the Conventional Penalties Act. In short, the penalty has to be reasonable and proportionate to the actual financial damages or losses suffered by the innocent party as a result of the breach.

Property practitioners should thus be very careful not to create an expectation with the seller that he or she will be entitled to all of the non-refundable deposit or monies already paid to the conveyancer if a purchaser breaches an agreement of sale, and such breach results in the cancellation of the agreement.

In a nutshell, a rouwkoop clause is the “get-out-of-this-relationship” fee, and a liquidated damages clause is the “you-caused-this-chaos” fee. Unfortunately, many sale agreements confuse the position in law, merging the forfeiture/liquidated damages clause with a rouwkoop clause, which provides that if the purchaser breaches the agreement and the seller cancels the agreement as a result thereof, the purchaser will forfeit his or her deposit as rouwkoop. Non-refundable deposits are effectively a myth and together with forfeiture clauses, subject to scrutiny by the courts in light of the Act. Unless the parties to the agreement can come to an agreement regarding the penalty, a court must ultimately be approached to finally quantify the amount payable as a penalty. A Rouwkoop clause in an offer to purchase must be clearly distinguished from the penalty clause as it is not subject to the provisions of the Act. Both involve money, both are part of the offer to purchase fine print, but only one lets you walk away with minimal drama. The other? Well, let’s just say it’s motivation to stick to your commitments.

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