4.2.4 Downside of approach B

However, the biggest downside of only providing protection against creditors/bankruptcy (approach B) is that, because it does not operate in the grantee vs grantee context, a double grant may give rise to the situation where one party performs and the other does not. An example to illustrate this argument: S sells immovable property to P, and intends to transfer/register on December 1 at 3 PM. Assume that none of the approaches applies. In order to ensure that either both parties perform or both of them do not – a simultaneous exchange – the legal practitioner has to check whether S still has the power to dispose of the property on December 1 at 2.59.59 PM. If we add approach B, the effect would be that even if bankruptcy took place before December 1 at 3 PM, the registration of the transfer would be backdated to an earlier date, to November 24 for example. This means that the insolvency would no longer affect the transfer. If insolvency would be the only reason why owners lost the power to dispose, the legal practitioner would no longer need to perform several checks – one of which at 2.59.59 PM exactly – and can instead perform only one check when it suits the practitioner best, at some point between November 24 and December 1, which would reduce transaction costs. This is the desirable result from a vacuum instrument (see section 2). Furthermore, because P knows for sure that he will acquire the property from November 24 onwards, P may opt to pay the purchase price directly to the seller, like in German real estate practice. However, sellers may also lose their power to dispose because of a double grant. This chance may be considered theoretical, but as mentioned, ‘theoretical’ risks do sometimes materialise, and hence, private law needs a solution for this issue. If this occurs – S registers a second grant in favour of X, at 2.50 PM – the legal practitioner needs to check whether S still has the power to dispose in favour of P at some point in the 10 minutes before 3 PM. If the legal practitioner fails to do so, P may pay the purchase price to S, only to discover that X has become the owner of the property and that the seller has left the country with both the purchase price from X and P in their pocket. As mentioned, P may invoke the ‘rule against offside goals’ or a doctrine to a similar effect against X, but even if P invokes this rule successfully, X is the one that has neither the purchase price nor the property. It is needless to say that X’s claim for breach of contract against S cannot be satisfied if S is untraceable, or has gone bankrupt in the meantime. Because of this particular risk that is not covered with approach B, the benefits of vacuum instruments cannot be fully seized: a last minute check for power to dispose is still necessary.1 However, the small risk of a double grant – and the dangers it poses to the performance interest – can also be remedied by an insurance-oriented remedy, similar to Anglo-American conveyancing practice.