Legal Comment by Mark Illidge

June 2007

As either a buyer or seller, you may be excited and/or relieved when a Contract of Sale is signed, and you start to prepare both mentally and logistically for settlement.  However, sometimes the other party, for whatever reason, wishes to get out of the contract.  Unfortunately (or fortunately for the other party) there are a number of escape routes. 

These include:

Is there a binding contract?

To be binding and enforceable it is essential that there is an offer in writing, the offer has been accepted in writing, and acceptance communicated by the party that accepted the offer.  A buyer must also have signed a Warning Notice prior to the formation of the contract.  No party is bound by the contract until all these requirements are met.

Title Encumbrances

Failure to properly disclose an easement is a common oversight that may give a buyer the opportunity to terminate.

Tenancy

Failure to disclose or incorrectly disclosing the nature of a tenancy will usually give a buyer the right to terminate a contract.

Area

The courts generally allow for a discrepancy of 2 to 5% in the stated area of land, so if overstated by more than 5% the buyer may terminate the contract.

Deposit

Non-payment of the deposit by the due date, or payment by a post-dated cheque, gives a seller the right to terminate.

Finance

Even if finance is approved a buyer may terminate if the finance is not approved on terms satisfactory to the buyer.  A seller may terminate if the buyer does not give written notice of finance approval within the prescribed time frame in the contract.

Building and Pest Inspection

If the building inspector is licensed, an unfavourable report can be relied upon to terminate the contract.  The seller is entitled to a copy of the report if you terminate on that basis.

As a seller, make sure you accurately disclose all key information to your agent before they prepare the contract.  Always have your solicitor look over the contract before you sign it, to help avoid pitfalls before they arise.

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