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Purchaser forfeits deposit due to poor drafting of Contract of Sale

Facts

In the recent decision in Namrood v Ebedeh-Ahvazi [2017] NSWCA 310, Mr Ebedeh-Ahvazi (Vendor) undertook earth works on a vacant lot he owned in Sydney. Council took issue and issued various notices requiring the Vendor to cease work and remediate the property.

The property was then placed on the market and purchased at auction for $1.46 million.

The contract of sale contained a special condition which provided that the Vendor would restore the property to the condition it was in before the unauthorised works by ‘completion’.

A separate term used in the contract was ‘completion date’, defined as 20 June 2015.

As the works had not been completed by the ‘completion date’, the purchaser served a notice requiring the Vendor to comply with its obligations under the contract. After protracted correspondence between the parties, the purchaser issued a notice to rescind the contract. The Vendor argued that the purchaser did not validly terminate and attempted to compel the purchaser to complete the purchase. When completion did not take place, the Vendor terminated and resold the property, keeping the deposit.

Court of Appeal

The Court of Appeal found that the purchaser was not entitled to terminate for breach of the contract as the Vendor was only required to fulfil its obligations by the time of settlement – reflecting the language in the contract by ‘completion’. The ‘completion date’ of 20 June 2015, was as the court found, not agreed as the date of settlement.

Implications

As is often the case in matters regarding the interpretation of a contract, the conclusion was reached due to the language and drafting of the contract. The contract drew a distinction between the terms ‘completion date’ and ‘completion’ being the date on which title to the property would be transferred to the new owner. The parties had chosen ‘completion’ and not the ‘completion date’ as the time by which the vendor was required to complete the works.

It is always prudent to review a contract of sale prior to bidding or submitting an offer paying close attention to any special conditions and defined terms.

At Burke & Associates Lawyers, we have the depth of experience and fast turnaround times to align with your business and commercial expectations.

Contacts

Kristy Muhlhan

Principal

Kristy Muhlhan

Principal
LL.B (Hons) GRAD DIP. L.P., GAICD.
Since 2014, she has been an owner and Principal of the firm and has mastered a broad range of essential commercial and business skills which go hand in hand with the work she does for...

Stewart Davis

Associate

Stewart Davis

Associate
LL.B (Hons) B.Com
As well as property law, Stewart has had exposure to VCAT administration matters and commercial law, particularly servicing developer clients.

George Hanger

Associate

George Hanger

Associate
LL.B BA
George was admitted to legal practice in May 2015 after completing a Bachelor of Arts at the University of Melbourne and a Bachelor of Laws at Monash University.

Emma Dickens

Paralegal

Emma Dickens

Paralegal
Emma previously completed a Bachelor of Legal and Dispute studies at RMIT University in 2015.

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