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Property → Sales and purchases → Default and remedies
Overview — Default and remedies

Dr. Stephen Pallavicini, Senior Legal Counsel, Group Legal, Stockland

Lisa Gaddie, Partner, Lander & Rogers (Vic)

Luckbir Singh, Partner, MacDonnells Law (Qld)

Gary Thomas, Partner, Tottle Partners (WA)

Philip Page, Partner, Mellor Olsson (SA)

Tim Tierney, Principal, Tierney Law (Tas)

Currently updated by Lyn Bennett, Consultant, Minter Ellison (NT)

Originally authored by Leon Loganathan, Partner, Ward Keller (NT)

Stephanie Lynch, Partner, Meyer Vandenberg (ACT)

Introduction

A contract for sale of land is like any other contract. The general remedies for breach of contract will therefore apply. See Remedies.

However, there are also specific issues that relate to contracts for the sale of land.

Termination

If a party to a transaction does not comply with the terms of the contract, the innocent party must consider whether it will terminate the contract. Termination is not a matter to be taken lightly. There are legal issues to be considered. The legal issues arise by operation of the standard provisions and the special conditions in the contract, as well as conveyancing practice.

See Termination.

Rescission

In NSW, the standard provisions in the Law Society of NSW — Contract for sale of land — 2016 Edition from the NSW Law Society and Real Estate Institute of NSW maintain the difference between rescission and termination. In addition, there are statutory provisions which give a party the right to rescind.

In Victoria however, the Sch in the Estate Agents (Contracts) Regulations 2008 (Vic) (the standard form contract) does not make a distinction between rescission and termination, and only deals with termination rights arising from a default by a party. However, there are statutory provisions in Victoria which give a party the right to rescind.

Similarly in Queensland, the Real Estate Institute of Queensland (REIQ) — Contract for houses and residential land — 14th Edition and the Real Estate Institute of Queensland (REIQ) — Contract for residential lots in a community titles scheme — 10th Edition (REIQ contract) does not provide for an express distinction between rescission and termination.

In Western Australia, the standard form contract does not refer to rescission.

In South Australia, there is no single standard form contract, though there are statutory provisions which give a party a right to rescind in certain circumstances.

In Tasmania, the Standard Conditions of Sale of Real Estate from the Law Society of Tasmania does not address rescission specifically, though standard condition 18 deals with termination for breach for failure to complete.

Similarly, in the Northern Territory, the Law Society approved Contract of Sale maintains the difference between rescission and termination (see cl 21).

In the ACT, cll 19, 20 and 21 of the ACT Law Society Contract for Sale — 2017 Edition maintain the difference between rescission and termination. In addition, there are statutory provisions which give a party the right to rescind (Civil Law (Sale of Residential Property) Act 2003 (ACT)) or “cancel” the contract (Civil Law (Property) Act 2006 (ACT)).

See Rescission.

Specific performance

An alternative to terminating a contract for breach is to consider whether to obtain an order for specific performance. This may be a viable alternative for a purchaser who wants a particular property; it may not be an alternative for a vendor who is faced with a purchaser who is unable to pay the purchase price.

See Specific performance.

Notice to perform and notice to complete

In NSW, the standard contract for sale of land and general conveyancing practice is that contracts are not time of the essence contracts. If a party does not perform a term of the contract, it may be necessary for the innocent party to issue a notice requiring performance before it takes the step of terminating the contract. Where completion does not occur on the date specified in the contract, it is necessary to issue a notice to complete, making time of the essence. At the end of that period, if completion does not occur, the innocent party could take steps to terminate the contract.

In Victoria, the standard form contract makes time of the essence subject to general condition 27. Under that general condition if a party is in default, the other party may serve a default notice, which usually serves the dual purpose of notifying the other party of the default and bringing the contract to an end if the default is not rectified within the required timeframe.

In Queensland, cl 6.1 of the REIQ contract provides that time is of the essence. Therefore, if a party fails to comply with an obligation by a due date, the other party, so long as it is not itself in breach of contract, can exercise its rights under cl 9 of the REIQ contract (including the right to affirm the contract).

In Western Australia, the standard form contract makes time of the essence, subject to cl 23. Clause 23 requires the giving of notice before the exercise of rights on default.

In South Australia, under most contracts, if a party is in default, the other party may serve a default notice, which usually serves the dual purpose of notifying the other party of the default and enabling the contract to be terminated if the default is not rectified within the required timeframe.

In Tasmania, standard condition 18 of the Standard Conditions of Sale of Real Estate from the Law Society of Tasmania deals with termination for breach from a failure to complete. The standard contract for sale of land and general conveyancing practice is that contracts are not time of the essence contracts. If a party does not perform a term of the contract, it may be necessary for the innocent party to issue a notice requiring performance before it takes the step of terminating the contract. Where completion does not occur on the date specified in the contract, it is necessary to issue a notice to complete, making time of the essence. At the end of that period, if completion does not occur, the party able to settle can terminate the contract by notice rescission according to common law contract principles rather than a specific procedure specified in the contract.

In the Northern Territory, time is of the essence in relation to the payment of the deposit (see cl 2 of the standard Contract of Sale). Therefore, if the buyer is in default, the seller can terminate the contract immediately. However, if a party is in breach of their obligations generally, the other party may serve a default notice which usually serves the dual purpose of notifying the other party of the default and bringing the contract to an end if the default is not rectified within the required timeframe (see cl 18 of the standard Contract of Sale).

In the ACT, the ACT Law Society Contract for Sale and general conveyancing practice is that contracts are not time of the essence contracts. If a party does not perform a term of the contract, it may be necessary for the innocent party to issue a notice requiring performance before it takes the step of terminating the contract. Where completion does not occur on the date specified in the contract, it is necessary to issue a notice to complete, making time of the essence. At the end of that period, if completion does not occur, the innocent party could take steps to terminate the contract. The right to issue the defaulting party with a notice to complete or a default notice is given under cl 18 of the ACT Law Society Contract for Sale — 2017 Edition.

See Notice to perform and notice to complete.

Other remedies

There are other remedies available, eg injunctions. In addition, a term of a contract may be uncertain, and the parties may therefore need to approach the courts to seek a declaration as to its meaning. Practitioners also need to be aware of other legal principles that may apply, such as what happens if a contract is repudiated. There is also a separate issue regarding forfeiture of the deposit. See Other remedies.




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