Please enable JavaScript.
Coggle requires JavaScript to display documents.
Wk 6: Formation of contracts, Pt II: - Coggle Diagram
Wk 6: Formation of contracts, Pt II:
Cooling Off
-
Calculation of time, non-compliance
-
-
Relevant contract
Contract, including a contract granting an option to purchase ('relevant contract')
For the sale of residential property
Includes CALL OPTIONS (clarifies previous uncertainty in the PAMDA)
So must include the s 165 warning
BUT, a contract formed on exercise of the option is EXCLUDED so no warning1
Does it include put and call options?
- K may be formed w/o exercise of a right to purchase, BUT
- K may still be a K 'for the sale of residential property'
- Cheree-Ann Property Devekopers P/L v East West Intl Dev P/L --> NO
Vale 1 P/L v Delorain P/L --> YES...but Neilson Properties
Residential Property
s 21: Residential property is real property that is used, or is intended to be used, for residential purposes but does not include real property that is used primarily for the purposes of industry, commerce or primary production
No definition of 'residential purposes'
- land + residence
- residential unit
- vacant land --> residences(s) may be built
EXCLUSIONS
- Used 'primarily' --> Gray v Mercantile Mutual Ins (Aust) Ltd
- 'Mainly' or ' chiefly' --> objective assessment, quantitative, commonsense approach
-
Non -compliance
If the seller does NOT comply and provide the warning
The buyer CANNOT terminate
The only remedy is that the seller commits an offence
200 penalty units $26,690
Calculations of period
-
S 168(1) POA If exercised by written, signed notice to seller/agent
will incur 0.25% 'termination fee'
-
-
Cooling off period starts on the day the buyer RECEIVES the contract signed by both parties --> or the first business day thereafter
If buyer receives on Sunday, cooling off period starts Mon, ends Fri 5PM
-
-
Instalment Contracts
s 71 PLA
- an executory contract for the sale of land in terms of which
- the purchaser is bound to make a payment or payments
- (other than a deposit)
- without becoming entitled to receive a conveyance in exchange for the payments
-
Sale of land
- includes agreement of sale, enforceable option for sale
- Be careful; option fees might unwittingly cause instalments Ks where drafted as part of the deposit and the deposit goes over the prescribed percentage
Purchaser bound to make a payment
- Buyer must be bound to make a payment
- w/o receiving a transfer in exchange --> it is this that makes it an Instalment K
- The contract itself must require the payment, not a collateral agreement
- Eg, separate tenancy agreement where rent is paid --> Not an instalment K
- BUT if eg, early possession and payments must be made under the K --> Instalment K
- the payment must be from buyer to seller (not third party)
- Must be made before settlement
- Payments made at settlement are made in exchange for a conveyance and won't be caught
BE CAREFUL: pre-settlement payments eg for interest on deposit in return for extension of settlement date --> Instalment K
OTHR THAN a deposit
- s 71: deposit means a sum -
- a) not exceeding the prescribed percentage of the purchase price payable under an instalment contract; and
- b) paid or payable in 1 or more amounts
- c) liable to be forfeited and retained by the vendor in the event of a breach of contract by the purchaser
Under Land Sales Act, BCCMA = max 20%
All other cases = max 10%
CAREFUL:
- Payment of interest on deposit to seller might exceed the PP --> Instalment K: Starco Developments P/L v Ladd
- If full deposit paid, and a rebate on the purchase price given, deposit will exceed the PP --> Instalment K: Moor v BHW Projects
Liable to Forfeiture
- Sometimes a K will stipulate that a deposit is 'non-refundable'
- This is sometimes interpreted as not refundable unless the seller breaches --> No Instalment K
- But sometimes interpreted literally --> Instalment K as falls o/side the definition of deposit
Rights of the Buyer
Caveat (this is prudent!)
- buyer not in default, has an equitable estate sufficient to support a caveat
- S 74(1A) this won't automatically lapse like ordinary caveats
S 76: Deposit of Title Deed and Conveyance
- At any time after contract, buyer may DIRECT the seller to deposit the title deed and duly executed transfer to a prescribed authority (solicitor, bank, trustee, etc)
- Will be held in escrow pending discharge of the contract by performance
- If seller defaults --> deemed to have breached a condition
S 75: Buyers right to require a conveyance
- buyer, not in default, after paying 1/3 the purchase price
- May serve on the seller a notice requiring a conveyance CONDITIONAL on the buyer executing a mortgage in favour of the seller/nominee to secure payment
Seller also has a correlative right
- Can be problems here
- S 75(3) requires seller to advance the buyer an amount equal to the transfer duty and legal costs BUT this is conditional on the buyer agreeing to this sum being added to the principal sum secured by the mortgage --> what if they don't agree?
- Buyer has to pay preparation, registration costs in the meantime
- PLA implies a power of sale in every mortgage made by instrument (even if unregistered)
-
Prohibited Transactions
s 57A(1) PLA
Inserted by amendment in 1982, to minimise subordinate legislation voiding contracts
Post 2017
(1)A - a statutory instrument, other than prescribed subordinate legislation, DOES NOT AND CAN NOT
- a) render void or uneforceable any contract or dealing concerning porperty that is made, entered into or effected contrary to the statutory instrument; or
- b) for a contract for the sale of land - give a party to the contract a right to terminate the contract for a failure by another party to the contract to comply with the statutory instrument
-
-
Acts
Statutory (Act) prohibition on contracting, or rendering unenforceable
- If an Act clearly specifies an agreement will not become effective without certain consents or approvals, or other conduct, the contract will be illegal and any purported contract will be void and unenforceable
- EG Coastral Protection and Management Act 1995
- If there is an undischarged coastal protection notice or tidal works notice
- Seller must give buyer written advice not less than 14 days before
- If not, the agreement will be of NO EFFECT unless buyer ratifies
- S 57A(2) doesn't assist: not a consent or approval
- Act will render the agreement unenforceable
Deposit
-
Payment
- Cash, cheque, direct debit (ensure funds are clear by payment due date
- May be made by guarantee, bond (week 2)
- If payment made by cheque is disturbed = payment NOT made
- post dated, dishonoured
- instructions given to agent not to bank cheque
Failure to pay a deposit is a BREACH of an ESSENTIAL TERM --> ELECTION
- AFFIRM --> (payt to s/holder: s/perf) --> (payt to seller: action in debt)
- TERMINATE: accept the REPUDIATION, terminate and seek remedies
- Cl 2.2(3) --> can recover deposit as a LIQUIDATED DEBT (plus seek loss of bargain damages)