Delays in exercising a right to cancel a contract can be dangerous.

February 13, 2012

in Property

A recent decision of the High Court has highlighted the need for parties to agreements for sale and purchase of land to take care when making decisions on whether or not to elect to confirm a conditional contract.

In the case in question the purchaser had a conditional contract to purchase land dependant upon the vendor complying with certain obligations including obtaining subdivision of the land.

The date for the vendor to comply with this obligation had passed but the purchaser had taken no steps to cancel the contract.  Some 15 months passed before the purchaser then took the step of cancelling the contact.  The vendor attempted to sue the purchaser for specific performance requiring the purchaser to complete the contract.

Although in this case the High Court decided in favour of the purchaser the Court did make it clear that a party that has the right to avoid under a conditional contract is put to their election immediately following the due date for compliance.  Accordingly their conduct after that date could in certain circumstances amount to an election to affirm the contract and thereby bind the party to the contract without any express confirmation of the contract by that party.

The courts are generally cautious in finding an election to affirm a contract without clear conduct by the party with the right to avoid.  If however there is conduct or actions which are consistent with an election to keep the agreement on foot and not to exercise a right to terminate then a party to a contract may find themselves bound to a contract they did not believe they were obliged to complete.

We always recommend that our client’s obtain legal advice when dealing with any contracts concerning the sale and purchase of land.  We are experts in this area of law and are able to provide comprehensive advice to you in respect to any transactions involving the sale or purchase of land.

If you require any advice or further information on the matters dealt with in this publication please contact the lawyer at Farry and Co. who normally advises you, or alternatively contact:

Paul Farry
09 379 0055 or 03 477 8870

The information contained in this publication is intended as a guide only.  It does not constitute legal advice and should not be relied upon as such.  Professional advice should be sought before applying any of the information to particular circumstances.  While every reasonable care has been taken in the preparation of this publication, Farry and Co. does not accept liability for any errors it may contain.

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