For many people, the purchase of a residential property represents the biggest purchase of their lives. Although such transactions are reasonably straight
forward, sometimes things can go wrong and can become very complicated.
Recently the NSW Court of Appeal considered whether a purchaser of an "off the plan" property was entitled to terminate the contract for the purchase of that property.The case highlights the consequences of decisions made by parties in circumstances where a contract appears to have been breached.
When Nicole (wrongly) indicated that she had terminated the contract and made arrangements for the deposit to be returned, she demonstrated that she no
longer intended to be bound by the contract.
The legal concept when that occurs is called repudiation. When a party repudiates a contract, they expose themselves to a claim for damages.
No – it’s not as simple as that.
You will recall that after Nicole’s repudiation, the Scott’s commenced the proceedings. Then Nicole validly terminated the contract. The timing of these matters is important.
When the parties went to Court, the Court had to consider whether the Scott’s were entitled to claim damages. The Court found that they were not, as their
entitlement to claim damages could have only arisen if the contract was terminated due to Nicole’s repudiation (this is a legal principle set out in
many, many other decisions).
The Scott’s downfall was that, rather than accepting Nicole’s repudiation, which would have entitled them to terminate the contract and seek damages, they elected to commence the proceedings seeking an order that Nicole perform the contract.
In legal terms, this means the Scott’s affirmed the contract. Had they elected to accept Nicole's repudiation and terminate the contract instead, they would have had a claim against Nicole for damages.
When Nicole subsequently terminated the contract, the Scott’s lost their right to claim damages from her.
The Supreme Court dismissed the Scott’s claim. The Scott’s had to pay Nicole’s costs.
The Scott’s appealed the decision. The Court of Appeal agreed with the original decision, dismissed the appeal and ordered the Scott’s to pay Nicole’s costs (again).
This matter demonstrates caution (and expert advice) is required when a party seeks to exercise a right to rescind or terminate a contract or elects to take a certain course of action in response to another parties conduct.
This case could have resulted in a poor outcome for both parties; it clearly ended badly for the Scott’s but had they elected to terminate the contract due to Nicole's repudiation, Nicole would have faced a damages claim.
If you have any questions or would like to discuss this matter further, please contact Chris Kintis on 02 8235 1251.
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