A contract of sale is legally binding and enforceable and it should be thoroughly reviewed by the purchaser before it is signed. It is the primary document setting out the terms and conditions of the transaction. Before signing, both vendor and purchaser should read and understand each clause of the contract or engage a solicitor or conveyancer to do this on their behalf. They should also make the necessary due-diligence enquiries (inspections and searches) before signing the contract.
Many of the contracts used in property transactions are standard forms. They are prepared by an industry group or organisations.
Some examples include:
However, it is not compulsory for a purchaser to enter into a standard contract. Parties are free to draft contracts specific to a transaction or even amend standard contracts to suit their needs. The cost of drafting a contract specific to a transaction and the extent of complexity of the transaction itself are the key issues that must be taken into account when deciding whether or not to draft a transaction-specific contract.
- Standard-form contracts do allow for the insertion of special conditions. The following are examples of commonly used special conditions:
- Subject to getting finance approval;
- Subject to the outcome of a building/conveyancing report;
- Subject to the purchaser selling their home;
- Permitting early access to the property to allow for development planning;
- Making a third-party signatory liable for a purchaser’s obligations; and
- Subject to the consent of a third party, such as the Foreign Investment Review Board, or board of directors approval.
Compliance with special conditions
There is an obligation that requires parties to take all reasonable steps to comply with a special condition and non-compliance will void a contract. In the event of substantial compliance, courts will not permit a party to avoid a contract altogether.
When a purchaser does not make reasonable efforts to satisfy a special condition a vendor is usually entitled to keep the deposit.
To avoid such situations it is advisable for a vendor to insert words such as ‘the purchaser must use their best endeavours’ to satisfy a special condition.