Contracts of sale usually contain a general condition stating that the vendor must give the purchaser a 14-day default notice in the event of termination. However, a recent ruling in VS Property and Holding Pty Ltd v Zurzolo [2024] VSCA 199 has introduced an override of this condition.
The case involved a failure by the purchaser to settle on the original due date and the entry by the parties into a deed that provided for an extension of the settlement date, with a specific term that failure to settle by the extended settlement date would result in the immediate termination of the contract. The purchaser failed to settle on the extended settlement date, and the vendors argued that the contract was terminated. The purchaser applied for an order for specific performance of the contract because the vendors had breached general condition 27 by failing to provide a 14-day default notice to the purchaser. The trial judge dismissed the claim. The Court of Appeal had to determine whether a 14-day notice was still required to terminate the contract and whether an order for specific performance could be made in the circumstances.
The deed the parties entered contained a condition that if the purchaser failed to settle on the extended settlement date, the contract would be “immediately at an end” without needing 14-day notice. This clause was intended to override general condition 27 of the contract, which required a 14-day default notice before exercising termination rights. The Court held that clause 5 of the deed was not subject to general condition 27 and provided for immediate termination upon default without needing a 14-day notice, thus overriding general condition 27.
In summary, the Court concluded that a 14-day notice was not required to terminate the contract under the specific circumstances outlined in the deed, and an order for specific performance of the contract could not be made. The purchaser negotiated an extension of time to complete the contract. In exchange, the vendors made it clear that there would be no further extensions and that a failure to complete by the extended due date would result in the immediate termination of the contract.
Considering this development, it is essential to review all special conditions, including amendments to the general condition, when signing a contract of sale.
For assistance with your default notice, please contact us at property@ballaratlawyers.com.au or on 5303 0281.
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