Purchaser loses their $241k deposit because of confusion over the definition of ‘month’

04 MAY 2021

 

On 4 April 2019, the vendor entered into a Contract to sell their residential property to the purchaser for $4,830,000.00 (Purchase Price). In accordance with the Contract, completion of the Contract was scheduled to occur in January 2020.

As per special condition 38 of the Contract, the purchaser was required to pay a deposit of $241,500.00 being five per cent (5%) of the Purchase Price in two (2) instalments. 

The purchaser paid the first instalment of $150,000.00 on exchange of the Contracts and the second instalment of $91,500.00 was payable “on the 4th month after the Contract date [of 4 April 2019]”. In accordance with clause 2 of the printed terms of the Contract, time for payment of the deposit is essential.

The purchaser paid the second instalment of the deposit on 7 August 2019 and was under the impression that they were entitled to pay the second instalment at any time throughout the month of August. This was despite the vendor’s agent sending multiple emails to the purchaser asserting to the fact that the second instalment was due and payable by 4 August 2019.

On 5 August 2019, the vendor proceeded to terminate the Contract on the basis that the purchaser failed to pay the second instalment on time. The vendor relied on section 181(1)(d) of the Conveyancing Act 1919, which provides that unless a contrary intention appears, a “month” means “calendar month”. In accordance with section 21 of the Interpretation Act 1987 “calendar month” means:

“a period commencing at the beginning of a day of one of the 12 named months and ending:

  1. immediately before the beginning of the corresponding day of the next named month; or
  2. if there is no such corresponding day, at the end of the next named month.”

The purchaser argued that the vendor was not entitled to terminate because payment of the second instalment was not late and the Contract remained on foot. Further, the purchaser argued that the word “on” in special condition 38 meant that the second instalment could be paid at any time during the month of August.

The NSW Supreme Court held that the vendors were entitled to terminate the Contract. The Court determined that the vendor’s interpretation of the awkwardly worded clause was in fact the correct interpretation. As a consequence of the Courts decision, the vendors were entitled to keep the $241,500.00 deposit plus interest. 

The Court further noted that despite the purchaser’s argument, it was not unconscientious of the vendors to rely upon their termination and declined to grant any equitable relief to the purchaser in the circumstances.  

If you would like advice or assistance in relation to the above or any other Property matters, please contact our accredited property law specialist and Partner Ben Wong on bwong@marsdens.net.au or call (02) 4626 5077.

The contents of this publication are for reference purposes only. This publication does not constitute legal advice and should not be relied upon as legal advice. Specific legal advice should always be sought separately before taking any action based on this publication.

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