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Which case won?

casea
The case for the purchaser
  • Prior to exchanging contracts for sale, I spoke with the vendors’ agent, telling him that I would pay the 5% deposit in two instalments, with the first instalment being paid on exchange and the second instalment being paid any time after four months. He replied that the vendors weren’t too concerned about the timing of the second instalment of the deposit, as long as they ended up receiving a 5% deposit.
  • The following day, the vendors’ agent rang me to say that he had spoken to the vendors, and that the vendors had accepted my offer. The agent told me to ask my solicitor to put the terms in writing.
  • On 4 April, my solicitor sent the vendors’ agent special condition 38 for inclusion in the contract, specifying that the second half of the deposit was payable “on the 4th month after the contract date”.
  • Under special condition 38, I was not required to pay the second instalment of the deposit until 31 August 2019. This was because the first month after the date of the contract was May, the second month after the date of the contract was June, the third month after the date of the contract was July and the fourth month after the date of the contract was August. “On” meant at any time during the fourth month of August.
  • Even if the court disagrees that I had until 31 August to pay, the fourth month after the contract date included 5 August 2019, and I had until the end of that day to make the payment. This is consistent with the agent’s email in July stating that payment was due “by or before 5 August”. The vendors were therefore not entitled to terminate the contract during the day of 5 August when they did.
  • If, as the vendor argues, the 4th month after the contract date ended on 4 August, the vendor was still not entitled to terminate the contract during the day of 5 August. The 4th of August was a Sunday, and the contract provided that if the time for something to be done is a day that is not a business day, then the time is extended to the following business day.
  • Since the vendors were not entitled to terminate the contract on 5 August when they purported to do so, the contract is still on foot. The court must order the vendors to complete the sale.
caseb
The case for the vendors
  • Under special condition 38, the purchaser only had until the end of the day on 4 August 2019 to pay the second instalment of the deposit.
  • Our real estate agent denies ever having said that we weren’t concerned about the timing of the second instalment of the deposit.
  • In any event, the interpretation of special condition 38 is determined by the definitions of “month” and “calendar month” in the Conveyancing Act and the Interpretation Act. Together, these acts define “month” to mean “calendar month” and “calendar month” to mean a period commencing at the beginning of a day of one of the 12 named months and ending immediately before the beginning of the corresponding day of the next named month. Therefore, the first month after the contract date commenced on 5 April 2019 and concluded on 4 May 2019, the second month after the contract date commenced on 5 May 2019 and concluded on 4 June 2019, the third month after the contract date commenced on 5 June 2019 and concluded on 4 July 2019 and the fourth month after the contract date commenced on 5 July 2019 and concluded on 4 August 2019.
  • These statutory definitions operate unless a contrary intention appears, and there was no contrary intention revealed by the contract.
  • Even though 4 August was a Sunday, the clause allowing for an extension of time when a date falls on a non-business day, was not applicable in these circumstances.
  • Since the purchaser failed to pay the second instalment of the deposit by the end of the day on 4 August as required, we were entitled to terminate the contract when we did and we are entitled to keep the deposit. The court must dismiss the purchaser’s claim.

So, which case won?

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Case B won. You were right!

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a71%
b29%

Expert commentary on the court's decision

“This case highlights the importance of ensuring that all contractual terms are clearly and unambiguously worded. Ultimately, the purchaser lost out on the house and forfeited his $241,500 deposit due to an awkwardly worded clause in the contract. If there is any doubt or uncertainty about a term of a contract, ensure that it is clarified in writing by all parties’ solicitors well before any critical date. If necessary, have the contract varied to resolve any doubt or uncertainty.”
Court finds that vendors validly terminated contract and can keep deposit

In Alexakis v Wan [2021] NSWSC 367, the NSW Supreme Court found that the purchaser, Mr Theo Alexakis, had breached the contract by not paying the second instalment of the deposit of $91,500 by 4 August 2019.  

The court ruled that the vendors, Mr Chi Wan and Ms Kwan Chan, had validly terminated the contract and were entitled to keep the whole of the $241,500 deposit.  

Mr Alexakis was also required the pay the vendors’ costs of the proceedings.  

Special condition 38 requires payment of second instalment no later than 4 August

The court accepted Mr Wan’s and Ms Chan’s argument that the statutory definitions of “month” and “calendar month” meant that the fourth month after the contract date started at the beginning of 5 July 2019 and finished at the end of 4 August 2019. 

The court also said that it was “unable to discern from the language of the contract, the commercial purposes of the contract, or the surrounding circumstances known to the parties, any intention to give ‘month’ a meaning different from the statutory definition”.  

The court did not think that reasonable business people in the position of the parties would have understood special condition 38 to provide that the second instalment of the deposit was to be paid during the month of August.  

Clause 21.5 of contract does not extend time for payment

Clause 21.5 of the contract provided that if the time for something to be done was a day that was not a business day, then the time was extended to the next business day, except in the case of clause 2. 

By clause 2.3, the time for payment of the second instalment of the deposit was essential. 

Clause 9 gave the vendors a right to terminate for breach of an essential term.  

The court interpreted these clauses to mean that clause 21.5 did not operate to extend the date to pay the second instalment of the deposit to 5 August 2019. Therefore, Mr Wan and Ms Chan were legally entitled to terminate the contract for breach of an essential term.  

Purchaser not entitled to equitable relief

Mr Alexakis argued that if special condition 38 was not construed to make payment due on 31 August, he should nevertheless be granted equitable relief in relation to the vendors’ exercise of their legal right to terminate.  

Mr Alexakis said that his belief that the deposit was due by 31 August was a mistake, based at least in part on the agent’s statement that the vendors were not too concerned about the timing of the second part of the deposit, as long as they ended up receiving a 5% deposit.  

The court rejected Mr Alexakis’s version of events, as well as his argument for equitable relief.  

The court noted that neither Mr Wan, nor Ms Chan, nor their agent had misled Mr Alexakis or caused him to misinterpret the terms of the contract.  

Rather, Mr Alexakis had “acted in a cavalier fashion” in response to the agent’s emails.  

The court also observed that Mr Alexakis had the funds available to make the payment by 4 August, and presumably could have accessed the internet from Athens to make the payment.  

Appeal of decision dismissed

In Alexakis v Wan [2021] NSWCA 172, Mr Alexakis appealed this decision on the basis that the primary judge had erred in concluding that clause 21.5 did not operate to extend the time for payment of the second instalment.  

The appeal was dismissed.  

Always ensure that contractual terms are unambiguous

This case highlights the importance of ensuring that all contractual terms are clearly and unambiguously worded.  

Ultimately, Mr Alexakis lost out on the house and forfeited his $241,500 deposit due to an awkwardly worded clause in the contract.  

It is also important to ensure that you understand all of the crucial terms of a contract and if in doubt, get legal advice. 

If there is any doubt or uncertainty about a term of a contract, ensure that it is clarified in writing by all parties’ solicitors, well before any relevant critical date. If necessary, have the contract varied to resolve any doubt or uncertainty. 

Avoid unnecessary travel during important property transactions

If possible, also avoid travelling overseas or going on holidays in the middle of an important property transaction.  

Remain in contact with your advisers and be in a position to receive advice and communications conveniently and quickly and to give instructions. 

NOTICE: This article is accurate as at the time of publication and does not constitute legal advice. Please see our legal notices page for more information. Information related to coronavirus can be outdated very quickly.
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