In May 2010 we reported on the Court of Appeal decision in Mana v Fleming which restated the well understood legal principle that “a person who has the benefit of a condition in a contract must ‘do all things reasonably necessary’ to fulfil the conditions”.

It seems that some people just do not learn!

In the recent case Kerr v Lee the sellers (the plaintiffs in this case) obtained summary judgment against the purchasers (the defendants) for the sum of $100,000.00 (together with interest) being the unpaid deposit under an agreement for the sale and purchase of a residential property, which became payable when the contract became unconditional.

The basic facts of the case were as follows:

  • The vendors agreed to sell their property to the defendants.
  • The sale contract was conditional upon the purchasers selling their property by a certain date.
  • The purchasers did take some steps to obtain a sale of their property.

    They took advice as to its value.  They completed recommended renovation works to enhance the chances of a sale.  They entered into a sale contract with a third party, which also was conditional on the third party obtaining a sale of his property (this contract was ultimately cancelled).

    However, critically, they did not list the property with an agent, nor did they advertise it or market it in any other way (there was no advertising in newspapers, by signs on the property, or through the internet).

The High Court took the view that the purchasers would be in breach of clause 8.7(2) of the sale agreement (which imposed a duty on them to do all things that may be reasonably necessary to fulfil the condition) if the sellers could prove that the purchasers did not take steps that were reasonably necessary, even if they had taken other steps that were necessary.  The Court was of the view that generally, both listing with an agent and appropriate advertising and marketing are reasonably necessary steps to obtain a sale of the property.  Because the purchasers failed to do so, they failed in their defence and summary judgement was awarded to the sellers.

The Court did note it as being significant that the purchasers did not take legal advice as to the steps that they should take to satisfy their obligations under clause 8.7(2).

This case highlights the dangers in not taking legal advice in respect to one’s obligations under a “straight forward sale and purchase agreement”.  More specifically, it is a timely reminder that a condition for the benefit to a purchaser in a property agreement should not be regarded as an “easy out” of the contract.   An expensive lesson!

Purchasers must be aware of what constitutes “all things reasonably necessary”.  If you are unsure, we have an excellent property law team at Willis Legal who can help you!

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