You have found the house of your dreams, signed the Contract, opened the champagne, but hang on, you have changed your mind. You contact your lawyer, “how can I get out of the Contract?”
A Signed Contract is Binding
When you sign a Contract, it becomes binding on all parties from the time it is signed and dated. If you change your mind, you cannot necessarily get out of the Contract. You have an obligation to try and satisfy the conditions you have requested in the Contract.
Purpose of General Terms and Further Terms
The purpose of the general terms and further terms of the Contract allow you as purchaser time to check that the property is all it is made out to be. For example, the LIM Report, Building Report, Title condition, all relate to the building and land and should alert you to any issues with the property. You are under an obligation to obtain the reports and review them. If you wish to cancel the Contract as a result of any of these conditions, then there must be a good genuine reason, and the cancellation must fall within the terms of the Contract.
Similarly, with a finance condition. A finance condition, for example, puts an obligation on the purchaser to try and obtain finance, and yes, that means contacting more than one bank if necessary. If a purchaser cancels because of finance, then the seller can ask for proof of the efforts made by the purchaser to try and obtain finance.
How do I cancel a Contract
Cancellation will depend on the term or condition you are cancelling on, and where it sits in the Contract. For example, if you are not satisfied with the Building Report, then cancellation could depend on one of two conditions. The first would be a further term of sale allowing you to cancel if you decide there is anything in the Building Report that you are not happy with. The second may be a bit more complicated and require you to allow the vendor the opportunity to fix any problems you have found in the Building Report prior to settlement. If the vendor agrees to fix the problems then you may not be able to cancel on the Building Report. However, if the vendor does not agree to fix the problems, then you may be able to cancel.
Another example would be a due diligence clause which states that you have the right to cancel if you are not happy with any matter at all after completing your due diligence on the property. This is a good clause to cancel on, it is not usually included in standard Contracts, but when it is, purchasers can make good use of it.
If your purchase is subject to the sale of your property, then you could cancel once the time limit runs out for you to find a seller. However, once again, you have an obligation to genuinely market your property for sale.
Therefore
Before you sign a Contract, you do have the opportunity to discuss it with your lawyer first. You lawyer can then review it and advise you on your obligations.
We at KW Legal are not going to talk you out of the house of your dreams, but we will help you to ensure, with a well worded Contract, that your rights under the Contract are better protected.
Note: Katherine’s Blog is not a substitute for legal advice, please contact your lawyer.