You have found the house of your dreams, signed the Contract, opened the champagne, but hang on, you have changed your mind. You enquire from your lawyer, “how can I get out of the Contract?”
A Signed Contract is Binding
A Contract 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 included 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, there must be a genuine reason, and the cancellation must fall within the terms of the Contract.
The situation is similar when dealing with a finance condition. A finance condition 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 evidence showing the efforts made by the purchaser in attempting to fulfil this condition.
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 the Building Report reveals a fault, you are not willing to accept. The second may contain the complication that will allow the vendor the opportunity to fix any problems found prior to settlement. If the vendor agrees to fix the issues raised, then you may not be able to cancel the Contract under the Building Report condition. However, if the vendor does not agree to fix the problems, there is a possibility you could 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 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
Remember, before you sign a Contract, you have the opportunity to discuss it with your lawyer first. Your lawyer can review it and advise you on your obligations.
At KW Legal we are not going to talk you out of the house of your dreams. However, we will ensure that, with a well worded Contract, your rights are protected as well as they can be.
Note: Katherine’s Blog is not a substitute for legal advice, please contact your lawyer.