Buyers' late notification regarding building and pest inspection leads to seller's valid termination of contract

24 September 2014
by Rhett Oliver, Angela Spear

In brief - Timeframes specified in property sale contracts must be strictly observed

The seller of a residential property validly terminated the contract after the buyers failed to notify the seller in time that they were satisfied with the building and pest inspections they had performed, according to a recent decision of the Supreme Court of Queensland.

Contract for the sale of residential property

In the case of Simpson & Ors v Jackson [2014] QSC 191, the buyers, Ms Simpson and others, had entered into a contract with the seller, Mr Jackson, for the sale of a residential property at Newport, north of Brisbane, on 23 November 2013.

The contract was subject to and conditional upon the buyers obtaining satisfactory building and pest inspections by 9 December 2013 and notifying the seller of the outcome of these inspections by the same date.

Buyers' notice not received on time by seller's lawyer

At 4.57pm on the inspection date, the buyers' lawyer sent a facsimile letter to the real estate agent (but not to the seller's lawyer) noted on the contract, advising that the buyers were satisfied with the building and pest inspections they had performed ("buyers' notice").

Seller terminates contract and buyer places caveat over title to property

Having not received the buyers' notice, the seller's lawyer sent a facsimile letter ("seller's termination notice") to the buyers' lawyer at 5.06pm on the inspection date, terminating the contract due to the buyers' failure to notify the seller of the outcome of the building and pest inspection condition by 5pm on the inspection date.

After receiving the seller's termination notice, the buyers' lawyer sent the seller's lawyer a copy of the buyers' notice. The buyers subsequently placed a caveat over the title to the property and sought an order for specific performance of the contract.

Satisfaction, termination or waiver of building and pest inspection condition

The contract required the buyers to notify the seller either that a satisfactory inspector's report had not been obtained by 5pm on the inspection date and the buyers were terminating the contract, or that the building and pest inspection condition had been either satisfied or waived by the buyers.

If the buyers failed to give the above notice to the seller, the seller had the right to terminate the contract. Terminating the contract was the seller's only remedy for the buyers' failure to give notice, subject to the buyers' continuing right to give written notice to the seller of satisfaction, termination or waiver of the building and pest inspection condition up until the time when the seller terminated the contract.

Clause 10.4(4) of the contract provided that notices sent by facsimile will be treated as given when the sender obtains a clear transmission report. Clause 10.4(5) provided that notices given after 5pm will be treated as given on the next business day.

Buyers argue that buyers' notice and seller's termination notice received simultaneously

The buyers argued that because both the buyers' notice and the seller's termination notice were received after 5pm on the inspection date, both notices were deemed to have been sent and received simultaneously on the next business day.

In addition, the buyers argued that where the notices were deemed to have been sent and received simultaneously, it could not be held that the seller's termination notice was given ahead of the buyers' notice.

Seller argues that seller's termination notice received earlier and contract validly terminated

The seller argued that the seller's termination notice was given prior to the seller's lawyer receiving a copy of the buyers' notice, regardless of whether both notices were deemed to have been given on the next business day after the inspection date.

The seller argued that he had therefore validly terminated the contract.

Buyer ordered to remove caveat and denied order for specific performance of contract

The court strongly rejected the buyers' argument and held that the seller had validly terminated the contract.

The court noted that the concept of each of the buyers' notice and the seller's termination notice being given simultaneously (as argued by the buyer) would leave the parties guessing as to which notice was effective. The better course was to treat the buyer's notice and the seller's termination notice as being given on the next business day, but in the order actually sent.

The buyer was ordered to remove the caveat it had registered over the property and was denied an order for specific performance of the contract.