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In brief - Purchaser's contract breach does not entitle vendor to terminate

Where a term negotiated for inclusion in a contract is essential so that breach of or non-compliance with the essential term entitles you to withdraw from the transaction, it is clear from the decision of Fuentes v Bondi Beachside Pty Ltd [2016] NSWSC 531 that the contract must specifically state this.

Order for specific performance of purchase contract sought by purchaser

This case related to a 2012 off-the-plan sale of a unit at Bondi Beach.

One of the provisions of the contract precluded the purchaser assigning, novating or otherwise disposing of its interest in the sale contract before completion without the consent of the vendor.

The purchaser, prior to completion of the units, entered into a contract for the on-sale of the unit to a third party at a higher price. The purchaser did not obtain the consent of the vendor to the on-sale and the vendor purported to terminate the contract.

The purchaser sought specific performance of his purchase contract.

Contract provisions regarding disposal of property found not to be essential

The Court held that the use of the wording in the contract was sufficiently broad to cover an on sale of the property. The Court held that the reference to "dispose" related to any dealing with the interest of the purchaser in the initial contract, and the on-sale was in fact a disposal.

However, the Court held that the provisions of the clause were not essential and therefore the vendor was not entitled to terminate the contract due to the purchaser not complying with this contractual provision.

Vendor awarded nominal damages but must pay cost of proceedings

The Court was influenced by the fact that the vendor's main concern under the contract was to receive the agreed purchase price for the unit and the on-sale did not diminish the vendor's rights in this regard.

Further, the Court found that the purchaser did not repudiate the initial contract by entering into the on-sale because the purchaser was prepared to comply with all of its obligations with regards to the purchase of the property under his purchase contract.

The breach of the condition only entitled the vendor to nominal damages. However, the vendor had to pay the purchaser's costs of bringing the proceedings for specific performance as an order for specific performance was made.

This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2019.

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