Important precedent for property settlement disputes

When selling property, the contract of sale typically dictates certain tasks that a vendor must undertake prior to settlement. In the recent matter of Namrood v Ebadeh-Ahvasi, the vendor was contractually required to remedy damage from works done to the property and comply with other outstanding council notices before settlement (‘completion’). The contract also contained a reference to the intended ‘completion date’ for settlement (35 days after the sale).

Ultimately, the vendor failed to complete the tasks by the intended settlement date but did complete them before the eventual settlement. As the contract contained the undefined terms of ‘completion’ and ‘completion date’, the vendor submitted that these ought to be read as one consistent term – meaning the intended settlement date – which the vendor had failed to meet. However, the judge concluded these terms were to be read separately, with ‘the completion date’ defined as 35 days after the sale (the intended settlement date) and ‘completion’ as the date on which the title was actually conveyed. Therefore, this decision effectively held that despite the vendor’s failure to fulfil his obligations before the ‘completion date’, this was permissible because it was only stipulated that it needed to be done before ‘completion’ and not a particular date.

In this matter, property purchaser Sarjon Youssif Namrood appealed the decision at the NSW Supreme Court of Appeals. During the appeal, Namrood argued that the vendor had an obligation to fulfil the conditions within a reasonable time and had failed to do so. However, the appellant judge found that the ‘reasonable time’ obligation arises when contracts lack explicit reference to a specificity of time. In contrast, the contract in this matter did specify a time – it was the time when ‘completion’ occurs. The judge also dismissed the argument that precedent had been set by other cases where ‘completion’ had been interpreted to mean the intended settlement date. The judge noted, “Decisions on the construction of the same words in different contracts are apt to be of little assistance.”

In dismissing the appeal, the court created the authority that contracts with a clear textual distinction between key terms ought to be read and defined as such. Simply put: the same word can have different definitions in a contract depending on the context.

WHAT PURCHASERS CAN DO TO PROTECT THEMSELVES

As demonstrated by this matter, it is very important that the terms of the contract are written as specifically as possible.

If the completion of a particular vendor’s obligation is of importance to the purchaser, then the purchaser can propose to impose upon the vendor a specific deadline. This should be written as a special condition in the contract of sale. However, take note that the vendor also has the right to refuse to accept such a condition or deadline.

The purchaser should also be cautious about the use of multiple words that appear to refer to the same matter when they are in fact separate matters (e.g., “completion” and “completion date”) and try as much as possible to keep the wording in their contract uniform.

Finally, the purchaser may wish to take note of the definitions of key terms in the contract. If no definition for a particular term is present (e.g., “completion”), the purchaser may again propose adding the definition for that term as a special condition (e.g., “completion meaning the date of settlement as written in this contract”), with the vendor again having the discretion to accept or refuse such a condition.

If you need advice or assistance with a dispute process, either as a vendor or purchaser, our expert commercial litigation team can help. Phone 131 LAW (529) to arrange a free 15-minute consultation.

The content of this article is intended to provide a general guide to the subject material that is discussed here and does not constitute legal advice.

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