While it’s more often that a Purchaser may default on a contract, there are certainly occasions where the Vendor may default on a contract instead. Here are the most common scenarios where a Vendor may find themselves breaching the conditions of the Contract of Sale.
What is a default on a contract?
A party is deemed to be in default when they fail to perform their contractual obligations once a Contract of Sale is signed.
Examples of most common default scenarios
Failing to disclose information in the contract
Vendors are obligated to disclose accurate and relevant information to all buyers, especially if the property has had a history of sensitive issues. If the Vendor withholds material information about the property from the Contract of Sale, they will risk the purchaser terminating from the contract.
Failing to support the purchaser
Vendors must ensure they assist Purchasers to successfully complete their obligations.
For example, the Vendor must provide a GST Withholding Notice and an ATO Clearance Certificate to the purchaser to facilitate a smooth settlement.
Without provision of these documents to the purchaser, both parties may risk facing fines.
Failing to perform with the Purchaser’s conditions
The Purchaser may add their own special conditions in the contract, which is negotiated with the Vendor before signing the contract. Usually, these conditions are to the benefit of the Purchaser.
For instance, a Special Condition may require the Vendor to arrange a professional clean of the property before settlement. If the Vendor fails to do so, they may need to reimburse the Purchaser the cost for them to arrange the professional clean themselves post-settlement.
Failing to fulfil the conditions of the contract
Vendors are required to perform several obligations under a Contract of Sale.
For example, the Vendor must deliver the property in the same condition as it was on the day of sale. If there are any damages or changes to the condition before or at the settlement day, the Purchaser may claim compensation or rectification from the Vendor.
What is a Default Notice? What should you do if you receive one?
Failing to comply with obligations listed in the contract may lead to a default notice being served to the Vendor by the Purchaser.
A Default Notice is a notice that details the conditions of the breach, the effects of the default, and the remedial period to resolve the event of default.
Once the Vendor is issued with a notice, they must do everything they can to rectify the default within the timeframe presented. Failure to remedy the default may lead to additional penalty interests, give rise to claim for compensation, and termination of the contract.
W Legal Group can help!
At W Legal Group, we ensure our clients are fully aware of the contractual terms and assist them in meeting their obligations. Contact us at hello@wlegalgroup.com.au or 03 9590 6180 to speak with our team!
