From Contract to Court: A $1.1 Million Lesson in Property Transactions
A recent court decision highlights the serious financial consequences of failing to settle a property purchase once a sale and purchase agreement becomes unconditional. In this case, a purchaser was ordered to pay approximately $1.1 million in damages after defaulting on settlement.
How Sale and Purchase Agreements Work
Most agreements include conditions such as finance or due diligence. Once all the conditions are satisfied or waived, the contract generally becomes legally binding. From that point, both parties are required to complete settlement in accordance with the agreed terms.
Failure to do so without lawful justification will usually amount to a breach of contract.
What Happened in This Case
The purchaser did not settle an unconditional agreement. The vendor resold the property and sought compensation for the loss suffered. The court awarded damages reflecting the difference between the original purchase price and the resold purchase price, along with interest and associated costs, totaling around $1.1 million.
Key Points
- Agreements Are Binding - Once unconditional, a sale and purchase agreement is enforceable, not an expression of intent.
- Liability Can Exceed the Deposit - Damages may include resale losses, interest, and reasonable enforcement costs, not just forfeiture of the deposit.
- Mitigation Still Applies - Vendors must take reasonable steps to reduce their loss, but any remaining loss may still be recoverable from the purchaser.
- Conditions Are Critical - Finance and due diligence clauses provide key exit rights. Once confirmed or waived, those protections fall away.
Final Thoughts
This decision is a clear reminder that sale and purchase agreements are legally binding once unconditional. Purchasers who fail to settle may face liability well beyond the deposit, including resale losses, interest, and costs. Understanding when an agreement becomes unconditional and the consequences that follow is critical.
Our property team advises purchasers and vendors on managing contractual risk, negotiating conditions, and responding to settlement issues. If you are entering into a property transaction or facing uncertainty about your ability to settle, early legal advice can help protect your position and limit potential exposure.
Disclaimer
This article provides general information only and does not constitute legal advice. You should seek legal advice specific to your circumstances before acting on this information.
