Buyer wants to cancel contract..can they?

Discussion in 'The Buying/Selling Process' started by Mamaof3, 22nd Jun, 2015.

  1. Mamaof3

    Mamaof3 Member

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    Hi SS's,

    Need some advice from my trust SSers :D.

    Buyer signed contract few months ago to buy one of our homes that is currently under construction?contract was subject to finance and subject to the sale of his property. All conditions satisfied so for all intents and purposes contract now unconditional and has been for a while now (obviously bank needs to do valuation before settling but not for another 3mths or so when we expect to finish the homes).

    Buyer calls Agent last week to say he?s been made redundant and wants out of the contract. Being the fair Vendors that we are, we consider letting him out of the contract and refunding his deposit on the proviso he gives us a copy of a letter from his Employer to confirm his loss of employment. Buyer kicks up a fuss when asked for this which only leads us to suspect the redundancy excuse is not legit. Is there any way to legally enforce that they buyer shows evidence of the employment situation to keep the contract in place?

    Agent says all he has to do is go to his Broker/Bank, tell them he's lost his job and they'll rescind the finance approval but it just doesn't seem right that he can just be let out of the contract this easily...that means anyone can just tell their bank they've lost their job without providing any evidence to support this claim and be let out of the contract and full refund of the deposit??

    I have confirmed with the bank in question and they said they wouldn't ask for any evidence so i'm really after another strategy to put into action here.

    Look forward to your suggestions!



    Has anyone got any advice/suggestions on how we can insist
     
  2. Gockie

    Gockie Life loving Big 4 Banker

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    Basically you still have the contract but if the buyer can just pull out, that would be unfair on you. Ask your solicitor but I guess as compensation you would get to keep the deposit (note, i'm not a legal person, so its only a guess on my part).
     
  3. Mamaof3

    Mamaof3 Member

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    Well thats what i was thinking but our RE Agent seems to think otherwise and reckons we'll have to refund the deposit. Hmmmm...
     
  4. S.T

    S.T Member

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    I wouldn't be taking legal advice from your real estate agent. Speak with your solicitor.
     
  5. Scott No Mates

    Scott No Mates ...and people wonder why?

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    Does the agent still expect to see his commission for the first sale? Yet also recommend relisting? Talk about a conflict of interest.
     
  6. Terry_w

    Terry_w Member

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    Exactly.

    Finance clauses are not open ended (usually) so if the finance was approved before a certain date the purchase may be in an unconditional binding contract.
     
  7. Peter_Tersteeg

    Peter_Tersteeg Finance broker/strategist

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    Solicitor is the best place to start.

    Did he obtain unconditional approval? If the contract has gone unconditional the buyer would have a difficult time justifying their finance is no longer approved. The could call the bank, have it declined, but as you suggest when it came to a court challenge, it would be fairly easy to show that they've attempted to deliberately sabotage their finance.
     
  8. Perp

    Perp Member

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    If they had advised that the contract finance condition was satisfied, the contract had become unconditional and the bank revoking their finance would be the buyer's problem, not yours.

    My only reservation is that you mention an on-completion valuation. Provided they advised "finance satisfied subject to valuation", then you still have a binding contract dependent only on that valuation, and I assume it'll "value up".

    If, however, due to the valuation being outstanding, the whole finance clause - not just the valuation aspect - was left as an unsatisfied condition, then they may have a "get out of jail free" card. It really depends on exactly what they notified with regards to satisfaction of the finance condition, and you should obviously speak to your lawyer.
    No, because his continuing employment was irrelevant to your contract. I'd stay right out of that element and stick to what is in the contract.

    If you want to release him out of the goodness of your heart, then do that, but asking for evidence may jeopardise your legal position.

    On the one hand, if he's able to provide it, it may be seen that you'd implied that you'd release him once it was provided.

    If he's not able to provide it, then you're back to your contractual options in any case.

    There are no positives to asking for this evidence, that I can see.

    Not a lawyer, get advice, yada yada yada. :)
     
  9. TMNT

    TMNT Member

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    ^^^ why woukd asking for evidence jeorpardise your position?
     
  10. Perp

    Perp Member

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    I am not a lawyer, and it almost certainly won't. But you have to be careful not to give rise to what's called an estoppel, which basically means that you "can't go back on your word to somebody else's detriment". (I hope Terry excuses my lay interpretation.)

    The vendor asks for evidence of termination. Unless you're actually prepared to commit to releasing him if he is terminated, that's a bad idea. At first, he refuses to provide it - it may not be because he hasn't got it, but because he's insulted at being asked. Or perhaps he was told verbally and is waiting on something in writing from his employer.

    Buyer realises he has to get out, and asks his employer for proof. A month later, knowing he'll get proof of his termination and be released, he commits to buying a cheaper property, that he can afford based on the part-time work he's secured. Two months later, he produces evidence that he was indeed terminated.

    Vendor might be compelled to accept this as a valid release from the contract because they'd earlier implied "we'll release you if you prove you were terminated". Vendor may be happy with this, but vendor's own circumstances might have changed in the meanwhile, and they may not be allowed to release him (e.g. by their own financier).

    They may have inadvertently given rise to an estoppel, which means they'd be bound to their (implied) promise of "if you provide evidence that you lost your job, we'll release you from the contract".

    It's not likely, but it's just not wise to suggest "if you do A, I'll do B" when it changes the nature of the contract, unless you're willing for it to form part of the contract and be bound by it.

    But I'm in the phase of studying law where you study appellate law and see all the things that go wrong, and I'm probably being super duper conservative. :)

    I defer to Terry and other legal-type folks.
     
  11. Mamaof3

    Mamaof3 Member

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    Thanks for your feedback. Makes sense.

    We'd just be happy to let him cancel it and retain his deposit....we don't want to hold people to buying something they don't want. If we retain his deposit that'll well and truly pay for the expenses incurred on that property to date (conveyancing, marketing etc) but we certainly don't want to create the impression that you can sign a contract with us and cancel it with full refund of deposit because we have 13 more to sell at this site and aint going to start a precedence!
     
  12. marg4000

    marg4000 Member

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    While you are at it, have a good look at your agreement with the RE agent. Sometimes they are entitled to commission even if the sale does not go through.
    Marg
     
  13. Mamaof3

    Mamaof3 Member

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    All good from the agency perspective, no commissions payable. Thanks for the reminder :)
     
  14. TMNT

    TMNT Member

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    ahh so its a encouraging or implying doubt type of scenario.

    eg asking a buyer who has submitted a uncodntional contract if they are going to do a pest inspection when you know there is problem with the property

    I would have thought in the name of law, feelings, implications, impressions mean squat!
     
  15. Perp

    Perp Member

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    It's about assessing what your contractual intentions are based on your conduct. Feelings and so on do generally mean squat, but it's relevant to how a reasonable person interprets your behaviour.

    If you ask to be released from a contract, and the other party asks for your letter of termination, what would a reasonable person infer from that conduct? I'd infer that they're going to release me if I provide the letter.

    That may - only in limited circumstances - turn into a legally-binding promise that you're prevented from retracting under the laws of estoppel, depending on subsequent conduct and surrounding circumstances, etc.
     
  16. TMNT

    TMNT Member

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    thats interesting, but how much weight does it have?

    in court

    I would like to recind my offer because I couldnt get finance, and the owners asked me for a letter but they denied my request

    vs

    I would like to recind my offer because I couldnt get finance, and I gave them the letter, but they denied my requets

    from my perspective (a dumb person) personally, I think whats law is the law, doesnt matter if the owner even verbally says ok I allow you to rescind but changes his mind in writing 10 mins later
     
  17. Perp

    Perp Member

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    Neither of those scenarios would be enough to give rise to an estoppel. This situation probably lacks the element of inducement that gives rise to unconscionability, e.g. it'd be different if the vendor induced the buyer to believe they'd be released from the subject contract, in order for the vendor to sell them the second cheaper property, and then tried to sue for default on the first contract.

    It really is hugely unlikely Mamaof3 went anywhere near creating an estoppel, I'm just making the point that you have to be careful in what you say.

    A good summary of the principles of estoppel can be found here: http://www.australiancontractlaw.com/cases/walton.html
    Once the vendor's verbally accepted the buyer's request to terminate by mutual agreement, it's a done deal - they can't change their mind in writing later. The contract discharges at that moment. Written contracts can only be varied in writing, but can be terminated orally. < Edit: this is at common law; there may be statutory requirements that termination is in writing, I'm unsure. In any case, it's obviously good practice to have it in writing.
     
  18. Scott No Mates

    Scott No Mates ...and people wonder why?

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    AFAIK all dealings relating to real property must be in writing (though a residential or retail lease may be verbally agreed the relevant Acts apply).
     
  19. Perp

    Perp Member

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    Unless the statutes have been modified in the 12 months since my contracts textbook was published, contracts for sale (and leases, and guarantees) must be evidenced in writing, but statute is silent as to how they may be varied and terminated.

    As such, it is determined by the common law position determined in Tallerman & Co v Nathan's Merchandise (Vic) (1957) 98 CLR 93, which is authority for the proposition that a variation is actually an agreement to terminate the first contract and substitute a new contract. So unless that variation is evidenced in writing, where the contract is for a disposition in land (or a guarantee), the first half can be achieved, but the second half can't (due to statutory requirements).

    But contracts that need to be evidenced in writing can still be terminated orally. Obviously there's still an evidentiary burden to demonstrate the oral termination, such that it's obviously prudent to have writing, but if the other party says "Yes I said I was releasing them but I didn't think it had any effect until I signed something!", the court would tell them that they're mistaken and the contract had been discharged.

    You can also repudiate such a contract by conduct, as happened in Foran v Wight (1989) 168 CLR 385.
     
  20. Terry_w

    Terry_w Member

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    Legally yes, but not under the laws of equity.