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Be aware of unfair clauses in contracts
for the purchase of real estate

Purchasers must beware of unfair clauses in contracts for the purchase of real estate. This is especially important when you are under the pressure of purchasing at auctions.

Berrigan Doube Lawyers recently reviewed a contract for the purchase of an apartment valued at $238,500.00. The contract contained the following clause:

“7.       A purchaser who breaches the contract must pay to the other party on demand –

  1. the full amount payable under the contract, whether due to be paid or not;
  2. compensation for any reasonably foreseeable loss to the other party resulting from the breach; and
  3. any interest due under this contract as a result of the breach

The Vendor shall not be liable for any damages costs or interest whatsoever or howsoever arising.”

If the purchaser had accepted the above terms and subsequently breached the contract, they would have to pay the full purchase price plus any reasonably foreseeable loss caused by the breach. If the vendor breached the contract, they would not be liable for any damages, costs or interest suffered by the purchaser as a result of the breach.

We advised our client that this was an unfair clause and must be amended as follows:

“7.       A party who breaches this contract must pay to the other party on demand –

  1. compensation for any reasonably foreseeable loss to the other party resulting from the breach; and
  2. any interest due under this contract as a result of the breach.”

The purchase then proceeded on this basis and the conveyance is now on foot.

If you have any inquiries concerning contracts for the sale of real estate, please do not hesitate to contact us for more information.