In all Contracts, there are General Conditions that may seem hard to understand. Below, we will summarise each General Condition to help you better understand Contracts.
In summary, this condition acknowledges and permits the use of electronic signatures in the contract, emphasizing the parties' consent and agreement to its validity. It also allows for the exchange of electronic counterparts while still recognizing the option of providing physical copies when requested.
This condition stipulates that any individual signatory representing a proprietary limited company purchaser becomes personally liable for the purchaser's obligations in the event of a default by the company. In essence, the signatory assumes personal responsibility and may be held accountable as if they were the purchaser themselves in case the company fails to meet its obligations under the contract.
This condition allows the vendor to request one or more directors of a proprietary limited company purchaser to provide guarantees for the purchaser's performance under the contract. Essentially, if the purchaser is a proprietary limited company, the vendor has the option to seek personal guarantees from the company's directors to ensure the contract's fulfilment.
This condition grants the purchaser the right to nominate a substitute or an additional person to receive the property's transfer, but it emphasises that the originally named purchaser remains personally liable for fulfilling all contractual obligations, even if a substitution is made. In other words, while the nominated recipient may change, the primary purchaser retains responsibility for fulfilling the contract's terms.
This condition states the purchaser is buying the property with specific conditions, including encumbrances, reservations, and lease agreements mentioned in the contract. The purchaser agrees to indemnify (compensate and protect) the vendor for any obligations that the vendor must fulfil under lease or tenancy agreements after the property's settlement. This means the purchaser takes on responsibility for the vendor's post-settlement obligations under these agreements.
The vendor guarantees that the contract's general conditions match those specified in the published documents by the Law Institute of Victoria and the Real Estate Institute of Victoria.
The warranties provided in conditions 6.3 and 6.4 replace the purchaser's right to make requisitions and inquiries.
Condition 6.3: The vendor warrants that:
(a) They have, or will have by the settlement date, the right to sell the land.
(b) They are not under any legal disability.
(c) They are in possession of the land, either personally or through a tenant.
(d) They have not previously sold, granted any option to purchase, agreed to a lease, or granted a pre-emptive right over the land that has priority over the purchaser's interest.
(e) They will hold an unencumbered estate in fee simple in the land at settlement.
(f) They will be the unencumbered owner of any improvements, fixtures, fittings, and goods sold with the land at settlement.
Condition 6.4: The vendor further warrants that they have no knowledge of:
(a) Public rights of way over the land.
(b) Easements over the land.
(c) Lease or possessory agreements affecting the land.
(d) Notices or orders currently affecting the land, excluding usual rate and land tax notices.
(e) Legal proceedings that would make the land sale void or voidable.
These warranties are subject to any conflicting provisions in the contract and disclosures in the Section 32 statement.
If sections 137B and 137C of the Building Act 1993 apply to the contract, the vendor also warrants that:
(a) All domestic building work related to the construction of the home was carried out properly.
(b) Materials used were suitable and, unless specified otherwise, new.
(c) Domestic building work complied with all laws and legal requirements, including the Building Act 1993.
In summary, any omission, mistake, or deficiency in the property description or land measurements does not invalidate the sale. The purchaser cannot raise objections or claims for compensation due to alleged misdescriptions or deficiencies or demand the vendor to amend the title or cover any costs associated with amending the title.
The vendor does not guarantee that the property's services (utilities, etc.) are suitable for the purchaser's intended use. The purchaser is advised to conduct their own investigations. The condition of services may change between the sale date and settlement, and the vendor does not assure that they will be in the same condition at settlement as they were on the sale day. After settlement, the purchaser is responsible for connecting all necessary services to the property and covering any associated costs.
The vendor is obligated to secure any required consent or license needed to sell the property. If, by the settlement date, the necessary consent or license is not obtained, the contract will be terminated, and all funds paid by the purchaser must be refunded.
The purchaser must prepare and deliver any needed land transfer documents to the vendor at least 7 days before settlement. Doing this doesn't mean they accept the property's title. The vendor must start the required paperwork for state duties with the State Revenue Office, and both parties should work together to complete it promptly.
This condition applies if any part of the property is subject to a security interest under the Personal Property Securities Act 2009 (Cth).
The purchaser can request the vendor's date of birth to search for security interests, provided the request is made at least 21 days before settlement.
The purchaser must use the vendor's date of birth only for this specific purpose and keep it confidential.
The vendor must ensure the purchaser receives a release, statement, approval, or correction for the security interest on personal property as specified in the condition.
The vendor is not obligated to ensure this for certain personal property, but there are exceptions.
The vendor must ensure this for specific personal property if it falls under certain criteria.
The release must be in writing and effective in releasing the goods from the security interest.
The purchaser must provide the vendor with a copy of the release after settlement.
The vendor must also ensure that a secured party undertakes to register a financing change statement if necessary.
The purchaser must inform the vendor of any registered security interests requiring release at least 21 days before settlement.
If the purchaser fails to provide this information, the vendor can delay settlement and charge interest and reasonable costs.
The vendor is not required to ensure the purchaser receives a release in respect of the land.
Definitions from the Personal Property Securities Act 2009 (Cth) apply unless the context dictates otherwise.
The vendor guarantees that they will provide details of any current builder warranty insurance they possess regarding the property at settlement, but only if the purchaser requests this information in writing at least 21 days before settlement.
This condition addresses various aspects of property title and land regulation. If the land has a provisional folio, the vendor must complete title conversion according to the Transfer of Land Act 1958 before settlement. The subsequent provisions in this condition apply when parts of the land are not governed by this Act. It defines criteria for the vendor to hold an unencumbered estate, grants the purchaser the right to inspect the vendor's title, and outlines the purchaser's acceptance of title criteria. If the vendor can't address the purchaser's objections within 14 days, the contract may end, and the deposit is returned with no claims for damages. In parts not covered by the Transfer of Land Act, the settlement condition is amended accordingly.
This condition outlines the payment and handling of the deposit in a property transaction. The purchaser is required to pay the deposit either to the vendor's licensed estate agent, legal practitioner, or conveyancer, or into a special account specified by the vendor. In cases of unregistered plans of subdivision, the deposit must not exceed 10% of the price and is held in trust until registration of the plan. The deposit can be released to the vendor if certain conditions are met, and the stakeholder is responsible for disbursing the deposit and any interest. Payment methods for the deposit include cash, cheque, or electronic funds transfer, with specific limitations and requirements for each method.
This condition applies only when the relevant box in the particulars of sale is checked. A "deposit bond" is defined as an irrevocable undertaking to pay the deposit or any unpaid part of it, with the issuer and form of the bond needing vendor approval and an expiry date at least 45 days after the settlement due date. The purchaser can deliver a deposit bond within 7 days of the sale and replace it at least 45 days before expiry. The deposit must be paid to the vendor's legal practitioner or conveyancer on the earliest of settlement, 45 days before bond expiry, contract termination due to breach, or contract repudiation acceptance by the vendor. The vendor can claim on the deposit bond without notice if the purchaser defaults or repudiates the contract and it ends, with the issuer's payment satisfying the purchaser's obligations under this condition.
This condition, activated when indicated in the particulars of sale, outlines the use of a "bank guarantee," an irrevocable commitment from a bank to cover contract amounts. The purchaser can provide this guarantee to the vendor's legal representative. The secured amount must be paid to the vendor's legal representative upon specific events, including settlement, the guarantee's expiration, contract termination due to purchaser breach, or vendor acceptance of contract repudiation. Upon payment, the vendor returns the bank guarantee document to the purchaser. If the purchaser defaults or repudiates the contract, the vendor can claim the guarantee without notice, satisfying the purchaser's obligations.
At settlement, the purchaser is responsible for paying the remaining balance, while the vendor must take all necessary steps to facilitate the purchaser becoming the registered owner of the property and provide vacant possession or arrange for rent and profit receipts as specified in the particulars of sale. Settlement should occur between 10:00 am and 4:00 pm, unless both parties agree otherwise. Additionally, the purchaser must make payments, excluding the deposit, as directed in writing by either the vendor or the vendor's legal representative.
This condition pertains to electronic settlement of the property transaction, as per the Electronic Conveyancing National Law. It takes precedence over other contract provisions in case of inconsistency. If settlement and lodgement cannot proceed electronically, the condition no longer applies.
This GST-related condition outlines the payment responsibility for Goods and Services Tax (GST) in the property transaction. If the particulars of sale state that the price includes GST, the purchaser doesn't need to pay any additional amount for GST. However, the purchaser must pay any GST required by the vendor if the particulars specify GST must be paid in addition to the price, if GST results from actions taken by the purchaser, if the property is used for farming, or if the transaction is intended as a going concern but doesn't meet certain requirements. .
This condition pertains to a loan approval contingency in the contract. If the particulars of sale specify that the contract is subject to loan approval, the contract is dependent on the lender approving the loan secured by the property by the approval date or a later date allowed by the vendor. The purchaser can terminate the contract if the loan isn't approved by the approval date, provided that they promptly applied for the loan, made reasonable efforts to secure approval, served a written notice ending the contract along with evidence of loan rejection within 2 clear business days after the approval date (or later if allowed by the vendor), and are not in default of any other contract condition when serving the notice. If the contract is terminated, all money must be promptly refunded to the purchaser.
This condition relates to the purchaser's ability to terminate the contract within 14 days from the sale date if they obtain a written report from a registered building practitioner or architect that identifies a current major building defect on the property. To do this, the purchaser must provide the vendor with a copy of the report and a written notice ending the contract, provided they are not in default. If the contract is terminated under these conditions, all money paid by the purchaser must be promptly refunded.
This condition allows the purchaser to terminate the contract within 14 days of the sale date if they obtain a written report from a licensed pest control operator in accordance with Victorian law, identifying a current major pest infestation affecting the structure of a building on the property. To exercise this right, the purchaser must provide the vendor with a copy of the report and a written notice ending the contract, as long as they are not in default at that time. If the contract is terminated under these conditions, any money paid by the purchaser must be promptly refunded.
This condition stipulates how periodic outgoings, rent, and income related to the property are to be divided between the vendor and purchaser on the settlement date. It assigns responsibility for these financial matters up to and including the day of settlement.
This condition outlines the tax-related obligations regarding foreign residents. If the vendor is a foreign resident and hasn't provided a clearance certificate, the purchaser is required to withhold a certain amount from the contract consideration, as stipulated by tax legislation. The withheld amount is to be paid to the Commissioner of Taxation.
This condition addresses GST withholding obligations related to the sale of property. The purchaser is required to notify the vendor in writing about the recipient of the supply at least 21 days before the settlement date unless the recipient is the purchaser named in the contract. The vendor must provide a GST withholding notice to the purchaser at least 14 days before the settlement date, along with all required information to confirm its accuracy
This condition emphasizes the importance of time in the contract and clarifies that time can be extended to the next business day if necessary. Both parties are obligated to take all reasonable steps to facilitate the contract's progression to settlement and act promptly and efficiently. Additionally, any obligations that remain unfulfilled at the time of settlement will not be considered completed or merged into the settlement process.
This section outlines the methods and procedures for serving documents in the contract. Documents can be served by or on the legal practitioner or conveyancer representing a party. The accepted methods of service include personal delivery, prepaid post, legally authorized methods, and email.
This condition outlines the responsibilities of both the vendor and purchaser regarding any notices, orders, demands, or levies that impose liability on the property. The vendor is responsible for such matters issued or made before the day of sale, excluding periodic outgoings. Conversely, the purchaser takes responsibility for notices issued or made on or after the day of sale, again excluding periodic outgoings. The purchaser is allowed to enter the property to fulfill their responsibilities if any actions are required before settlement.
The purchaser or someone authorized by the purchaser has the right to inspect the property at any reasonable time within the 7 days leading up to and including the settlement day.
In a 'terms contract', the purchaser must discharge any mortgage on the property before gaining possession or rent entitlement unless the vendor meets specific requirements. All payments except those for discharging the mortgage must be held by a legal practitioner, conveyancer, or licensed estate agent. The purchaser must also maintain property insurance, provide documentation, maintain the property, seek vendor consent for alterations, follow ownership obligations, and allow inspections with reasonable notice by the vendor or authorized personnel, not exceeding twice a year.
The vendor is responsible for any loss or damage to the property until settlement, and they must ensure that the property is delivered in the same condition it was on the day of sale, except for fair wear and tear. The purchaser cannot delay settlement due to property condition issues but can claim compensation from the vendor after settlement. The purchaser has the option to nominate an amount, not exceeding $5,000, to be held by a stakeholder if the property does not meet the required condition at settlement. This nominated amount can be deducted from the vendor's settlement payment, but only if the purchaser also pays the same amount to the stakeholder. The stakeholder will resolve any disputes and distribute the funds accordingly, including any costs associated with dispute resolution.
If a party breaches this contract, they are required to compensate the other party for any reasonably foreseeable loss resulting from the breach and also pay any interest due under this contract as a consequence of the breach upon demand.
At settlement, if any money is owed under the contract during a period of default, interest is payable at a rate of 2% per annum plus the rate specified by section 2 of the Penalty Interest Rates Act 1983. This interest is payable without affecting any other rights the offended party may have.
A party cannot enforce any rights resulting from the other party's default, except for the right to receive interest and the right to sue for money owed, unless a written default notice is provided to the defaulting party. This notice must detail the nature of the default and indicate the intention to exercise the rights stemming from the default unless, within 14 days of receiving the notice, the default is rectified, and any associated costs and interest are paid.
If the purchaser defaults and doesn't remedy the situation by paying the required costs and interest, all unpaid money under the contract becomes immediately payable to the vendor.