What are you signing? Be aware of your obligations under a conditional contract
Shiree Blackwell, solicitor, from the Hamilton Lawlink firm of Harkness Henry & Co, reviews a recent High Court decision highlighting the importance of your contractual obligations when buying or selling property. Shiree also provides advice on working with your lawyer to ensure you avoid the pitfalls of a conditional Sale and Purchase agreement.
The laws of New Zealand are intended to provide contracting parties with certainty as to where each party stands once the contract is formed. In residential property transactions, it is common for purchasers to make their contractual obligations conditional upon certain things occurring (eg arranging satisfactory finance or the sale of an existing property).
In these situations, the law requires that the party for whose benefit the conditions have been included do all things that may reasonably be necessary to enable those conditions to be satisfied by the due date. This general obligation at law is generally reinforced by a special condition in most standard form contracts.
This obligation provides a degree of certainty to the contract. Without it, one party would be bound by the contract and the other who had the conditions for their benefit, could avoid the contract at their discretion, effectively turning the contract into an option.
The High Court decision in Mana v Fleming 17/10/06, HC Whangarei is an illustration of this contractual requirement. The Court was asked to review whether the purchaser had made sufficient effort to satisfy a condition or had merely used the contractual conditions as a means to get out of the contract.
Read the attached article to find out what happened.
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