A contract is an agreement between two or more parties, which is legally binding. For the sake of this blog, we are referring to the majority of contracts in Queensland for the sale and purchase of residential property (mainly REIQ contracts).
All contracts are different, so it is important you have yours reviewed by a lawyer before signing anything.
What does time to remain of the essence mean?
In most contracts, time is of the essence. This means that performance of a contractual obligations on the specified dates, must be strictly adhered to.
Generally, finance conditions, building and pest conditions, deposit due date or other buyer or seller conditions are required to be complied with by 5pm on the due date, whereas settlements are usually supposed to occur by 4pm on the due date.
A buyer or a seller may ask to extend any condition due date or any settlement due date, but the other party doesn’t have to agree to these extensions.
Usually, time is of the essence of the Contract which means that both parties to the Contract must perform their obligations strictly by the due date. However, under the new standard REIQ Contract, either party may extend the settlement date by up to five business days by giving notice to the other party, without the need for the other party to agree. A party does not need to provide any reason for exercising this right of extension. You should take the possibility of an extension of the settlement date into account particularly if settlement on the nominated settlement date is critical to you or your plans. For more information on settlement extensions under the new REIQ Contracts, please see our blog.
What happens if a condition under a contract is not satisfied by the due date and time?
All conditions are worded differently, so it is important you have your contract reviewed so that you understand your rights and the risks of not complying with contract conditions or settlement timeframes.
For example, if there is a finance condition in an REIQ Contract and the buyer does not give notice to the seller by 5pm on the due date that they have satisfied finance or waive the requirement to obtain finance, the seller is able to either:
- terminate the contract, in which case the deposit is refunded to the buyer; or
- leave the request for any extension of the finance due date sought by the buyer in limbo.
In the second scenario, the buyer is able to still satisfy or waive the finance condition after 5pm on the original due date if they are waiting for the seller to still agree or disagree to the extension request, while the contract is in limbo, but it must done before the seller elects to terminate the contract.
When it comes to settlement or the payment of the deposit, is very different. If the buyer is unable to settle by the due date or pay the deposit by the due date, the seller is be able to then:
- terminate the contract; and
- forfeit any deposit paid to date; and
- sue the buyer.
This is why it is important you are always available to contact us when your conditions or settlements are due.
How do I ensure I comply with the conditions by the due date and time?
There are many steps you must take once a contract is signed; some things you should look out for are noted in this FC Lawyers blog.
It is important that you diarise all dates and that ensure that you read all of the first letters and emails we send you to remind you of these due dates.
This is why it is crucial that you speak with us before signing a contract, so that you are well prepared for the next steps in the usually fast paced conveyancing process.
Contact our team today to speak with us regarding any property matters.
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