By Russell Cocks, Solicitor
First published in the Law Institute Journal
The recently reviewed Contract of Sale of Real Estate published jointly by the Law Institute of Victoria and Real Estate Institute of Victoria establishes 28 general conditions as the fundamental terms of the agreement entered into by the vendor and purchaser.
As a contract designed to be used by both vendor and purchaser, and sanctioned by the Department of Justice, the contract is designed to be fair to both parties. It embodies principles that have been established by many years of conveyancing practices and many more years of judicial decisions. It relies upon a solid base of statutory provisions, most of which have developed in the last 50 years and are designed to protect the consumer – namely the purchaser.
The contract does not need to refer to these statutory protections, such as those relating to off the plan sales, terms contracts, deposit release and vendor disclosure obligations in the Sale of Land Act 1962, as they apply to all contracts and cannot be removed by the contract.
Additionally, more general consumer protection legislation based on trade practices principles, such as the Fair Trading Act 1999, applies in a real estate context and are important implied statutory terms of any contract between vendor and purchaser.
Whilst these implied statutory conditions cannot be removed from the contract, it is permissible for parties to agree to additional conditions and, indeed, to agree to alter any of the general conditions, by special condition. The contractual warranty contained in general condition 2.1 to the effect that the general conditions adopt the standard 28 general conditions is designed to give the parties a clear base upon which to agree.
In many cases no further conditions will be required, but in some situations one of the parties may desire further provisions. For instance, the purchaser might want a ‘building inspection’ condition or the vendor may wish to alter the statutory sunset period for an off the plan sale. This is achieved by special condition.
Unfortunately, old habits die hard, and some vendors’ representatives have continued the old habit of adding pages of special conditions, most of which are either already dealt with in the general conditions or are mere restatements of statutory provisions and are therefore superfluous. The typical example is a special condition that states that the deposit will be held in accordance with s 27 Sale of Land Act 1962. Of course it will. That is what the Act requires.
Another relatively common special condition is an ‘entire agreement’ condition. This purports to limit the agreement between the parties to the written words of the contract and to exclude from the contract any representations or promises that may have been made prior to the contract. Such conditions often appear in off the plan contracts but may be added to contracts for the sale of existing properties.
Such a condition was considered in the case of Nifsan Developments Pty Ltd v Buskey & Anor  QSC 314. That case considered a contract for the off the plan sale of a unit to be constructed near the Gold Coast. The purchasers established that the vendor developer’s in-house agent had told the purchasers that no other developments would be built in the area such as to interfere with the purchasers’ view and that the purchasers had relied upon that representation. Indeed, the agent honestly believed this to be the case as the developer had not informed the sales staff that the developer had applied to change proposed future construction by increasing the height of proposed buildings.
The purchasers sought to avoid the contract when they became aware of proposed construction that would interfere with their view. They might have sought relief for breach of contract on the basis of common law misrepresentation, but chose to pursue the statutory remedy of avoidance based on misleading and deceptive conduct in breach of the Trade Practices Act 1974. Whilst the contract cannot exclude these statutory protections, the developer argued that an essential element of this statutory right is ‘reliance’ by the purchasers on the pre-contract representations made in relation to height and that the special condition in the contract prevented the purchasers from relying on those representations.
The court decided that the developer’s representations were misleading and deceptive, that they were important to the purchasers and that the purchasers were entitled to rely upon them as the developer had control of future construction in the area. The inclusion of an ‘entire agreement’ clause did not remove those pre-contract representations from the relationship between the parties, nor mean that the purchasers were not able to rely upon those representations for the purposes of enforcing their statutory rights.
In conclusion, an ‘entire agreement’ clause may well be as superfluous as many other of the rag-tag special conditions habitually attached to contracts with little thought as to their virtue or application.
Whilst written for Victoria this article has interest and relevance for practitioners in all states.