A contract of sale is a type of legal contract usually concerned with buying a property for sale. It can also be for other goods and services exchanged between a vendor and purchaser for an agreed amount of money.
An offer is first set out in writing by the purchaser including any conditions and then it is presented to the vendor. It is important to remember that the contract of sale becomes legally binding as soon as the purchaser signs – even with just the one signature. However, the sale is not activated until the vendor signs the contract.
The only way that a purchaser can revoke the contract is if they revoke the offer prior to the vendor signing, or the vendor rejects the offer.
It is wise to invest in a property lawyer who can help you avoid the pitfalls and guide you through the contract of sale process.
Elements of a Contract of Sale
- The names of the vendor and purchaser.
- The address of the property that is being purchased.
- The amount of deposit to be paid to the vendor.
- The sale price of the property.
- The settlement date of the property.
- The conditions of sale – for example:
- a finance clause meaning that the purchaser has to obtain finance in order for the sale to be completed; and
- an inspection clause – where the property has to pass a building and/or pest inspection for the sale to be completed.
- The date that the sale will become unconditional.
- It needs to state whether the purchaser will be obtaining the property with a lease in place or vacant possession.
- It needs to state whether any personal possessions of the vendor are to be included in the sale.
Is there a cooling off period?
There is a cooling off period of 3 days which commences at the point at which the purchaser signs the initial offer.
What happens if finance is not approved?
If a purchaser is unable to obtain finance approval before the date that the contract becomes unconditional, the contract can be cancelled. However, it is important for the purchaser to protect themselves and make sure they apply immediately for finance and attempt to obtain finance from another option if the first lender refuses to provide finance for the property – this way it can be showed that they genuinely attempted to complete the contract for the sale of the property.
If unable to to obtain finance approval by the unconditional date, it is important that the purchaser notifies the vendor in writing at least 3 days prior to the unconditional date.
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