Implied Terms in Off the Plan Contracts
A recent Supreme Court decision Brightman & Ors v Royal Pines Project [2024] QSC 149 shows that Developers owe duties outside of the Contract.
The law of contract includes a general rule of construction that there is an implied obligation on each party to do all that is reasonably necessary to secure performance of the contract. The implied obligation may entail an obligation to do something or an obligation to refrain from conduct that will prevent, delay or hamper performance of the contract.
Facts & summary of the Case
The Applicants were Purchasers of a Lot who entered into an Off the Plan Contract with the Developer before they were built;
The Respondent was the Developer/Seller “Royal Pines Projects Pty Ltd”;
The standard form of Contracts used by the Developer were not subject to a Finance Condition, however the terms envisaged that the Purchaser would have a financier;
The Developer registered the Survey Plans, provided a copy of the Registration Confirmation Statement to the Purchaser’s and called for Settlement within 14 days as per the terms of the Contract;
The Purchasers required Finance and their bank required to attend the Property for a Valuation. The Developer failed to respond to the Purchasers request for access, until 8 days before the Settlement Date advising that the Lots were not finalised for Construction and that the Valuer could not attend the Property until 8 July, 2024 (Settlement was due 16 July, 2024);
The delay in response from the Developer and dis-allowing access caused issues with the Purchaser’s obtaining finance approval in time for settlement, leaving their deposit at risk and the Contract at risk of termination by the Seller.
The Purchasers brought an application for injunctive relief before the Supreme Court based on the implied duty of the parties to cooperate.
The Judge reviewed the meaning of “implied duty to cooperate” and discussed the following:
Contracts that are not subject to finance, and/or do not allow for an access provision for the purposes of obtaining a valuation, do have an implied duty to cooperate to allow the other party to complete the Contract. Especially, in this case, at the time of entering into the Contracts, the Developer had knowledge that the Purchasers would engage with a financier to complete.
The Developer had an implied duty to respond in a timely manner to the Purchasers when requesting access to the Lot for a valuation. Be delaying in response and refusing access, the Purchaser was not able to perform their obligation to pay the purchase price at the Settlement Date.
The Court found that the Developer breached the implied duty by delaying their response time to the Purchaser’s request to access the property for a valuation within the 14 day period after notice of registration were given. Although there is no explicit finance condition in the Contract, the Developers breach hindered the Purchaser from obtaining finance in order to complete the Contract. Certain conditions within the Contract noted that the Purchaser may have a financier, and that the Purchaser will have the full benefit of the 14 day notice period to perform their obligations for Settlement.
As a consequence, the Court held that the Developer could not call for Settlement on 16 July, 2024 where Purchasers had not yet finalised their Finance. Furthermore, the Purchasers would not be in breach if they did not settle on that date.
The discussion of “implied duties to cooperate” raises interesting questions from a developers perspective as it is not uncommon for Off the Plan Contracts to include a provision where Settlement is due within 14 days of Registration of the Survey Plan. Upon registration, it is also not uncommon for the works of the Lot to not yet be finalised. It is proven that these issues can cause impacts on the final valuation of the Lot and cause a Developer to cooperate to allow the Purchaser to conduct steps necessary to complete the Contract by the Settlement Date. A Contract could be considered “unfair” if a Developer insists on the Purchaser performing their obligations on the Settlement Date without sufficient notice to complete a valuation, even when the Contract is not subject to finance.
Pre-contractual advice is extremely important, especially with Off the Plan Contracts. If you require advice on contractual obligations, commercial or property matters, please contact our Commercial Team.