Contract change not initialled. When can buyer walk away?
Every agent learns that amendments made to a contract after signing by a party must – to ensure contract validity – be returned to that party for initialing: Real Estate 101.
But can a party effectively signify their consent to a change in another way?
In a case decided in June, * a buyer had signed an off-the-plan contract in November 2004 for the purchase of a residential unit at Gabba Central, Woolangabba Brisbane.
The contract contained a “sunset clause” entitling either party to terminate if the property was not ready for occupation by 1 December 2006.
On receipt of the contract, the solicitor for the developer crossed through that date and handwrote a new date: 31 March 2007. The contract was not returned to the buyer to have the alteration initialed.
The buyer argued before the District Court that the handwritten amendment made the contract invalid. The buyer did not attempt to rely on any PAMDA irregularity.
Should the Qld government compensate the real estate industry for its financial losses related to the chaos it created with PAMDA?!
- Yes (92%)
- No (8%)
On the other hand, the buyer could not recall the conversation.
The solicitor’s evidence was accepted and the court ruled that even though the amendment was not initialed by the buyer, he had agreed to the change.
Also in the developer’s favour were the subsequent actions by the buyer - payment of the balance deposit - which was evidence of the buyer’s affirmation of the intention to be bound by the contract terms.
On this basis, the court held the contract was valid and the buyer’s purported termination was a breach entitling the developer to terminate and keep the deposit that the buyer forfeited.
* Barron Properties Pty Ltd v Borhani-Shidani  QDC 253 (24/06/2010)
The developer was fortunate that the buyer did not mount a stronger factual case disputing the solicitor’s recollection. Had that happened, an entirely different result could have occurred.
Best real estate office practice still requires that every change to the written contract is accepted by initialing. This will safeguard agents against uneccessary disputation and its potential cost.
Post your comments below.
If you post a comment to this article below, you will receive an email with links to the following:-
- ADL – House & Land Contract v7.9
- ADL – Residential Unit Contract v9.7
- Cross Reference – ADL House and Land Contract
- Cross Reference – ADL Residential Unit Contract
- Table of REIQ House and Land 7th ed changes
- Version 7 of the House & Residential Land
- Version 3 of the Residential Lots in a Community Titles Scheme