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What is ‘time of the essence’ on settlement day?

Warren Wackerling and Luke Bull – 15 January 2014

Introduction

The steps taken on settlement date to ‘finish’ a purchase transaction are critical and can prove disastrous if care is not exercised, particularly on an agreed time.  When parties to a purchase contract agree on time, what then is ‘time of the essence’?   

A costly dispute ending in the Queensland Court of Appeal assists answering this question.  The decision illustrates how a ‘time of day’ can be much more than a time in the diary.

Facts

At trial it was held the buyer breached their ‘dependent, concurrent and reciprocal obligation’ to deliver payment to the seller on time.

Generally, the typical house sale contract specifies a date for settlement but no time other than between 9 am and 5 pm.

In practice, the seller and buyer or their solicitors agree on a time for settlement.  Here the seller’s solicitors proposed 3pm but also expressly stated to the buyer that they reserved their rights to settle up and until 5pm.

On the day of settlement, the seller was not ready at 3pm so the buyer left the place of settlement at 3.05pm. The seller was however prepared to settle at 3:20pm and so instructed the buyer to return. Interestingly the buyer did not return.  At trial, the Supreme Court held the buyer was in breach of contract.  After 5pm the seller did have a right to terminate the contract for the buyer’s breach.

This decision was upheld on appeal.

What do I need to be careful about?

For owners and buyers this case highlights the importance of understanding your rights and obligations under a conveyancing contract.

Your rights and obligations on settlement date can be daunting and sometimes what innocently seems a ‘right’ can tragically be breach with disastrous outcomes. 

Download the decision here.

This article is for general information only and should not be relied upon as a substitute for specific legal advice.