In Gubbay v Burnet  NSWCA 174 Ms Gubbay purchased property from Mr Burnet and Ms Clancy (“the Vendors”) at an auction for $2,300,000.
The Contract for the Sale of Land provided for a 10% deposit, being $230,000. The Contract was exchanged and Ms Gubbay provided the Vendors with a cheque for $2,300,000.
Some four days later, the solicitor for Ms Gubbay wrote to the solicitors for the Vendors advising that the cheque would be dishonoured as Ms Gubbay did not have the means to pay it.
The solicitor for the Vendor raised the possibility of a $50,000 replacement deposit in lieu of the $230,000 deposit. However, no agreement had been reached.
One week later, the Vendors’ solicitor wrote to Ms Gubbay’s solicitor advising that unless a satisfactory resolution occurs by 5pm that day, the Vendors will terminate the Contract and enforce their rights under it.
On the same day, a cheque in the sum of $50,000 was provided by Ms Gubbay to the agent and the agent banked it.
One week later, the Vendors issued a Notice of Termination of Contract (because the $230,000 deposit had not been paid in full).
The Court of Appeal agreed with the findings of the primary judge, namely that there was no agreement made as to a change in the amount of the deposit. Clause 2.5 of the standard Contract for Sale of Land provides that “if any of the deposit is not paid on time or a cheque for any of the deposit is not honoured on presentation, the vendor can terminate. This right to terminate is lost as soon as the deposit is paid in full.” As such the Vendors had had the right to terminate the Contract.
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