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Duty to Mitigate Damages for Purchaser’s Default

A decision by the Supreme Court of South Australia, in Murphy v Mitanovski [2012], reiterates the importance of a vendor attempting to mitigate loss from a reduced sale price following a terminated contract.

Facts

In the above case, a purchaser entered into a Contract to purchase land for the sum of $782,000. The Contract was subsequently terminated by the vendor as a result of the purchaser’s failure to complete. Following the termination of the Contract in July 2010, the vendor retained the deposit and decided to hold onto the property. In late September 2010 the defaulting purchasers offered to buy the property again. The vendor rejected that offer and put the property to auction in late October 2010. By that time, the property had reduced in value and was sold at auction for $750,000.

 

The vendor sued the defaulting purchasers for $32,000.

The court held that the vendor was not entitled to claim the difference of $32,000 between the two contract prices, as she had not attempted to mitigate the loss by contacting the initial purchasers regarding their offer following her decision to put the property to auction.
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