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In brief - Purchaser validly terminated contract, awarded
damages
Foster v Hall involved the subdivision of land in
which the contract had a 12 month sunset period.
Ultimately the vendor was held not to have used its best
reasonable endeavours (as required by the contract) to have the
plan registered prior to expiry of the sunset date and therefore
the purchaser validly terminated the contract and was awarded
damages in excess of $1.6 million.
Purchaser argues that vendor not entitled to rescind
contract
The contract for sale required the parties to use their
"best reasonable endeavours" to have the plan of
subdivision registered within 12 months from the date of
contract.
Registration did not occur within that period and, as a result
of this, the vendor purported to rescind the contract. The
purchasers maintained the vendor was not entitled to rescind, as it
had not used its best reasonable endeavours to have the plan
registered, treated the purported rescission by the vendor as a
repudiation of the contract and themselves terminated the contract
and sought damages.
Fire access conditions of the development consent
The vendor's contention was that a condition of the
development consent issued by Wollongong Council with respect to
fire access and the gradient of the fire access was such as to be
unreasonable and unachievable, and therefore the vendor had
complied with his contractual obligations.
The vendor put two options to council to comply with this
condition and it was acknowledged by council that due to the
excessive gradient, neither option was adequate to meet
council's conditions and there did not appear to be other
suitable alternatives.
However, the court held that by virtue of discussions with
council, there were certainly avenues available to the vendor to
seek to have the terms of the development consent modified, but the
vendor did not do so.
"Best reasonable endeavours" sets higher standard
than "reasonable endeavours"
The court held that the addition of the word "best" to
the expression "reasonable endeavours" raised the
required standard to a higher level.
Whilst the vendor was not required to undertake the obligation
beyond the bounds of reasonableness, he was required to do all that
he reasonably could to achieve the contractual objective of having
the plan registered.
Vendor did not seek to have the development consent waived or
modified
The court held that the vendor, by not seeking to have the
development consent condition either waived or modified, had not
taken steps which a prudent, determined and reasonable party
(acting in his own interests and with a view to achieving the
contractual outcome) would have taken.
Even though the undertaking of an application to modify the
development consent condition complained of by the vendor was not
assured to be a success, the vendor was still required, to satisfy
his obligations with respect to reasonable endeavours, to take that
action. The vendor was required to do so, particularly when
council's response to correspondence indicated that an
amendment application may have been successful.
Include right to rescind contract if development consent
provision unacceptable
A party undertaking obligations in a contract has to fully
appreciate what level of obligation he is undertaking and negotiate
in the contract only that level of responsibility which he is
prepared to take.
The vendor in this case should have had a provision in the
contract indicating that if any development consent provision
proved to be unacceptable, then he had a right to rescind the
contract, and this would have overcome the difficulties which he
ultimately faced.
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