To print this article, all you need is to be registered or login on Mondaq.com.
Property sale contract requires payment of deposit on 4th month
after contract date
On 4 April 2019, a purchaser and vendors exchanged contracts for
the sale of a residential property in Vaucluse, Sydney. The
purchase price was $4,830,000 with a 5% deposit.
Special condition 38 of the contract provided that the deposit
was payable in two instalments.
The first instalment of $150,000 was payable on exchange, while
the second instalment of $91,500 was payable "on the 4th month
after the contract date".
Vendors and purchaser disagree on final date for payment of
On 1 July 2019, the purchaser travelled with his family to
Greece, believing that under special condition 38 he had until 31
August to pay the second instalment of the deposit.
In July, the vendors' agent sent two emails to the purchaser
regarding payment of the second instalment. One required payment
"by or before 5 August" and the other required payment
"on or before 4 August".
The purchaser said that he did not see these emails until 1
August, the same date that he had sent an email to the vendors'
agent saying: ".with regards to the second part of the deposit
I'm currently overseas and have been for the past 5 weeks.
However I will be returning on 6th August and will be depositing
the balance there shortly after."
On 2 August, the vendors' agent replied saying that payment
was due on 4 August. However, the purchaser was in transit from
Greece to Australia and said that he did not see the email until he
landed in Abu Dhabi at midnight on 5 August.
Vendors terminate contract for non-payment of deposit and
purchaser seeks order for completion of sale
Meanwhile, on 5 August at 6pm, the vendors' solicitor issued
a notice terminating the contract due to the purchaser's
failure to pay the second instalment of the deposit by 4
The purchaser returned to Australia on 6 August.
On 7 August, he paid the second instalment of $91,500 to the
vendors' agent and notified the vendors' solicitor of his
belief that the contract was still on foot, due to the defective
notice of termination.
The vendors' solicitor responded that the contract had been
terminated on 5 August and that the $241,500 deposit paid by the
purchaser was forfeited.
The purchaser commenced proceedings in the NSW Supreme Court,
seeking an order that the vendors complete the sale.
case a - The case for the purchaser
case b - The case for the vendors
Prior to exchanging contracts for sale, I spoke with the
vendors' agent, telling him that I would pay the 5% deposit in
two instalments, with the first instalment being paid on exchange
and the second instalment being paid any time after four months. He
replied that the vendors weren't too concerned about the timing
of the second instalment of the deposit, as long as they ended up
receiving a 5% deposit.
The following day, the vendors' agent rang me to say that
he had spoken to the vendors, and that the vendors had accepted my
offer. The agent told me to ask my solicitor to put the terms in
On 4 April, my solicitor sent the vendors' agent special
condition 38 for inclusion in the contract, specifying that the
second half of the deposit was payable "on the 4th month after
the contract date".
Under special condition 38, I was not required to pay the
second instalment of the deposit until 31 August 2019. This was
because the first month after the date of the contract was May, the
second month after the date of the contract was June, the third
month after the date of the contract was July and the fourth month
after the date of the contract was August. "On" meant at
any time during the fourth month of August.
Even if the court disagrees that I had until 31 August to pay,
the fourth month after the contract date included 5 August 2019,
and I had until the end of that day to make the payment. This is
consistent with the agent's email in July stating that payment
was due "by or before 5 August". The vendors
were therefore not entitled to terminate the contract during the
day of 5 August when they did.
If, as the vendor argues, the 4th month after the contract date
ended on 4 August, the vendor was still not entitled to terminate
the contract during the day of 5 August. The 4th of August was a
Sunday, and the contract provided that if the time for something to
be done is a day that is not a business day, then the time is
extended to the following business day.
Since the vendors were not entitled to terminate the contract
on 5 August when they purported to do so, the contract is still on
foot. The court must order the vendors to complete the sale.
Under special condition 38, the purchaser only had until the
end of the day on 4 August 2019 to pay the second instalment of the
Our real estate agent denies ever having said that we
weren't concerned about the timing of the second instalment of
In any event, the interpretation of special condition 38 is
determined by the definitions of "month" and
"calendar month" in the Conveyancing Act and the
Interpretation Act. Together, these acts define
"month" to mean "calendar month" and
"calendar month" to mean a period commencing at the
beginning of a day of one of the 12 named months and ending
immediately before the beginning of the corresponding day of the
next named month. Therefore, the first month after the contract
date commenced on 5 April 2019 and concluded on 4 May 2019, the
second month after the contract date commenced on 5 May 2019 and
concluded on 4 June 2019, the third month after the contract date
commenced on 5 June 2019 and concluded on 4 July 2019 and the
fourth month after the contract date commenced on 5 July 2019 and
concluded on 4 August 2019.
These statutory definitions operate unless a contrary intention
appears, and there was no contrary intention revealed by the
Even though 4 August was a Sunday, the clause allowing for an
extension of time when a date falls on a non-business day, was not
applicable in these circumstances.
Since the purchaser failed to pay the second instalment of the
deposit by the end of the day on 4 August as required, we were
entitled to terminate the contract when we did and we are entitled
to keep the deposit. The court must dismiss the purchaser's