Real property contracts: The conduct of the parties matters

In the recent case of Storey v Britton (No 2) [2025] QSC 151, the Queensland Supreme Court was required to consider the complexities of navigating breaches, performance, and termination of real property contracts.

Background

On 31 January 2024, the plaintiffs, Mr and Ms Storey (buyers), entered into a contract to purchase a residential property situated at 72 Cuba Court, Parrearra, on the Sunshine Coast (the property) for $3,264,000.

The defendants were the sellers, Mr and Ms Britton.

The contract was a standard REIQ contract; however, there were a number of pertinent special conditions, namely:

1. The contract provided for settlement to occur electronically 7 months later, on 16 August 2024;

2. The contract provided that the deposit was to be paid in three separate tranches:

a) The initial instalment of $125,000 was payable on or before 2 February 2024;

b) The second instalment of $125,000 was due on or before 1 March 2024; and

c) The third instalment of $76,400 was due on or before by 30 June 2024.

3. The sellers were entitled to immediate access to each deposit payment as, and when, paid by the buyers; and

4. Upon the sellers’ receipt of the initial instalment of the deposit, they were entitled to exclusive access to the property, subject to the sellers accessing the property to remove their belongings.

On 1 February 2024, the buyers paid an initial sum of $90,000. On 2 February 2024, the buyers moved into the property. The balance of the initial instalment in the sum of $35,000 was paid on 4 February 2024, following text communication between the buyers and sellers.

On 12 February 2024, the sellers purported to terminate the contract on account of the buyers’ failure to pay the initial instalment of the deposit within time.

On 1 March 2024, solicitors on behalf of the sellers wrote to the buyers stating that ‘the contract is afoot and any prior notice of termination is rescinded’.

On 16 August 2024, the contract was due to settle. However, the sellers, once again, asserted that the contract was at an end. The buyers demanded that the sellers settle on the contract on 19 August 2024. When the sellers again refused to perform their obligations under the contract, the buyers commenced proceedings against them, seeking to enforce performance of the contract.

Issues for determination by the court

The first issue to be determined by the Court was whether the contract had been validly terminated on 12 February 2024.

That is, the buyers had failed to pay the full amount of the initial instalment within time, with the balance of $35,000 paid to the sellers two days later than prescribed by the contract.

Certain text messages passing between the parties purportedly demonstrated the sellers’ acceptance of the late payment arrangement, particularly, in circumstances where the female seller had responded to notice of the delayed payment with the words ‘no problem at all thank you!’.

Notwithstanding the content of their text messages to the buyers, and the fact that they had also handed over the keys to the property, granting access to the buyers from 2 February 2024, the sellers later asserted that the contract was at an end on account of the buyers’ breach.

On 1 March 2024, the sellers’ solicitors wrote to the buyers, stating that ‘the contract is afoot and any prior notice of termination is rescinded’.

The Court determined that the contract had not been validly terminated on 12 February 2024, given the clear language and actions of each of the parties in making arrangements for the delayed payment and to agree occupancy arrangements notwithstanding the purported default of the buyers. The Court concluded that, at that point in time, the contract remained on foot.

It was also observed that the content of the letter issued by the sellers’ solicitors on 1 March 2024 was clear, with both parties contending that the contract remained on foot. Therefore, the Court held that, even if the contract had been validly terminated on 12 February 2024, the sellers had revived the contract by written notice to the buyers on 1 March 2024.

When it came time to settle on the contract on 16 August 2024, the sellers, once again, asserted that the contract was at an end.

Following that communication by the sellers, the buyers’ conveyancers were unable to contact the sellers for reasons that the sellers’ representative, as recorded on the contract, was a family law firm managed by Ms Britton (the female seller). That firm informed the buyers’ conveyancers that it had no knowledge of, nor instructions to act in, the transaction. 

The buyers’ conveyancers’ subsequent requests for contact details for the sellers failed to elicit any satisfactory response. 

The Court considered that the sellers’ conduct demonstrated a clear refusal to co-operate and undermined the conveyance.

After the sellers failed to settle on 16 August 2024, the buyers demanded that the sellers settle on the contract on 19 August 2024. The sellers again failed to settle.

When the buyers commenced proceedings against the sellers, the sellers submitted that the buyers had not been ready, willing, and able, to complete the contract at the material time. (The demonstration of which, is a necessary element to a claim for orders for specific performance.)

The evidence given at trial by the buyers’ conveyancer, however, was that the settlement could have proceeded but for the sellers’ refusal. The buyers’ conveyancer confirmed that sufficient funds had been paid by the buyers to complete the transaction and she held instructions to settle on the contract on behalf of the buyers.

The Court accepted the evidence of the buyers’ conveyancer and found that it was the sellers’ refusal to engage that caused the settlement to falter, and that the buyers were otherwise ready, willing, and able, to complete the contract at the material time. On this basis, the Court found that the buyers were entitled to orders for specific performance.

In dealing with the issue of costs,[1] the Court had regard to a clause within the contract of sale which entitled the buyers to claim damages for any loss suffered as a result of the sellers’ default including their legal costs on an indemnity basis. Applying the test set out in Chen v Kevin McNamara & Son Pty Ltd, [2]the Court observed that the terms, in this instance, were plain and unambiguous such as to justify an order for costs in the buyers’ favour on the indemnity basis.

Key takeaways for agents

The above case serves as a reminder of the risks which may arise when parties who seek to transact over real property fail to obtain early independent legal advice prior to entry into a formal contract. As demonstrated by this case, a failure to seek legal advice may give rise to a costly misunderstanding as to the cause and effect of the terms of a contract, and/or unintended affirming conduct by one, or the other, party.

Sales agents should remain mindful that the manner and context of their own communications as between the parties to a contract, may be material. Extreme care should be exercised when facilitating negotiations between the parties to a contract, particularly where one or both parties are not legally represented.

As set out above, a text message passing from the sellers to the buyers was just one of a number of critical factors which the Court looked to, when determining whether, or not, the contract had been validly terminated following the buyers’ failure to pay the initial instalment within time.

Agents are reminded that any miscommunication of information (even if inadvertent) may give rise to an unintended outcome for a party to the contract. Where an agent acts as a conduit of information for a party to a contract, extreme care must be taken to ensure that the agent has properly understood that party’s instructions, and the agent must ensure that they communicate that information exactly as intended. Should an agent convey information incorrectly, the agent may be exposed to a claim in negligence, breach of contract or fiduciary duty, or misrepresentation.

Read another article: When is reasonable to terminate based on a building and pest inspection report?.

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