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Property: A matter of time

Every Issue

Cite as: August 2015 89 (8) LIJ, p.68

“Time is of the essence” is a time-honoured phrase with extra significance in the law. Both the common law and equity have recognised the obligation of contracting parties to comply with time constraints included in their contract. While the common law typically adopted a hardline approach, equity was more inclined to enforce such obligations if the defaulting party had been served with a notice requiring compliance with the contract and had then failed to comply with that notice.

For 50 years, the various iterations of the standard form contract of sale of land in Victoria have included a provision specifying that time is of the essence in relation to the obligations of the parties. The standard form contract also stipulates that a party that is in default in performance of the contract may be served with a notice identifying that default, and requiring the defaulting party to remedy that default, failing which the contract could be ended.

The current contract (the 2008 version, as amended) includes these three components in three parts:

GC 16 makes time of the essence;

GC 27 requires the service of a default notice; and

GC 28 specifies the consequences of non-compliance.

Carbon Black Lab P/L v Launer [2015] VSCA 126 is the first reported case to consider the operation of these new general conditions. Earlier cases considered the issues of time and default in the context of Condition 6 of Table A of the 7th. Schedule of the Transfer of Land Act 1958, which governed such issues until the 2008 contract was adopted. Carbon Black Lab P/L v Launer has decided that a previously accepted requirement regarding rescission of the contract by notice does not apply to the new provisions.

The case concerned an application to remove a purchaser’s caveat. The vendor claimed that the contract had been ended by notice, but the purchaser argued that the procedure adopted by the vendor was deficient. The first issue concerned the question of time being of the essence. The Court concluded that even though the vendor had granted the purchaser one formal extension of time and a further “indulgence”, time was again made “of the essence” when the vendor served a default notice requiring the purchaser to settle within 14 days. The vendor relied on this notice to terminate the contract at the end of that 14 days but the purchaser argued, on the basis of reasonably well settled authority arising from the Table A process, that the vendor’s notice had only made time of the essence again, which meant that the purchaser was therefore only in default at the expiration of that notice, and the vendor was required to give a further 14-day notice based on that default.

The Court acknowledged that the wording of Table A had previously been interpreted as requiring two notices – one to make time of the essence again and one to give notice of default – but concluded that the wording of GCs 27 and 28 did not require an antecedent notice making time of the essence before service of a default notice that operated to successfully ended the contract. The default notice served to achieve both purposes – to make time of the essence again and to end the contract after 14 days if the defaulting party did not remedy the default.

Tips
  • Time is of the essence in land contracts.
  • Time may cease to be of the essence, but may be made of the essence again by service of an appropriate notice.
  • A notice that serves to again make time of the essence can also operate as a default notice under GC 27 and may operate to end the contract if GC 28 is complied with.

  • Russell Cocks is author of 1001 Conveyancing Answers. For more information go to www.russellcocks.com.au.

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