Rosemary Gibson, The University of Queensland

In the Bluey episode “The Sign”, the Heeler family enters a contract to sell their family home to a pair of English Sheepdogs, or as Bluey calls them, “the dogs with no eyes”.

But towards the end of the episode, the Sheepdogs spy another house that they prefer. Unlike Bluey’s house, the new place has a pool.

They telephone Bandit and tell him that they have changed their mind. Happily for Bluey’s family – and let’s face it, most of Australia – Bandit decides not to press ahead with the sale and the Heelers end up staying put in their family home.

But aside from the fact that the contracting parties are all cartoon dogs – how realistic is this scenario? Is it possible to end a contract to purchase or sell a house simply because you’ve changed your mind?

The reality is that once a contract of sale is signed, there are only limited circumstances in which buyers and sellers can bring the contract to an end.

What do you sign when buying or selling a house?

In Australia, each state and territory has its own standard form contract for the sale of land that buyers and sellers must sign.

The terms of these contracts mirror relevant state or territory laws, meaning they differ throughout Australia. It is important for parties to obtain advice from a property lawyer with experience in a particular jurisdiction’s contract.

Can you change your mind after signing?

Once a contract has been signed, a buyer may only end it for a “change of mind” during the “cooling off period”. The cooling off period is a short period of time – usually between two and five business days – after the contract is signed.

During this time, the buyer can end the contract, “no questions asked”. But there are usually financial consequences for terminating during the cooling off period.

For example, in New South Wales, Queensland and the ACT, a buyer who ends the contract during the cooling off period must pay the seller 0.25% of the purchase price. For a house purchase of A$1 million, this termination penalty would be $2,500.

But not all states and territories guarantee a cooling off period for buyers. And in such a hot property market, an individual seller may be unlikely to agree to include such a term in a contract.

What if something goes wrong down the track?

When negotiating the contract terms, the parties may agree that the sale is subject to certain conditions. Typically, these conditions are in the purchaser’s favour. If one of the conditions is not satisfied in time, then the contract can be brought to an end.

It is up to the parties to negotiate which conditions (if any) are included in the contract, and the time by which the conditions must be satisfied. The most common conditions of sale are:

• the buyer obtains finance by a certain date (a finance clause)
• the buyer obtains satisfactory building and pest inspection reports by a certain date (a building and pest clause).

The buyer may also want the sale to be subject to the buyer first selling an existing property.

Once all of the conditions of sale are satisfied, the contract is said to be “unconditional”. From this time, there are no express circumstances in which either party may bring the contract to an end.

When the Sheepdogs telephoned Bandit, the Heelers had already moved all their furniture out of the house. Clearly, the sale had already gone unconditional. There was no express basis on which the Sheepdogs could have terminated the contract.

Could the Heelers have sued for breach of contact?

A party who ends a contract without justification is liable to pay compensation to the other party.

A house purchaser who wrongly terminates a contract would almost certainly lose their deposit. They may also be liable for additional losses the seller suffers as a result of the breach, including any deficiency in price on a resale of the property.

But a buyer and seller may bring a contract to an end by “mutual agreement”, which seems to be what happened in Bluey. The Sheepdogs sought to end the contract and – to the relief of all Australians – the Heelers agreed.

This is, however, unlikely to occur “in real life”, especially in today’s highly competitive property market.

At the very least, the seller would be entitled to retain the purchaser’s deposit. There would also be the issue of who bears the costs incurred in advertising and agency fees.

It seems Bandit followed his heart rather than the strict terms of the contract — and Australia is the better for it.

Rosemary Gibson, Lecturer in Contract Law, The University of Queensland

Image credits: Shutterstock 

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