Property Law – Due Diligence Clause in your Sale and Purchase Agreement.

In a recent High Court case, the decision clarified when a property purchaser may lawfully exercise the right of cancellation in a conditional sale and purchase agreement pursuant to a due diligence clause.

The Court held that an agreement can be worded so as to make the satisfaction of a condition entirely a matter for subjective determination of a property purchaser.

This case is based on what the parties had done using a similar phrase to those below in their property agreement:

“.. the Purchaser being satisfied that…”

“In the event that the Purchaser is not satisfied with any aspect…”

“… the Purchaser shall not be obliged to give reasons …”

 The Court stressed that it is a matter of wording in respect of the individual agreement.  If a clause provides for a subjective determination without any obligation to disclose reasons, it is difficult to see how it can restrict the matters that the property purchaser can take into account.

This case highlights the importance of fully understanding and being aware of the implications of any legal contract and reinforces the importance of taking legal advice before signing a legally binding contract.

For further conveyancing information on your Agreements or Contracts contact Auckland law firm, Quay Law in Remuera.

Ph: (09) 5232408