In the recent case of Latimore Pty Ltd v Lloyd [2020] QSC 136, the Queensland Supreme Court ruled that the buyers' termination of a residential contract was premature after the seller allegedly failed to comply with an essential term. This case highlights the importance of correctly interpreting clauses, notice provisions, and special conditions when calculating the time by which a party must comply with an obligation under a contract.
Introduction
The buyers entered into a contract to purchase a residential property from the seller. The contract included a special condition stipulating that the seller must provide the buyers with a pool safety certificate seven days before settlement, which was an essential term.
The seller did not deliver the pool safety certificate by 5.00 pm, seven days before settlement. Relying on that failure, the buyers purported to terminate the contract at 5.03 pm on the same date. On receiving the termination notice, the seller's solicitor then provided the pool safety certificate to the buyers' solicitor at 6.31 pm.
Court's findings
The seller made an application to the Court seeking an order that the buyers' termination was not valid on the bases that:
- the provision of the pool safety certificate was not a 'notice' as defined in the contract, and consequently did not need to be provided by the close of business as required for 'notices' under the contract
- the special condition requiring the pool safety certificate to be provided to the buyers did not prescribe a time of day for compliance, therefore the seller had until midnight on the due date to provide the pool safety certificate, which the buyer complied with by delivering the pool safety certificate at 6.31 pm.
The Court agreed with the seller and ruled that the termination was invalid.
The Court reasoned that the law takes no account of fractions of a day unless prescribed by a clause or special condition. The general rule provides that a 'day', in its ordinary sense, is a calendar day, running from midnight to midnight. For that reason, the seller had until midnight on the due date to provide the pool safety certificate.
Importance of decision
Contract provisions should be drafted carefully. If the parties intend that an obligation must be performed by a certain time, then the contract should specify this.
As highlighted by this case, be careful not to prematurely terminate a contract by assuming that a day ends at 5.00 pm or that the requirements of the notice provisions apply in respect of the time for doing a certain 'thing' as opposed to giving a 'notice'.
It is critical that any contract terms and special conditions correctly reflect the parties' intentions so as to avoid ambiguity and possible misinterpretation.
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