The ins and outs of a Contract – When does a Contract Exist and Amending a Contract

When is a Contract Official?

A contract becomes official and legally binding when the last party has signed the contract. It is common that the buyer signs the contract first with their offered amount. If the seller accepts the offer, they will then sign the contract. The contract will become legally binding on the day the last party signs the contract which will be the Contract Date. It is important for the Contract Date to be inserted as the calculation of other essential conditions such as building and pest and finance depends on the Contract Date.

Therefore, when the last person signs the contract, they should also insert the date they signed the contract in the Contract Date section which is usually on the first page of the contract.

Amending a Contract before it is signed

Amendments can be made to a contract before it is signed by both the buyer and seller. This includes a seller increasing the purchase price, or the buyer reducing their offering price until both parties sign. An amendment cannot be made without both parties acknowledgement of the amendment by inserting their signature or initial next to the amendment.

How can I sign a contract?

As a result of COVID, most contracts give parties an option to sign a contract electronically or by hardcopy and if you intend to sign the contract electronically, you should advise the agent so they can provide the electronic execution method. If you are signing a contract by hardcopy, your signature should be witnessed by someone who is not a party to the contract and is over 18 years of age. Not having your signature witnessed will not void the contract but removes any doubt that the party actually signed the contract.

Regardless of how you have signed the contract, it is generally accepted to send a signed contract through electronic correspondence such as email or facsimile.

Amending the Contract conditions after the Contract has been signed

It is not uncommon for a buyer wanting to seek amendment to a contract term after the contract has been signed. This may include requesting an extension on the time a condition is due or wanting a price reduction on the contract purchase price in order to satisfy a condition.

A big concern buyer’s have with the current competitive market is if an amendment is requested can the seller decline and terminate the contract. The answer depends on what you are seeking to amend. While the terms and conditions will provide the basis a party can terminate the contract, it will be subject to your right to satisfy the condition by the original date stated in the contract.

There is even greater risk if you are looking to amend an unconditional contract. An unconditional contract is not something to take lightly as if a party has notified the conditions are satisfied but are unable to effect settlement by the settlement date, they will be in default and the other party can seek compensation. The exception to this is the 5 business day extension that can be sought by either party under the contract as per item 1 of our previous article.

While we understand the property market is extremely competitive, a party should not indicate that a condition is satisfied (and thus proceed with an unconditional contract) unless they are absolutely confident of this. The risk of non-performance of the contract can result in termination of it, forfeiture of entitlement to the deposit and possible court action to seek damages.

 

If you have any questions or require assistance with a amending a property contract or any other conveyancing matter in Queensland then please contact the property team at NB Lawyers for more information.