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Sep 2, 2017

Conditions precedent beat warranties hands down

Lawyers use a term "condition precedent" to mean something that must be done before the contract can conclude. Now I hasten to add, that as a mere humble settlement agent, I am not a lawyer and nothing I say should be construed as legal advice.

But the point should be made that conditions precedent in contracts are very important. And that often things that ought to be "conditions precedent" in contracts are not.

A classic example typically included in a contract to buy a house is a "sellers warranty" which generally requires all the electrical, plumbing and gas fittings, fixtures and appliances included with the sale to work. But unless it's a condition precedent, it's virtually impossible to enforce.

If the clause begins "The seller warrants that all electrical, plumbing & gas ..." it is not a condition precedent, but a warranty and generally you can't hold up settlement until the condition is satisfied.

However, if the clause begins "This contract is conditional on all electrical, plumbing & gas ..." that very clearly indicates that the clause is a conditional precedent and the buyer is not obliged to proceed to settlement until they are satisfied.

Often we have buyers who say they don't want to hold up settlement to get something fixed in the house they are buying. My advice to them, is that if it isn't fixed before settlement, there is no prospect of it being fixed after settlement. 

Let me assure you, there is nothing anyone is less interested in than a house they have just sold and been paid for. Absolutely nothing. The only hold you have over the seller getting work done is to hold up settlement.

The only alternative to this is to obtain accurate quotes from reputable tradesmen to do the work and have sufficient funds paid over to you at settlement to enable you to complete the 

The other advantage to that is that you get the work done to your standards and not merely to achieve settlement.

Disclaimer: None of the above should be considered specialist building or legal advice. Readers are advised to retain their own independent professional counsel. Which is the point to the article.

This article was submitted to The Kalgoorlie Miner and and an edited version was published on Sat 2 September 2017, under the headline "Lock in key sale contracts"

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