DELAYED COMPLETION AND REMEDIES Flashcards
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WhetherTime Is of the Essence
- Any delay to completion will be a breach of contract that entitles the innocent party to damages caused by the de-lay. However, the innocent party will not have the right to cancel the contract unless the time for completion was ‘of the essence’, meaning the date in the contract is frm and cannot be moved.
- Generally, in a residential contract for sale (including the Standard Conditions of Sale), time is** not** of the essence unless specifed in the contract.
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Entitlement to Interest for Delay
- Even if the contract does not provide that time is of the es-sence, as indicated above, **any **delay in completion, even a delay of only a couple of hours, still amounts to a breach for which damages are available.
- Note that under the Standard Conditions of Sale, the money due on completion must be re-ceived by 2pm on the day set for completion. If the funds are received after 2pm, completion is treated as taking place on the next working day.
- The seller is then entitled to interest at the contract rate on the outstanding balance for the number of days that completion was delayed.
Calculation at Contract Rate
Interest is calculated on the amount equal to the pur-chase price and contents price less any deposit paid for
the period between the contractual completion date and the actual completion date.
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Rental Income in Lieu of Compensation
If the property being sold/purchased has a tenant in situ, the innocent party can elect to take the rental income until completion instead of compensation by notifying the other party.
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Notice to Complete—Making Time of the
Essence
- If time is not of the essence under the contract, as already noted, delayed completion does not alone entitle the inno-cent party to refuse to complete or withdraw from the trans-action. This means that although the innocent party may hold the breaching party liable for interest, the breaching party may still enforce the contract.
- If the innocent party wants to be able to withdraw or terminate the contract, they must serve** a notice to complete** on the other party, which** makes time of the essence.**
Requirements for Notice to Complete
A ‘notice to complete’ can be served at any time after the
completion date by a party who is ready, able, and willing to complete。
Exam Tip
Be careful to distinguish the following situations:
(1) Completion has not taken place on the contractually agreed date; and
(2) Completion has taken place, but after the time speci-fed in the contract.
The notice to complete can be served only in situation (1), where completion has not taken place. It will not be needed in situation (2), where completion is late but has already taken place.
Defaulting Party Must Complete Within Ten
Working Days
After service of the notice to complete, the defaulting partyhas 10 working days, excluding the date of serving the notice,
to complete. Note that if the buyer had paid only a reduced deposit, on receiving a notice to complete, the buyer must pay any balance necessary to bring the deposit up to the full 10%
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Consequence of Non-Compliance
Buyer is the defaulting party
If the buyer has not complied with the notice to complete, the seller may rescind the contract, and may also:
*Retain the buyer’s deposit;
*Resell the property; and
*Claim damages.
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Consequence of Non-Compliance
Seller Is Defaulting Party
If the seller has not complied with the notice to complete, the buyer may rescind the contract, and may also:
*Reclaim their deposit monies with interest at the con-tract rate; and
*Claim damages.
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OTHER REMEDIES FOR BREACH
Before completion
Before completion, the innocent party has the following pos-sible remedies available for breach of contract:
*Specifc Performance;
*Claim for compensation by way of damages; and
*Rescission.
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Specifc Performance
1.Specifc performance is an equitable remedy (given at the discretion of the court) that compels the defaulting party to perform and complete the contract.
2.Specifc performance can be sought together with claims for rescission and damages, but the claimant would have to decide which option to pursue by the time of hearing.
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Claim for Damages
- In the event of delayed completion or failure to complete, the innocent party may also make a standard claim for damag-es based on losses flowing naturally from the breach plus reasonably foreseeable consequential losses.
- When claiming damages, the measure of damages is the standard measure: the innocent party is entitled to be placed, so far as possible, in the position they would have been in had the contract been performed. When calculating damages, credit must be given for any deposit funds forfeited by the seller.
Calculation of Damages for Buyer’s Breach
An innocent seller is limited to recovering the diference in value between the contract price and the value on re-sale. So, if the resale price is higher, the seller’s solicitor should advise them to retain the buyer’s deposit and not pursue a claim for damages as well.**
Rescission
Rescission has two meanings:
*An order of court to put parties back in a position as if the contract had never existed, which is made when there is fraud, misrepresentation, or mistake; and
*The innocent party’s acceptance of the repudiation of the contract when the defaulting party breaches a major term of the contract.
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Rescission Under the Standard Conditions of Sale
Under the Standard Conditions, rescission is permitted in two specifc circumstances:
*When there has been a misrepresentation because of an error or omission; and
*When the landlord’s consent for an assignment is required and the licence to assign is not forthcoming.
