Special Conditions 7.1.1 & Encroachment

Topics: Contract, Standard form contract, Contract law Pages: 5 (1383 words) Published: September 2, 2011
1.Special Conditions

Clause 7.1.1

Clause 7.1.1 of this contract is deemed to be deleted.

This clause allows a Vendor to rescind the contract when the Purchaser brings a claim against the Vendor for more than 5% of the purchase price. This clause is commonly reduced to a lesser amount or, as in this case, deleted altogether. The consequence upon John is that if he were to make a claim, for example; for an encroachment not clearly disclosed (other than a claim for delay) against the Vendor, no matter how slight, the Vendor has the option to rescind. The Vendor must serve notice of this intention in accordance with 7.1.2, and John then as the option to waive his claim (so that he may still purchase the property without compensation) within 14 days after the Vendor’s notice in accordance with 7.1.3.


The Purchaser acknowledges that the garage erected on the subject land encroaches onto the land adjoining to the west by up to 0.50 metres. The Purchaser cannot make any objection, requisition or claim in respect of the encroachment.

This special condition is an attempt to exempt a Purchaser from making an objection, requisition or a claim in respect of the encroachment of the garage. On its face it appears that John will be unable to object, requisition or claim in relation to the encroachment.

This encroachment may constitute a defect in title as the vendor cannot pass to John the part of the land the subject of the encroachment.

In the case of Flight v Booth the Court of Common Pleas held that because there had been a substantial misdescription, the purchaser was entitled to terminate the contract, notwithstanding the non-annulment clause. Further the purchaser was able to recover his deposit. Cases have come to apply the rule in Flight v Booth where there has been a material and substantial misdescription as such that the purchaser would not have purchased the property.

In John’s case however there appears to be no misdescription as the encroaching garage has been specifically disclosed, whether it has been ‘clearly’ described is the contentious issue.

This brings us to section 52A (2)(b) of the CA which states that the prescribed term clause 1 (a) of Schedule 2 CSOLR be deemed to have been included in the contract. This term holds that a Purchaser will not be prevented from making any objection, requisition or claim that he is entitled to make in respect of any encroachment onto any adjoining land unless the encroachment is specifically disclosed and clearly described in the contract and the contract contains an express term precluding the Purchaser from making such an objection, requisition or claim.

The encroachment is specifically disclosed; however the question is whether or not the special condition clearly describes the encroachment enough to prevent John from objecting or claiming. Bill Henningham in his paper , stated when discussing the 2005 version of clause 1(a) of Schedule 2 CSOLR (equivalent to the current version) that a ‘survey is clearly needed’ for this purpose. Therefore if there is a survey attached to the contract John will be precluded from claiming. If there is a survey report it is pertinent to ascertain whether any improvements pre-date the survey.

If there is not a prepared survey report then one should be obtained and John could raise an objection to the Vendor’s title (within 21 days of the date of the contract ) in accordance with clause 5 of the contract where the term ‘requisition’ includes ‘objection’ , this would give the Vendor a chance to cure the defect. If the Vendor is unable or unwilling to cure the defect then the Vendor can give notice pursuant to clause 8 requiring John to waive the objection . John should not waive this objection, thus forcing the Vendor to rescind the contract and return John’s deposit.

However if John wants to proceed with the purchase (or there is a survey attached to the contract thus...

Bibliography: Text Books
Skapinker, Diane & Lane, Patricia; Sale of Land in NSW Commentary and Materials, 5th Edition, Lawbook Co, 2010.
2005 Standard Form Contract For Sale of Land (May 2011)
Journals and Articles
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