What’s the effect of a “subject to finance date” that pre-dates an actual date of contract?

Consider the story of Ryan and Nerissa Emmett who signed up for a $274k project home at Doolandella on 30 March 2011 by contract that specified a loan approval date 22 days prior to signing.

No deposit was paid as – according to the buyers – it was agreed that the $14k could wait until finance had been approved.

By 19 May, all attempts to get suitable finance had been exhausted. Ryan emailed the seller – builder Brian Moloney – with the bad news adding “this is not ‘goodbye’ more like ‘see you later’.

Moloney replied “I understand your position. If I can help any further please let me know.”

It was thus somewhat of a shock to the buyers, that in March 2014, Moloney’s company – Urban Homes P/L – filed a claim in Brisbane’s Magistrates Court demanding the unpaid deposit.

Urban argued that the entry of an earlier date in the reference schedule to the contract meant the parties had agreed finance had already been approved.

The buyers on the other hand contended that the contract was still subject to finance but with an unknown due date.

A magistrate ruled for the buyers. Urban appealed to the District Court.

Obviously, said Judge Nick Samios, the contract was intended to be subject to finance because the reference schedule question to that effect had been answered “Yes”.

The only means of reconciling the answer “Yes” and the “meaningless” expired date – and to give business efficacy to the contract – was to imply a date to define a “reasonable” period for the buyers to secure a finance answer.

The date of 19 May – the day the Emmets emailed their termination notice – was selected.

Thus the buyers had validly terminated and were not liable to pay the deposit.

Judge Samios also noted that had he considered it inappropriate to imply the date term into the agreement, he would have ruled that the contract was “void for uncertainty”.

Urban Homes Pty Ltd v Emmett & Anor [2014] QDC 282 Samios DCJ 12/12/2014