Consequences of Negotiating Major Changes to a Contract
Tony Cavanagh is a Director at Mullane & Lindsay in Newcastle and is one of LawCover’s panel solicitors.
A recent Supreme Court case from Queensland looked at the consequences of negotiating major changes to a contract, prior to a deal being struck.
Under Queensland law it is a requirement that a “warning statement” be given by a vendor, and signed by the purchaser, before entry into a contract for the purchase of residential property. That occurred in this case. However the vendor then wanted to make some substantial changes to the contract document. These were made, but no new “warning statement” was attached to the amended contract, or signed by the purchaser. Instead, the initial warning statement was simply attached to the new document.
There was a later dispute and the contract was terminated. The vendor wanted to keep the deposit and obtain damages. One of the purchaser’s arguments was that because there was no warning statement attached to the second contract, the vendor could not enforce it. The vendor argued the initial warning statement was sufficient because it was, in effect, the same contract.
The Court decided that although the two contracts were similar, the changes required by the vendor were so substantial that the second contract amounted to a “counter offer” rather than a variation of the original document. The absence of the warning statement therefore put the vendor in breach of the Queensland statutory regime. It was therefore not entitled to retain the deposit or recover damages.
Although there is no requirement for “warning statements” under NSW law, the case does illustrate the care that needs to be taken in negotiating the ‘detail’ of contracts. In some circumstances, parties who think they are really just haggling over the “fine print” on a deal that has already been made; may in fact be making a new offer on different terms – such that they lose the benefit of the prior bargain.
Tony Cavanagh is a Director at Mullane & Lindsay, and practises extensively in Commercial and other Litigation; and employment law. If you require any assistance in these areas please contact Tony Cavanagh or contact our Newcastle office.