RHGIt is a well-known principle in New South Wales conveyancing law that there is no binding agreement for the sale & purchase of real estate until formal written contracts are exchanged.

A recent case concerning sale of farmland between neighbours sought to challenge this principle.

The case involved the sale of approximately 200 acres of grazing land by Ms N, to her neighbour, Mr H. Ms N offered the land to Mr H in a letter by way of a private sale without involving a real estate agent.

Mr H wrote to Ms N by email indicating he was interested in purchasing the 200 acres adjoining his property. Emails back and forth between the parties saw the price and other details of the sale negotiated.

Ms N then instructed her solicitor to prepare a formal Contract for the Sale of Land to formalise the arrangement. Mr H retained a solicitor to review the Contract on his behalf.

After undertaking the necessary pre-purchase enquiries in relation to the rural land, Mr H instructed his solicitor to send the Contract to Ms N’s solicitor with a cheque for the deposit to initiate exchange of contracts.

Unbeknownst to Mr H, Ms N had been speaking to another party in relation to selling the whole of her property (including the 200 acres adjoining Mr H’s farm). At the “eleventh hour” Ms N decided to sell the whole farm to the other party and instructed her solicitor to return Mr H’s deposit cheque.

Mr H brought a case against Ms N claiming that a binding contract for the purchase of the 200 acres had been formed through the email communications with Ms N.

The court considered the emails and other correspondence between the parties, and ultimately decided that the wording in the emails & letters had not intended to bind the parties and both Ms N & Mr H were working towards a formal exchange of Contracts to “seal the deal”.

This case serves as a good reminder that vendors and purchasers are unlikely to be held to “handshake deal” when it comes to the sale & purchase of real estate – it is essential that formal Contracts for the Sale of Land are exchanged to lock all parties into the agreement.

To ensure you are not caught out in a conveyancing transaction, contact the experienced property team at Everingham Solomons where Helping You is Our Business.

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