A contract for the sale of land is an agreement drawn up between a buyer ("the Purchaser") and a seller ("the Vendor") for the sale of property. Contracts for the sale of land must be in writing for it to be enforceable.
Terms
There is no statutory form for a contract for land, all that is necessary is that there is sufficient evidence in writing. There are however certain requirements that must be included in a contract for the sale of land:
1. Name/description of the parties–The contract must either contain the names of the parties or enough description that there can be no dispute as to identity.
2. Property–the property should be adequately described and capable of being identified.
3. Consideration–What is being given for the property must be clearly stated, or there must be a means of ascertaining it eg 50 per cent of the market value.
4. Terms–What are terms under which the property is being transferred eg, freehold, leasehold or life interest.
5. Signature of the party to be sued–the contract or the memorandum must be signed by the party to be sued. If the document is varied after being signed the parties must resign the document, initial the amendments or execute a supplemental contract.
Effect
Once a valid contract is executed each party has rights and responsibilities. Until completion, the vendor remains the legal owner and the Purchaser becomes the equitable owner with the right to dispose the property. The Vendor however holds this legal interest on trust for the Purchaser. The Vendor therefore has the following rights and responsibilities:
1. Duty of maintaining and repairing the property � The vendor must use reasonable care to preserve the property in a reasonable state of preservation as it was when the contract was made. He is liable to the purchaser for wilful damage to the property or even if fails to take reasonable care of the property.
2. Right to retain possession–The vendor can retain possession of the property until the payment of the purchase price, but this right may be varied by contract.
3. Rents and profiles are for the vendor's use –The vendor is usually entitled to take rents and profits from the property until completion.
4. Discharge the outgoings eg rates and taxes–
The vendor must pay the rates and taxes so long as he remains in possession notwithstanding that the date fixed for completion has expired due to the purchaser's delay.
Death
The general principle is that the death of either the purchaser or the vendor does not bring the contract to an end. On the death of the vendor before completion, his personal representatives must convey to the purchaser and on the death of the purchaser before completion the vendor can enforce his rights against the purchaser's personal representatives. It should be noted that it is the person who is entitled to the property who would be responsible for the balance of the money. The vendor has a right though to enforce payment out of the deceased's assets.
Vacant Possession
Vacant Possession means free from any occupation by the vendor or a third party and free from any claims to the property. The Purchaser can refuse to complete a sale if an encumbrance was not disclosed, but he cannot object to an undisclosed encumbrance of which he was aware when entering into the contract unless:
(i) the contract expressly provides that good marketable title shall be given;
(ii) he reasonably believes the encumbrance to no longer be enforceable or
(iii) the encumbrance is removable, that is, capable of being discharged or removed, before completion without the consent of the encumbrancer (eg a mortgage) as distinct from being irremovable, such as an easement.
Delay and Time of the Essence
It is common to see the words "on or before the date time being of the essence". Failure to complete on that date or any extended date allows the vendor to immediately rescind the contract and the deposit considered forfeited. In most contracts for sale a date of completion is usually fixed. The norm is three months or 90 days from the date of execution of the agreement for sale. In such a circumstance however, time is not of the essence of the contract unless expressly stated or that the nature and subject matter of the contract implies that time was of the essence.
Whether or not time is made of the essence, failure to complete on an agreed date is a breach of contract and the injured party is entitled to damages. Merely standing by and failing to insist on punctual performance does not amount to a waiver, unless an unreasonably long time has elapsed. If there is delay in completing the contract because of the purchaser, the vendor can charge interest on the balance of the purchaser price.
Failure to have contract in writing
Failure to have a contract for sale of land in writing does not make the contract void, but would only be enforced by the court if the purchaser can show sufficient acts of "part performance" that is, where one of the parties does certain acts by which the contract is partly performed. For there to be sufficient part performance, that act must be performed by the person alleging the contract to exist and must relate unequivocally to the contract. An example would be taking possession of property alleged to have been sold to the person who takes possession. It is unclear whether mere payment of money is a sufficient act of part performance.
This article sets out general guidelines, All legal rules have exceptions and variations. How the law applies to you depends on the facts of your case.