What is a Contract of Sale?
- The Contract of Sale is split into the Contract and the Vendor Statement.
- The Contract is broken up into the Particulars of the sale, the General Conditions and the Special Conditions.
- The Vendor Statement is all of the information that the Vendor is legally required to disclose to the purchaser about the property.
Let’s take a look at the basic structure of a Contract of Sale for residential property and see if we can break it down to make it easier to understand
CONTRACT OF SALE AND VENDOR STATEMENT
Firstly the Contract of Sale as a whole is split up into two main sections. If you are reading this with a potential purchase contract nearby you should be able to roughly split it up the middle. To help you find the ‘middle’, there will be a Vendor Statement cover page which the Vendor should have signed.
Together they are known as the ‘Contract of Sale’. More accurately they are called the Contract of Sale and Vendor Statement.
UNDERSTANDING YOUR CONTRACT OF SALE
The Contract of Sale is broken up into three sections, the ‘particulars’ which is usually the front few pages that includes the signing clauses, the details of each party, the price, settlement date and whether the contract is subject to lease or finance. This is different for every transaction.
Next we have the ‘General Conditions‘ which are included in 99% of contracts that we review. They are a set of standard conditions that are prescribed by a governing body like the Law Institute of Victoria (LIV) or the Real Estate Institute of Victoria (REIV).
The benefit of having a set of General Conditions is that if you include them you aren’t allowed to change the words around. They are a ‘standard’ set of conditions that guide the property transaction.
The next part is where your lawyer earns their money. The “Special Conditions” are in addition to the General Conditions. They are included to compliment the General Conditions adding additional clauses, obligations and responsibilities to the parties or most importantly remove or edit a specific General Condition to change the wording.
CHANGING A GENERAL CONDITION: PENALTY INTEREST
For example a Special Condition may add an additional amount of penalty interest to the amount prescribed in the General Condition. The General Condition will usually say that the penalty interest rate is 2% plus the amount in the Penalty Interest Rate Act whereas a Special Condition may amend that to be 4% or even 6%.
To find out more about Penalty Interest click here
To read more about the Vendor Statement click here