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7 November 2018
Property Developments
Payment of deposits by electronic funds transfer – the importance of careful drafting
The recent case of Long v Hijazi [2017] QDC 187
addresses the timing issues surrounding payment of
deposits by electronic funds transfer (EFT) and
highlights the importance of careful drafting with respect
to deposit clauses in contracts.
Background
The Buyers entered into a contract with the Seller for the
purchase of a property in Springwood. The contract:
▪ provided that the deposit was to be paid to the
Seller’s agent on ‘acceptance of the contract’; and
▪ contemplated payment by electronic funds transfer
(EFT) because a BSB and account number was
provided for the Seller’s agent’s trust account.
The Seller’s agent advised the Buyers that the Seller
accepted the Buyers’ offer at 2.08pm on 19 October
2016.
The Buyers then paid the deposit by EFT at approximately
8.30pm – it was receipted into the Seller’s agent’s trust
account on 20 October 2016.
Termination?
The Seller terminated the contract on 21 October 2016
because the deposit was not received into the Seller’s
agent’s trust account on 19 October 2016.
The Buyers’ conveyancer emailed the Seller’s
conveyancer on 25 October 2016 asking for confirmation
that the contract was still on foot (on the basis that the
Seller’s agent received the deposit on 20 October 2016).
The Seller’s conveyancer confirmed that the termination
was withdrawn, but then later advised that the Seller could
not proceed with the sale for other reasons.
Decision
The Buyers bought an action against the Seller for specific
performance and damages for the Seller’s failure to settle.
Each party made arguments about whether the deposit
had been paid in accordance with the contract. The Court
held that the Buyers’ argument that the deposit should be
paid ‘as soon as reasonably practicable’ was accepted
and that the deposit had been paid in accordance with the
contract.
The Court also held that the Seller’s termination on 21
October 2016 had been rescinded. The Buyers therefore
received an order in their favour for specific performance
and damages.
What does this mean?
Parties to sale transactions should be certain that deposit
clauses are clear and unambiguous with respect to the
timing of payments.
Where payment by electronic funds transfer is
contemplated, parties should ensure that sufficient time is
allowed under the contract for such payments to be
processed by third parties.
*Disclaimer
The information contained in this update is intended as a guide only.
Professional advice should be sought before applying any of the information
to particular circumstances. While every reasonable care has been taken in
the preparation of this update, MinterEllison does not accept liability for any
errors it may contain