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Legislative Assembly for the ACT: 1999 Week 3 Hansard (24 March) . . Page.. 743 ..

MR HUMPHRIES: I think I need to correct something you said. Contracts which have a flaw in them are very rarely void. They are often voidable, which is a difference. It means that parties can withdraw at their own decision. That is not often the case either. Only in a rare number of circumstances is the entire contract voidable, and in an even rarer number of cases is the contract void ab initio, to use the expression used by lawyers - that is, it is flawed from beginning. That is rarely the case.

What happens if Ms Tucker is selling her house to me and we discover, three days before settlement, that the energy rating clause is not present in the bill and we have not got the energy rating of the house? What do we do? Our contract is void. Do we proceed with the sale? She still wants to sell her house to me and I still want to buy it, but the contract, according to the law, is void. What do we do? What do the poor citizens do? They may go and ask a lawyer for advice. The lawyer may be scratching his head and saying, "Well, technically the contract is void, but if you go ahead and exchange title deeds, hand over cheques and so on on the settlement date, you've got a sale. Maybe the best thing to do is just to shut up about it, not say anything about it, and ignore it". Frankly, if I was a solicitor, I would be in a bit of a bind as to what to advise my clients in those circumstances.

The contract is void but I assume that if you get to the point of settlement of the sale, and you have your house in your name, you are not going to have the regulation police coming in and saying, "Sorry, the house doesn't belong to you. The contract on which you exchanged and on which you arranged for the sale to occur was void and therefore you have to give the house back to Mr Blogg or to Ms Tucker who sold it to you". That is a ridiculous situation.

I would put it to you that more often than not this provision in the present legislation amounts to a loophole because where parties want to complete a sale, and they discover that the contract is void because they have forgotten to put these provisions in, they will on most occasions just ignore it. That is what they will do.

However, Mr Speaker, a real penalty is where the parties are in the position of having to address a cost penalty which flows to the purchaser in the event that the contracts have been exchanged without that clause in it. That is a real penalty. Take that example before, that I am buying from Ms Tucker, and I have suddenly discovered that the sale contract does not have that clause in it. I will go back to her and say, "Well, it's a $300,000 house and the penalty is $1,500. I want $1,500 taken off the sale price when we settle this sale". That is a big penalty for Ms Tucker who loses $1,500 off her sale price.

If a lawyer is doing the conveyancing and he or she has failed to include the certificate in the sale price, the lawyer is going to lose his fees. In fact he might have to pay the client something because he overlooked the need to have that particular provision in the sale contract. That is a real penalty. But it does not take the thing to the stage where the whole contract necessarily falls through.

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