Alexakis v Wan [2021] NSWCA 172: Clarifying Payment Deadlines in Property Contracts

In Alexakis v Wan [2021] NSWCA 172, the New South Wales Court of Appeal examined the importance of strict adherence to payment deadlines in property contracts and the consequences of failing to meet essential time requirements. The case involved the sale of a residential property in Sydney, and the primary issue was whether the purchaser's failure to pay a second deposit instalment on time allowed the vendor to terminate the contract. This blog will explore the court's decision and its implications for property transactions in NSW.

Background of the Case

The case concerned a contract for the sale of land between Mr. Theo Alexakis (the purchaser) and the vendors, Mr. Chi Hing Wan and Ms. Kwan Yee Chan. The contract included an "Additional" clause 38, which allowed the deposit to be paid in two instalments:

1. The first instalment of $150,000 due upon the exchange of contracts (4 April 2019).
2. The second instalment of $91,500 due "on the 4th month after the contract date."

The contract further specified in Clause 2.3 that time for the payment of the second instalment was "essential." If the purchaser failed to pay the deposit on time, the vendors had the right to terminate the contract under Clause 2.5.

While the purchaser paid the first instalment on time, the second instalment was delayed. The contract date set the payment deadline as 4 August 2019, which was a Sunday. The purchaser paid the second instalment three days later, on 7 August 2019. However, the vendors had already terminated the contract on 5 August 2019, claiming that the second instalment was not paid by the agreed deadline.

The purchaser, Mr. Alexakis, sought specific performance of the contract, arguing that since the payment deadline fell on a Sunday, Clause 21.5 of the contract should have extended the time for payment to the next business day—Monday, 5 August 2019. He argued that the vendors' termination notice, served on 5 August, was invalid because the payment was technically still due by the end of that day.

Key Legal Issue

The central question before the Court of Appeal was whether Clause 21.5, which extends payment deadlines falling on non-business days to the next business day, applied to the payment of the second deposit instalment. Specifically, the court had to decide whether the exception to the application of Clause 21.5 ("except in the case of Clause 2") applied to the payment deadline set by Clause 38.

Court’s Findings

The Court of Appeal upheld the primary judge's decision that Clause 21.5 did not apply to extend the time for payment of the second deposit instalment. The key points from the court’s decision were:

1. Clause 2.3 of the contract explicitly made payment deadlines "essential." The clause applied not just to the first instalment but also to any later payment deadlines, including those set out in Clause 38.

2. Clause 21.5 generally extends deadlines falling on non-business days to the next business day, but it specifically excludes deadlines governed by Clause 2. Since Clause 2 applied to the deposit payments, the court found that Clause 21.5 could not extend the payment deadline to 5 August 2019.

3. As a result, the purchaser’s failure to pay the second instalment by 4 August 2019 constituted a breach of an essential term of the contract, giving the vendors the right to terminate the contract under Clause 2.5.

Implications of the Case

The decision in Alexakis v Wan reinforces the importance of adhering to strict payment deadlines in property contracts, particularly when those deadlines are classified as "essential." Even when a deadline falls on a weekend or public holiday, parties cannot automatically assume that they have until the next business day to make payment unless the contract explicitly allows for such an extension.

Property purchasers in New South Wales must carefully review the terms of their contracts, especially clauses relating to deposit payments and the consequences of late payment. The case also highlights the risks for purchasers who delay payments, even by a single day, as vendors can terminate contracts and forfeit deposits in cases where time is made "of the essence."

Key Takeaways for Property Buyers and Sellers

1. Ensure Clear Understanding of Payment Deadlines: If a contract specifies that time is of the essence, purchasers must strictly adhere to deadlines. Even minor delays can lead to termination of the contract.

2. Non-Business Days and Extensions: While Clause 21.5 of the standard NSW Contract for the Sale of Land may extend deadlines falling on non-business days, exceptions may apply. If essential terms like deposit payments are involved, extensions may not be available.

3. Legal Consequences of Breach: In cases of breach, vendors can terminate the contract and retain the deposit. Purchasers may not be entitled to specific performance if the breach involves an essential term.

4. Seek Legal Advice: Property contracts can be complex, and both buyers and sellers should seek legal advice to understand their rights and obligations under the contract. This is especially important for clauses involving deadlines and termination rights.

Conclusion

This ruling serves as a clear reminder to parties involved in property transactions in NSW to carefully manage their contractual obligations, particularly where deadlines are concerned. Whether you are a buyer or a seller, understanding the importance of "essential" time provisions can help you avoid costly disputes and ensure smooth property transactions.