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September 2005

Understanding What You are Signing

Too frequently, people are encouraged to sign documents without having an appropriate understanding of the effects and implications of what they are signing. This is particularly true of Agreements for Sale and Purchase of Real Estate.

Three recent cases highlight the dangers (and costs) for Vendors and Purchasers:

“Authorised” Agent

A husband and wife were the joint owners of a property, which had been on the market for some time. The real estate agent telephoned indicating that he had an offer. The wife indicated to the agent that she would not sell at the offer price. The wife advised her husband of her views. The agent arrived at the home with the offer, whilst the wife was out. The agent persuaded the husband to sign the agreement at the original offer price. The agent then suggested to the husband that he could sign on behalf of the wife. The husband wrote his wife’s name on the agreement but did not sign his name. Afterwards, the words “as duly authorised agent for….” were added. When the wife found out what had occurred the couple sought to withdraw from the agreement. The purchasers under the agreement lodged a caveat against the title to the property preventing a sale at a higher price. Ultimately, the matter was resolved on the basis that the couple paid the purchaser’s legal costs and the purchasers withdrew their caveat.

Sign up quickly

A wife and her friend went to inspect a mock up and plans for a proposed apartment building. The wife expressed interest in purchasing an apartment to the agent. She indicated that she wanted her husband to see the apartment first. The agent told the wife that there was no time for that as there was heavy demand for the apartments and that unless she signed up the “preliminary agreement” there and then, the opportunity would be lost as someone else would buy the apartment. The wife signed the agreement and paid a deposit. The agent assured her that if the agreement did not proceed further she would be refunded the deposit (which was quite contrary to the provisions of the agreement that said that the deposit was non-refundable). She was also told that she should sign her husband’s name on the agreement. Subsequently, the parties sought to withdraw from the agreement. The vendor took the position that if they wanted to withdraw from the agreement, they could do so but would forfeit their deposit. Ultimately, a refund of the deposit was obtained on the basis that notwithstanding the provisions of the agreement, the wife had been assured when she signed the agreement that the deposit would be refunded if they did not proceed for any reason. 

Noting the price

The vendor was the successful bidder at an auction for the sale of property. Immediately following the sale, the vendor was approached by a real estate agent indicating that the agent might be able to negotiate an on sale of the property at a profit. The vendor gave the agent a general indication of the approximate figure he wanted for the property. Subsequently, the agent presented the vendor with an offer for the property. The vendor was intoxicated at the time and did not notice that the offer price was for in fact $100,000.00 less than he thought, and for substantially less than the price for which he had contracted to purchase the property, meaning that he would be on selling the property at a considerable loss. After lengthy negotiation the agreement to on sell was avoided.

If each of these parties had sought legal advice first these problems (and the costs) would not have occurred. You should be very wary of any person who tries to persuade you to sign such an agreement without first obtaining proper legal advice. If in doubt, you should insist that (at the very least) a clause is inserted making the agreement conditional upon your solicitor’s approval in all respects.