When it comes to making changes to a property contract in Queensland, parties sometimes find themselves torn between two options: executing a Deed of Rescission or amending the contract.
The decision can carry significant implications, and choosing the appropriate course of action requires a thorough understanding of the legal consequences involved. As always, we recommend engaging an experienced property lawyer who can guide you on the best decision for you.
1. Deed of Rescission
A Deed of Rescission is a legal document used to rescind a contract between the parties. This is different from terminating a contract (which still holds legal implications), as it operates as if the contract never existed, restoring both parties to their pre-contractual position.
This option is commonly used in situations where both parties wish to revoke the terms of the original agreement due to unforeseen circumstances or a mutual change of heart.
A common example where a Deed of Rescission is required is when an individual or entity needs to be removed or added to the contract (e.g. for financial reasons or at the advice of an accountant, broker or lawyer). If you were to simply amend the contract, the Queensland Revenue Office (QRO) may deem the alteration to be a separate transfer for dutiable purposes, exposing the parties to what is often referred to as ‘double duty.’
While transfer duty is usually paid by the Buyer, it is important to remember that the Seller can also be liable under Section 17 of the Duties Act 2001 (Qld).
In this instance, a common course of action is for the parties to enter into a Deed of Rescission on the basis they enter into a new Contract of Sale with new terms agreed and required by the parties.
This is also why it is important that buyers and sellers have any Deed of Rescission and/or new Contract of Sale drafted and reviewed by an experienced lawyer to ensure their interests are protected.
When to Consider a Deed of Rescission
Mutual Consent
Both parties must agree to the rescission of the contract. This option is ideal when both parties acknowledge the need to revoke the existing agreement and prefer to walk away without any lingering obligations.
Material Breach
If one party has substantially breached the contract, rendering it unenforceable or ineffective, the other party may choose to execute a Deed of Rescission to rescind the agreement.
Mistake or Misrepresentation
In cases where the contract was entered into based on a fundamental mistake or misrepresentation, a Deed of Rescission can be used to rectify the situation (see example above).
2. Contract Amendment
Amending a contract entails making changes to certain terms or conditions, while keeping the rest of the agreement intact.
This option allows the parties to adapt to changing circumstances without completely abandoning the original contract. Contract amendments are often used when both parties want to preserve the relationship but need to update certain provisions. A common example is the misspelling of a name, amending a due date, or inserting a new clause.
When to Consider Contract Amendment
Flexibility
If the changes needed in the contract are specific and can be isolated to certain clauses or sections, amending the contract might be a more practical option compared to a Deed of Rescission.
Preserving the Relationship
If the parties have an ongoing business or personal relationship and wish to continue working together, making amendments might be more conducive to maintaining the partnership.
Cost and Time Considerations
Contract amendments are generally more time and cost-effective compared to executing an entirely new agreement.
Conclusion
Deciding whether to pursue a Deed of Rescission or amend the contract is a choice that will depend on the circumstances of each situation.
It is crucial to seek professional legal advice to ensure compliance with Queensland's property and contract legislation, and to protect your rights and interests. An experienced lawyer can guide you through the process, providing valuable insights specific to your situation and needs.
Disclaimer: This publication is not intended to be comprehensive, nor does it constitute legal advice. We are unable to ensure the information is current and there is no guarantee in relation to accuracy. You should seek legal or other professional advice before acting or relying on any of the content of this publication. The views and/or opinions expressed in this publication is that of the author and may not necessarily represent the views and/or opinions of RHC Solicitors.
RHC Solicitors ©