The common law rule is that any difference between the land described in the contract and the land to be actually conveyed constitutes a defect that entitles the purchaser to rescind. Vendors must be careful to protect themselves with effective defects clauses to avoid having contracts terminated in reliance on this rule.
In Vella v Ayshan (2008) departures from the approved plans were substantial and the purchasers were entitled to terminate the contract at common law and to have their deposit returned. The vendors’ obligation under the contract for sale was to build a residence in a proper and tradesmanlike manner and in accordance with the terms and specifications approved by the council.
The contract described the property as the land and the improvements. The “improvements” was the house. At the date of occupation the residence had been substantially, but not wholly completed. So, the purchasers issued a notice to compel the vendors to complete the construction and later, because various defects allegedly remained, they gave notice of termination.
Both sets of parties claimed they were entitled to the deposit and damages, but the court held that the contract had been validly terminated by the purchasers.
Although the residence was fit for human habitation, there were examples of non-compliance with relevant building standards relating to the construction of the residence. The defects in this case were held to be not trivial or isolated as they were departures from mandatory standards. Consequently, the vendors breached the contract by failing to cause the residence to be erected in a proper and tradesmanlike manner.
Further, there was a breach in that the vendors did not erect the house in accordance with the plans and specifications. The three departures from the approved plans had not been agreed to by the purchasers.