Some contract-killing clauses

Did you know that the variety of clauses that Investors use is almost limitless?

As a solicitor I regularly get surprised by the variety and creativity of clauses that I am called upon to draft from investors which can, at times, add a bit of colour to your professional life.

One vivid example I recall is where a foreign investor engaged me to represent him on the purchase of a penthouse in a new development, to purchase off the plan for millions of dollars.

He had the cash to buy the property and so the developer was keen to oblige his every contract sign

His fundamental issue was that the en-suite to the main bedroom on settlement must have a noiseless flushing toilet.

That’s right, a toilet that flushed without any noise at all!

That was the fundamental issue then and if the toilet didn’t comply, there was no deal.

And so as the Buyer’s solicitor I received an inordinate amount of attention from the senior partner of a national law firm representing the developer, who sent numerous drafts of a clause to be included in the contract that put this issue to bed and gave the Buyer the comfort to sign the contract.

It all turned out well and on settlement date it was my job to test out the toilet to ensure that it complied with this fundamental requirement.

Another noteworthy aspect about the transaction was the origin of the Buyer.

The standard documentation that I sent to the Buyer requested him to provide me with details of his place of birth and his occupation.

You may be amused to know that this gentleman, who was acquiring a multi-million dollar property, returned the forms with the following notations:-

  1. Place of Birth – Colombia;
  1. Occupation – Farmer.

So that is where the money came from!

Some Escape Clauses

Cunning investors regularly brief me to prepare clauses to be included in their Contract of Sale, with the sole purpose of allowing them the ability to exit the Contract if they simply change their mind.

That is an escape clause.

My book “Smart Questions that Property Investors must ask their Solicitor” contains commentary about a lot of such clauses, some transparent and others where the real purpose of the clause is carefully disguised.

Things must be a lot easier on this score in the United States of America as a couple of investors have told me over the years, after attending a seminar by the great Robert Kiyosaki, that you should always include such a clause in your Contracts and you can put down any reason, giving you the ultimate say about whether you proceed or not.

The big man himself even suggests, I am told, that you can make a contract “subject to approval of your dog”.

Well perhaps you can in the United States but you definitely cannot in Australia.

Any such escape clauses used here must be real and genuine and you won’t get away with using this American style of clause here if you want to ensure that your Contract is legal and watertight.

You can however make it subject to approval of your business partner or spouse.

Want more of this type of information?

Rob Balanda


Rob is a partner in the Gold Coast based law firm MBA Lawyers. He is a highly regarded educator of property investors and estate agents and the author of the "Made Simple" series of books and CD's.

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