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Saturday, 09 June 2007

THE BOND CLAUSE THAT SANK THE SALE

In a recent High Court case, a purchaser had to secure the balance of the purchase price by lodging "undertakings acceptable to the sellers' conveyancer".

When, by due date, all the purchaser had come up with was a bank letter of "bond approval", the seller put the purchaser to terms and in due course cancelled the sale.

The Court, holding that "there is a marked difference between obtaining bond approval and delivering undertakings acceptable to the seller's conveyancer", upheld the cancellation.

There are many possible ways to word a bond clause - there may be reference to the provision of a guarantee or of an undertaking, to "pre-approval of a bond", to "approval in principle of a bond", "obtaining a bond in principle" and many other permutations. All have different legal effects, and create different rights and obligations that may be critical to protecting your interests.

So make sure that the wording in the bond clause is checked professionally before you sign the agreement - the risk of not doing so isn't worth it.

This article first appeared in LawDotNews and is reproduced with permission of Herold Gie.


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Last Updated ( Saturday, 09 June 2007 )
 
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