SUBJECT
TO FINANCE CLAUSE
The
most common “other condition(s)” is the subject to finance
clause - Annexure clause attached to the standard form contract.
Whether
a subject to finance clause will be upheld in a contract will depend
upon its exactness, clarity, and detail.
EXAMPLES
- "Subject to finance being arranged on $200 deposit" Held
to be too vague and therefore, the contract was void Moran v
Umback (1966) 1NSWR437.
- "Subject to bank finance of $3000 being obtained for
the purchaser" Held that bank finance was sufficient guide to
reasonableness and therefore upheld Jubal v McHenry (1958)
VR 406.
- "The purchaser to apply to "all lending bodies" for
finance on conditions set out in the agreement" Held to be
unenforceable as the term; "lending bodies" was too uncertain Morgan
v Cambridge (1966) 2NSWR556.
Most
borrowers need time after deciding on the house to get approval for a
loan to buy it. Most sellers understand this. Agreements can
generally be exchanged subject to a finance clause. A
finance clause is an escape route for the buyer provided its terms
are complied with. After exchange, the seller is obliged to proceed
with the sale and so is the buyer except in the case where he does
not get approval for the mortgages mentioned in the finance
clause. If that happens he can rescind the agreement and obtain the
return of his deposit except for the agreed figure (generally
$100.00) held back towards the seller’s legal costs.