Developments (WA) Pty Ltd v Whittle-Herbert

Developments (WA) Pty Ltd brought an action against Whittle-Herbert for specific performance of a contract for the purchase of land. The contract contained a condition that the contract was subject to the purchaser obtaining finance approval. The purchaser failed to obtain finance approval within the time stipulated in the contract. The vendor purported to terminate the contract on this basis but the purchaser affirmed the contract, insisting that the contract could only be terminated if the purchaser failed to obtain finance approval within a reasonable time. The vendor argued that the contract gave an immediate right to terminate if finance approval was not obtained in time, and that the purchaser’s affirmation was ineffective because it came after the vendor had purported to terminate the contract. The court had to determine whether the contract gave an immediate right to terminate and, if so, whether the purchaser’s affirmation was effective.

The court held that the contract did not give an immediate right to terminate. The word ‘immediate’ in the contract was not to be taken literally. Instead, the vendor was required to exercise its right to terminate within a reasonable time after the purchaser failed to obtain finance approval. Because the vendor did not exercise its right to terminate within a reasonable time, the purchaser’s affirmation was effective. The court also held that the vendor was estopped from terminating the contract because it had led the purchaser to believe that the contract would not be terminated if the purchaser took steps to obtain finance approval. The court held that the purchaser was entitled to specific performance of the contract. The court ordered that the vendor was to return the property to its condition as at practical completion.