Rescind a contract for the sale of land
When you buy a property in New South Wales, after exchange and prior to settlement of the property, the buyer can rescind the contract at any time before the cooling off period expired. However, the vendor has no right to rescind the contract during the cooling-off period. Nevertheless, most property contracts normally have a special condition that gives rights to both parties to rescind the property contract. The special condition provides
“should either party, prior to completion…die or become mentally ill, then either party may rescind this Contract by notice..thereupon this Contract shall be at an end…”
In accordance with Brennan v O’ Meara [2009] NSW 1374, although the contract did not contain a definition of “mentally ill”, the Court considered section 14 of the Mental Health Act 2007 (NSW) (“MHA”). It provides, a person is a mentally ill person if the person is suffering from mental illness, and, owing to that illness, there are reasonable grounds for believing that care, treatment, or control of the person is necessary (a) for the person’s own protection from serious harm or (b) for the protection of others from serious harm.” Section 4 of the MHA defined ‘Mental Illness’ as ‘A condition that seriously impairs, either temporarily or permanently, the mental functioning of a person and is characterized by the presence in the person of any one or more of the following symptoms (a) Delusions; (b) Hallucinations; (c) Serious disorder of thought form; (d) A severe disturbance of mood; (e) Sustained or repeated irrational behaviors indicating the presence of any one or more symptoms referred to in paragraphs (a)–(d).’
From the above case, no evidence suggested Mr. O’Meara was unable to function or deal with his affairs. As such, the Court held the notice given by Mr. O’Meara of recission was invalid because he was not mentally ill within the meaning of the special condition.
In order to avoid disputes on such matters, consider drafting the special condition rights to rescind the property contract, when a party is suffering mental illness by making it referrable to s4 of the MHA.
Speak to CFS Legal dedicated lawyers in confidence for contract review. Email: info@cfslegal.com.au