The District Court recently had to consider if a deposit payable under a house sale contract was paid on the due date. In this situation, the deposit was electronically transferred to the agent’s trust account late at night on the due date (after business hours) and as a result did not appear on the account statement until the following day. The question is, was it ‘paid’ by the due date or was it not?
The buyers signed a contract for the purchase of a house. It provided that the deposit be paid: “on the day the buyer signs this contract”. The agent was the nominated deposit-holder and its trust account details were shown in the contract. At 2.08 PM, the agent communicated the seller’s acceptance of the buyers’ offer and the signing of the contract by the seller.
The buyers paid the deposit by electronic transfer to the agent’s trust account at approximately 8.30 PM and it was receipted into the agent’s trust account the following business day, which was 20 October 2016. The seller claimed the deposit was not paid on the due date and terminated the contract. The buyers sued for specific performance, which is a court order requiring a party to perform what is stated in the contract.
The buyers argued:
1. They were not in breach
2. The parties intended the deposit to be paid on the day of the acceptance of the contract
3. The time that the deposit was receipted was out of their hands and in control of the banking system
4. The same result would have ensued if a cheque had been handed to the agents after banking hours – albeit sooner after the contract was accepted
5. The contract did not require payment “upon” or “on” acceptance (an event which they would not know when occurred) but “on the day”.
The seller argued:
1. The electronic transfer did not constitute a payment made on the due date and that there is a difference between an internet banking transfer, which is essentially a transaction between an account holder and his or her bank, and payment by cheque.
2. The letter from the agent to the buyer of 18 October warned the buyers re payment: “If you are paying your deposit via internet banking or credit card, please ensure this is paid 48 hours before the due date for this to arrive into our bank. If you do not allow this time, your deposit will arrive late and you will be in breach of contract”.
3. By virtue of the rationale in the High Court case of Brien v Dwyer (1978) 141 CLR 378, the deposit should have been paid on the afternoon of 19 October being the earliest practical time after communication of acceptance of the offer.
The Court’s decision
The buyers were “ready, willing and able” to complete the contract of sale and indicated that by the payment of the deposit on the evening of 19 October 2016, which was made in accordance with the contract. The contract did not require that the deposit be paid immediately, but rather on the day the buyer signed the contract. Specific performance of the contract was ordered.
What does this mean?
Whilst the specific terms of any contract must be looked at carefully to understand the precise obligations for payment of a deposit, the decision is authority for the proposition that where a deposit is paid by electronic transfer, it will be treated as having been paid on the day the transfer is put in place – even though the funds will not be receipted into the recipient’s bank account until a later day.