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Benchmark - Cases & Commentary
Contract for Sale
    •  Parties
        -  Addition of new party following exchange

Addition of new party following exchange     

The vendors entered into a contract of sale to sell residential property to Mr Pallister as sole purchaser.

After exchange, but before completion, the purchasers’ solicitor sent a letter to the vendor’s solicitor stating that “we have added Mrs Pallister as a joint purchaser … please amend the counterpart Contract accordingly.” The vendor’s solicitor complied with this request, and added Mrs Pallister as a joint purchaser.

The sale fell through, and the vendors sued both Mr and Mrs Pallister. Mr Pallister had gone bankrupt and so was worthless as a defendant. After litigation, Mrs Pallister was held not to be liable, on the ground that there had been no contract between the vendor and herself; that is, it was held that she had not been validly added as a party to the contract, as her solicitors did not have the authority to act as her agent in this respect.

The vendors then sued the solicitor for the purchaser, alleging that they had falsely stated that they had authority to act as Mrs Pallister’s agent.

The Court of Appeal agreed with the Trial Judge that the purchaser’s solicitor had not stated that they had authority to act for Mrs Pallister.

This case shows the importance of understanding the nature of the contract for sale. A new party cannot be added to such a contract in the same way that minor amendments to the contract might be made. Adding a party to the contract, in fact, amounts to the creation of an entirely new contract of sale. Young JA warned:

“I must state the general proposition that the Court expects that conveyancers will not take short cuts in conveyancing transactions without a full appreciation of what they are doing, ensuring that what they do will not cause loss to the client.”

Hearse v Staunton [2011] NSWCA 139