Time is not normally of the essence in a contract for the sale and purchase of land. This means that if one party is late completing, the other party will not be entitled to rescind the contract. However, most contracts will allow a party who is ready, able and willing to complete to serve a "notice to complete" on the defaulting party.
The effect of such a notice is usually that completion must occur within ten working days. For this purpose, time is of the essence and so if the defaulting party still does not complete, the innocent party may then rescind the contract (and, if the innocent party is the seller, forfeit the deposit).
In Chinnock v Hocaoglu, the buyer failed to complete on the contractual completion date. The seller therefore served a notice to complete.
The buyer tendered the completion monies on the last day for completion under the notice. However, the monies did not include an amount in respect of the seller's legal costs, which the buyer was obliged to pay under the contract.
The court held that the buyer had not tendered the correct amount and that the seller was not obliged to complete. Since the deadline for completion had expired without the buyer re-tendering the right amount, the seller was entitled to rescind the contract and forfeit the deposit.
Given that the contract did not in fact provide when the additional costs were to be paid, the buyer tried to argue that it could, in effect, "settle up later". The court disagreed and found that it was implicit that the monies were to be paid on completion.
Things to consider
Where completion occurs after the completion time stated in the contract (usually, 1 or 2pm), most contracts will provide that completion is to be treated as if it had occurred on the next working day, for the purposes of calculating the amount due. This means that, in addition to the balance of the purchase price and any other sums due under the contract, the buyer must also pay compensation for late completion. If this amount is not tendered alongside the rest of the completion monies, the seller is entitled to refuse to complete until the whole amount is paid.
Where a notice to complete has been served and time is of the essence for completion, this could have disastrous consequences for a buyer. While many sellers may adopt the more relaxed stance of completing and dealing with the outstanding payment afterwards, buyers should be aware that sellers are within their rights to insist on payment of the entire amount, including interest.