A seller and a buyer agreed to buy and sell a property. Both parties used the Contract Incorporating the Standard Conditions of Sale (5th edition - 2018 revision) unamended to exchange the contract. After the exchange of contracts, a severe storm destroyed the property before the completion date. Unfortunately, neither the buyer nor the seller had insurance on the property during this period. As a result, the buyer is now refusing to complete the purchase. The question is whether the buyer is obligated to proceed with the purchase despite the damage caused by the storm.
Is the buyer obligated to proceed with the purchase?
Select 2:
A seller and a buyer agreed to buy and sell a property. Both parties used the Contract Incorporating the Standard Conditions of Sale (5th edition - 2018 revision) unamended to exchange the contract. After the exchange of contracts, a severe storm destroyed the property before the completion date. Unfortunately, neither the buyer nor the seller had insurance on the property during this period. As a result, the buyer is now refusing to complete the purchase. The question is whether the buyer is obligated to proceed with the purchase despite the damage caused by the storm.
Is the buyer obligated to proceed with the purchase?
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Yes, because risk in the property passes to the buyer on exchange of contracts.
(B) The buyer is contractually bound to proceed with the purchase because according to the standard conditions of sale, the risk associated with the property passes to the buyer on the exchange of contracts. This means that if the property is damaged or destroyed between the exchange and the completion, the buyer must still go ahead with the purchase.
(A) is incorrect because the standard conditions do not require the seller to insure the property between exchange and completion. There is also no obligation on the buyer to insure the property during this period. However, given that the risk passes to the buyer on exchange, it is advisable for the buyer to do so. Most properties are insured by both the seller and the buyer between exchange and completion.
(C) is incorrect because the title to the property does not transfer on exchange. If the land is unregistered, the title transfers on completion. On the other hand, if the land is registered, the title transfers when the purchase is registered.
(D) is incorrect because it is irrelevant whether the property is in the same condition as it was on exchange since the risk has already passed to the buyer on exchange.
(E) is incorrect because, as explained above, the risk associated with the property passes to the buyer on exchange, not on completion.