Contracts for the sale of land — When does a deposit paid via instalments constitute a penalty?

Publication Type:
Journal Article
Australian Property Law Journal, 2016, 25 pp. 40 - 54
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Tension has long existed between common law and equity over whether certain moneys sought as a result of a contractual breach should be constituted as a penalty. Recently, this ongoing debate has had significant consequences for parties in conveyancing matters where deposits are paid via instalments. Previous case law reveals some courts confirming the status of secondary payments as deposits, with others declaring them to be unenforceable penalties. Associate Justice Harrison’s recent judgment in Rana v Dalla Costa has to an extent clarified how the courts will determine the status of a deposit paid via instalments. In light of the decision, this article revisits the leading authorities and fundamental principles in an effort to elucidate the current standing of the law.
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