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This article from 2015 covers claims relating to the use of rebate clauses. In addition to exposing practitioners to a complaint, the use of rebates can also expose a practitioner to a claim.

In one claim a practitioner acting for a purchaser failed to advise their client that if settlement did not occur on the due date the client would not be entitled to the rebate as specified in the contract of sale.

In another claim the practitioner acting for the vendor made a mistake in preparing a contract of sale. Purchasers were offered either a rebate or a rental guarantee. The purchaser selected the rebate but the practitioner included both the rebate special condition and the rental guarantee in the contract of sale.

In Miro v Fu Pty Limited [2003] NSWSC 1009 Justice Windeyer made the following statement about rebate clauses in contracts of sale of real estate:

I have said before and say again that this type of clause is quite improper. It can be inserted for no purpose other than to mislead persons such as lending authorities and purchasers of other units in that development. In my view it is likely that solicitors who purposely prepare contracts with contradictory clauses such as this may be guilty of professional misconduct. …………. Instructions of clients cannot excuse such conduct.

Here are three tips about avoiding these sorts of claims.

  • When acting for a vendor ask the client what is the purpose of providing a rebate. Where a rebate is being offered for marketing purposes tell the client they should consider other ways of achieving the outcome they desire.
  • When acting for a purchaser ensure the client is informed of any conditions precedent which need to be satisfied for eligibility for the rebate.
  • Both vendor and purchaser will also need to be informed that they should:
  • Obtain tax advice particularly about GST and CGT
  • Notify their lender of any rebate
  • Consider any duty implications