An SA buyer and vendor sign and exchange the contract for a house on Thursday. What is the legal effect?
Correct Answer
D) It creates a binding contract, subject to any conditions and the buyer's cooling-off right
Exchange of contracts creates a legally binding agreement between the vendor and purchaser, subject to any conditions precedent (such as finance or building inspection) and the purchaser's cooling-off rights.
Why This Is the Correct Answer
Once contracts are signed and exchanged the parties are bound, subject to any conditions such as finance and to the purchaser's statutory cooling-off right. Title passes only on registration after settlement.
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