Under SA law, what is the effect of a subject-to-finance clause in a REISA contract if the purchaser fails to obtain finance approval by the specified date?

Q: What is the correct answer to: Under SA law, what is the effect of a subject-to-finance clause in a REISA contract if the purchaser fails to obtain finance approval by the specified date?

The correct answer is The purchaser must provide notice to the vendor that finance was not obtained; the contract may then be terminated in accordance with its terms. Under the REISA contract, the finance clause requires the purchaser to give notice to the vendor that finance was not obtained. The contract does not automatically terminate — the buyer must follow the contractual notice procedure to invoke their right to terminate due to finance failure.

Q: What background knowledge is needed for this Contracts Conveyancing question?

Subject-to-finance clauses are common in SA property contracts. The REISA standard contract specifies the process: the buyer must apply for finance, and if not obtained by the specified date, must give written notice to terminate. Time limits and notice procedures are strictly construed by courts.

Q: What is a good way to remember the answer to this Contracts Conveyancing question?

Finance failed? The contract does not die automatically — you must NOTIFY the vendor first. No notice = no termination. Remember: finance clauses need ACTIVE notice to terminate. Automatic termination is a common trap answer — always wrong.

Q: What exam tip applies to this Contracts Conveyancing question?

Finance clause termination requires NOTICE to the vendor. Contracts do NOT automatically end. Silence can waive the finance condition.

Q: How does this Contracts Conveyancing concept apply in Australian real estate practice?

A buyer's finance application is declined before the finance date. Their conveyancer promptly sends written notice to the vendor's conveyancer invoking the finance clause. The contract is terminated and the deposit is refunded per the contract terms.

Question

Contracts ConveyancingSAHARD

Under SA law, what is the effect of a subject-to-finance clause in a REISA contract if the purchaser fails to obtain finance approval by the specified date?

Answer Options

A

The contract automatically terminates without any further action required

B

The purchaser must provide notice to the vendor that finance was not obtained; the contract may then be terminated in accordance with its terms

C

The vendor can extend the finance date indefinitely

D

The purchaser forfeits the deposit automatically