Implied obligation to give reasonable time to comply with ‘split cheques’ stipulation

Where a contract obliges a purchaser to pay with split cheques, the seller has an implied obligation to give the buyer the necessary information early enough to give the buyer reasonable time for compliance. If this time is not given, the buyer may be entitled to rescind. If the seller does not give the information early enough and the contract is not rescinded, time will not be of the essence for completion even where the contract states that it is. The buyer will be allowed a reasonable time to complete.

In Kensland Realty Ltd v Whale View Investment Ltd ([2002] 1 HKLRD 87, CFA) a contract for the sale of land required the buyer to pay with split cheques. The necessary information as to the payees and amounts arrived with less than two hours to go before the deadline for completion. Time was expressed to be of the essence. The buyers arrived six minutes late with the cheques and the seller purported to rescind and forfeit the deposit. The Court of Final Appeal held that the sellers had not complied with an implied obligation to give reasonable time to comply with a split cheques requirement. The buyers had by their conduct elected to keep the contract on foot. Nevertheless, the sellers could not insist on strict compliance with the time for completion. There is a principle that prevents parties to a contract from relying on their own wrong. It can take effect either as a principle of construction or as a substantive rule of law. Here the seller was seeking to rely on its own failure to give adequate time for compliance to allow it to invoke the time of the essence clause. This would not be allowed. Instead, the equitable rule applied. Thus, it was enough for the buyer to show that he had completed the transaction, or been ready to do so, within a reasonable time after the stipulated time. The buyer was entitled to rescind and to damages from the seller.

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