Vendor’s rights to retain instalments paid by defaulting purchaser clarified

Clause 35.4 of the Victorian standard form contract for the sale of land sets out the vendor’s rights where a contract for the sale of land is terminated because of breach by a purchaser.

At common law where a vendor terminates a contract because of a default by the purchaser and retains the land, the vendor is required to return any instalments paid over and above the deposit: McDonald v Dennys Lascelles Pty Ltd(1933) 48 CLR 457. Clause 35.4(d) of the standard form contract displaces the common law by permitting the vendor to retain any part of the price paid until the vendor’s damages have been determined.

The Court of Appeal in Aintree Major Town Shopping Centre Pty Ltd v Copia Developments Pty Ltd [2026] VSCA 179 clarified the operation of 35.4(d). In earlier versions of the standard form contract clause 35.4 was numbered 28.4 as it was in Aintree.

In Aintree, in 2019 the parties signed a contract for the sale of land in a standard form with an agreed purchase price of $30,000,000 with a settlement date in 2021. The purchaser paid a deposit of $3,000,000 and an instalment of $1,500,000 but failed to pay the balance of the purchase price by the settlement date. The vendor served a default notice, the default was not remedied, and the vendor terminated the contract and became entitled to possession of the land and the deposit was forfeited. In 2024 the purchaser demanded repayment of the instalment of $1,500,000. The vendor refused to repay the instalment pending the determination of a claim for damages for breach of contract that it had not commenced.

Clause 28.4 (as amended by special conditions which are not relevant to this post) provided:

The question was: was the two year time frame referred to in 28.4(c) relevant to the exercise of the vendor’s rights under cl.28.4(d)?

The trial judge held that the purchaser was entitled to the return of the instalment of $1,500,000 because clause 28.4(d) only had effect if the vendor were to take action in accordance with clause 28.4(c) and did so within two years of the contract ending.

The Court of Appeal dismissed the vendor’s appeal: the Court held that because paragraphs (a) to (e) were connected by the repeated conjunction “and” the vendor’s rights under clause 28.4 were cumulative and interdependent and that their arrangement in sequence was a strong indication that they were to be read together: see [24].

With respect to the time limit, the Court held that the function of the two year time limit was clear in relation to cl. 28.4(c)(ii): if the vendor resold the property it could – at its option – recover any deficiency in the price on resale as liquidated damages: see [26].

But the function of the time limit was less clear in relation to cl. 28.4(c)(i) because the paragraph added nothing to the vendor’s position at common law: the vendor’s claim for damages for breach of contract was a common law claim that existed independently of clause 29.4(c)(i) and was neither confined nor improved by the inclusion of the time limit: see [27].

The time limit had work to do in relation to cl.28.4(c)(i) only if the vendor’s right of retention in cl.28.4(d) depended upon having taken one of the actions in cl.28.4(c) and, if the vendor took either of those actions within two years of the contract ending, it gained the benefit of being permitted to retain any instalments paid by the purchaser until the vendor’s damages had been determined and then being able to set off that money against its damages.

The effect of Aintree is that where a vendor wishes to take advantage of cl.28.4(d) (cl.35.4(d) in more moderns versions of the standard form contract) it must commence its proceeding for damages within the time frame set out in in paragraph (c).