Can vendor cancel contract of sale Victoria?

Picture this: you list your Carlton terrace, the Saturday inspection is packed, a young family makes an offer and everyone signs on the dotted line. Two weeks later the market shifts, your neighbour hints at a bigger purchase price and you start wondering whether you can simply tear up the paperwork. In Victoria the answer is almost always "no". Once a contract of sale is signed it is a binding agreement and any attempt by a vendor to walk away must fit within narrow legal gateways. Below we explore those gateways in plain English so you can avoid costly mis-steps.

When the Deal Becomes Binding

A residential property is "sold" the moment the last party signs the contract of sale and each side receives a fully executed copy. From that point the document creates enforceable rights and obligations under the Estate Agents (Contracts) Regulations 2008 and the standard Law Institute of Victoria / REIV contract. Unlike buyers, vendors have no statutory cooling off period. In other words, the law expects sellers to be sure before they sign.

Myth-Busting: "I Changed My Mind" Is Not a Ground for Rescission

Many owners assume they may simply pull out because they have found a higher offer or had second thoughts. That is not the case. A vendor cannot just change their mind unless the contract itself gives them that right. Attempting to withdraw without a lawful basis exposes the vendor to specific-performance orders forcing settlement and to claims for compensation.

Walking Away Before Anybody Signs

Prior to exchange either party may depart at will. If your agent is still "taking offers" you can choose not to accept one or counter at a higher figure. Once even a conditional offer is accepted in writing and signed copies are swapped that freedom disappears. Vendors who are uncertain should hold off signing and obtain advice about adding protective special conditions.

Special Conditions Drafted in the Vendor's Favour

A contract may include bespoke clauses that let the seller cancel if a nominated event occurs, for example:

• "Subject to the vendor obtaining finance to purchase another property on terms satisfactory to the vendor"
• "Subject to the vendor's accountant consenting to the tax consequences of the sale within seven days"
• "Vendor may terminate if a planning certificate ordered before settlement reveals a proposed public acquisition overlay"

Because such conditions are not part of the LIV standard form they must be negotiated case by case. If worded clearly they give the vendor a contractual right to rescind simply by serving written notice within the stated time. If not drafted tightly, a court may find them uncertain or that the vendor has not acted reasonably, so specialist conveyancing advice is essential.

Off the Plan Sunset Clauses (Now Heavily Restricted)

Developers once used sunset clauses to cancel residential off the plan contracts when construction ran late and then resell at a higher price. The Victorian Parliament shut that door in 2019. Sections 10A–10F of the Sale of Land Act 1962 now say a vendor can rescind under a sunset clause only if every purchaser consents or the Supreme Court declares the rescission just and equitable. At least twenty-eight days' written notice stating the reason for delay must be given, and the vendor wears the cost of any court application. In practice, very few vendors succeed unless there are genuine construction issues beyond their control.

Buyer Default

The most common path for a vendor to end a contract is when the purchaser breaches it. Typical breaches include:

• Failure to pay the deposit on time
• Failure to supply finance approval by the due date (where the contract is subject to finance)
• Failure to settle on the nominated day

The standard General Conditions require the vendor to serve a formal default notice identifying the breach and giving the buyer at least fourteen days to fix it. If the buyer does not comply, the vendor may issue a rescission notice. On valid rescission the vendor generally keeps the deposit, may sue for any shortfall if the property later sells for less and may claim interest and costs. Precise outcomes depend on contract wording and mitigation steps, so prudent vendors engage experienced conveyancers to handle notices.

Step-by-Step Timeline When a Purchaser Is Late to Settle

To make the default process less abstract, imagine settlement is due on 30 September:

1. 30 September, 3:00 pm – Your conveyancer attempts electronic settlement in PEXA. The purchaser's bank fails to supply cleared funds.
2. 1 October – Your lawyer serves a Default Notice giving fourteen clear days, so the last day to remedy is 15 October at 4:00 pm.
3. Any time to 15 October – The buyer may settle, pay penalty interest and the matter ends.
4. 16 October, 9:00 am – A Rescission Notice is served. The contract ends, the deposit is released to you and you may re-list the property.
5. November onward – If you sell for less than the original price you may sue the first purchaser for the difference, interest and costs. Conversely, if the new contract is higher you still keep the original deposit.

Destruction of the Property or Statutory Frustration

If the house burns down or is compulsorily acquired between contract and settlement, either party may be able to end the agreement. Section 34 of the Sale of Land Act 1962 allows rescission and return of the deposit where the land becomes unfit for human habitation. Consumer Affairs Victoria confirms buyers might also walk if the dwelling suffers major damage post contract. Courts have recognised equivalent rights for vendors in rare cases, though most modern contracts now allocate insurance risk to the purchaser after signing.

Mutual Rescission

Nothing prevents both parties signing an agreement to unwind the deal. This often occurs where a genuine issue arises (for example the buyer's finance falls through) and the vendor prefers to remarket quickly rather than litigate. A deed of rescission typically directs the stake holding agent to refund the deposit, releases each side from future claims and records who pays costs.

Situations Where the Vendor Cannot Cancel

• Because a higher offer arrives after exchange
• Because the vendor's own purchase collapses and they no longer wish to sell
• To punish a buyer who conducted a building inspection that revealed minor defects
• Simply by refusing to settle without first serving the contractual notices

In each of these scenarios the vendor risks court orders compelling settlement, plus substantial damages for lost opportunity and rent.

Risks of Getting It Wrong

Recent LPLC case studies show vendors who rescinded prematurely faced claims exceeding six-figure sums, including costs of bridging finance and rent for displaced purchasers. Courts may also order specific performance, meaning the seller must complete the sale even if values have risen. Where the vendor's behaviour is egregious, buyers can lodge a caveat on title, freezing any fresh dealings until the dispute is resolved.

Practical Tips for Melbourne Sellers

1. Be contract-ready: gather building permits, owners corporation records and other Section 32 documents early to avoid delays.
2. Discuss special conditions before auction day: if you truly need an escape hatch (for example you have not yet bought elsewhere) insist your lawyer drafts a clear clause.
3. Keep deadlines in your calendar: missing a purchaser's due-diligence deadline may forfeit your own rights.
4. Serve notices correctly: default and rescission notices must follow the contract's format, be delivered properly and allow the correct time.
5. Insure up to settlement: you remain at risk for property damage until the title transfers.

Melbourne Market Quirks to Watch in 2025

The current shortage of inner-city family homes means multiple offers above reserve are common. That ups the temptation for vendors to change their minds post contract. Remember, the courts do not care about FOMO or last minute bidding wars. A paper loss on a "better deal" is not a lawful basis to rescind. Instead, focus on negotiating the right price before signing, or craft an early release clause that allows you to bank part of the deposit straight away.

If You Are the Buyer and the Vendor Wants Out

Stay calm, read the contract and seek advice fast. Often a firm letter reminding the vendor of their obligations and threatening specific performance is enough. If the vendor still drags their heels consider lodging a caveat, applying for urgent orders to force settlement and claiming out of pocket expenses.

Conclusion

In Victoria the law stacks the deck in favour of completed contracts. Vendors have scant opportunity to cancel once the ink is dry unless the contract itself or rare statutory provisions open a narrow gate. Before you list your Brunswick cottage or Southbank apartment, talk to a conveyancing professional about those gates and make sure you know exactly where they lead.

Need clarity on your own contract? The team at Pearson Chambers Conveyancing specialises in Melbourne property transactions. Call us on 03 9969 2405 or email contact@pearsonchambers.com.au for a no-obligation chat and a free Section 32 contract review. We are ready to help you step through the process with confidence.