A recent case considered whether a price adjustment clause in a contract merged on settlement. 

The Purchaser entered into a contract to purchase a shop in a “off the plan” development.  The contract contained a clause allowing for a price adjustment in the event that the area of the shop once completed was more or less than the area shown on the plan. 

A dispute arose between the Vendor and Purchaser as to the actual area of the shop:  whether to measure from the internal face of the wall or from the outside face of the wall. 

The Contract provided that the measurement of the lot included:

  1. The front face of the premises; and
  2. The middle of the dividing walls to each of the side walls where these are shared walls; and
  3. The outside face of all other walls of the premises.

The Purchaser claimed he was entitled to a reduction of the purchase price due to the 2 square metre reduction in size.   The Vendor claimed the property had increased by 2.3 square metres and was entitled to a $25,300 increase in the purchase price.

The Purchaser intended to obtain his own survey of the property.  Unfortunately this could not be done prior to settlement.  The Purchaser settled while reserving his rights to claim later.

The Court held that the doctrine of merger provides that the provisions of a contract for the sale of land merge on completion. This means that a purchaser’s right to sue on the terms of the contract is extinguished upon completion. 

“I do not think there is a more important principle than that a purchaser investigating a title must know that when he accepts the title, takes the conveyance, pays his purchase-money and is put into possession, there is an end to all as between him and the vendor on that purchase. If it were otherwise, what would be the consequence? There never would be an end to the question; whereas, by adhering to the rule, the purchaser is put into possession at once of his land, and the vendor has the purchase-money to dispose of as he thinks fit the moment after receiving it.”