Agreements - Essential Clauses
Note: This article follows on from our recent post: Sale & Purchase Agreements
Article 2: “Essential Clauses You Can Include Safely & How to Draft Them Properly”
Not all additional clauses are dangerous. In fact, some are essential to protect your interests, provided they’re written correctly.
Here’s a guide to a couple of common clauses, New Zealand buyers and sellers request along with tips on drafting them effectively.
1. Due Diligence Clause - Covers the unknowns in a transaction such as environmental factors, insurance, tenancies or resource consents (to name a few). These are often inserted for the sole benefit of the purchaser with no need to justify reasons should the clause not be satisfied.
Tip: Ensure the clause provides a clear timeframe, sole benefit wording and absolute discretion for the purchaser.
2. Sunset Clause - Often used in off-the-plan purchases to set a date by which the Code Compliance Certificate and/or the Title must have issued. These clauses are used as a “back-stop” in an agreement and often allows one or both parties the ability to exit the agreement by invoking this clause, with no penalty.
Tip: Specify the consequences if the date is not met, who can cancel under the Sunset Clause and the ability to extend the clause if required.
Drafting Best Practices
Keep it clear – Avoid jargon unless legally required.
Use correct numbering – Follow the SPA format.
Match the rest of the contract – Ensure dates and definitions align with other clauses.
Initial all changes – Each party should initial changes to confirm agreement.
By using these clauses strategically and drafting them well, you can protect your position without undermining the agreement.
Whether you are looking to purchase or sell for the first time , the last time or anywhere in between our property experts can walk with you on every step of your property purchase…
Need Help - Get In Touch
To contact a member of our property team, use the links below or call us on +64 9 486 2169.
Kate Chivers (Partner) - kate.chivers@turnerhopkins.co.nz
Samantha Davey (Legal Executive) - samantha.davey@turnerhopkins.co.nz
