In a recent case questions arose regarding whether a postdated cheque was legally a cheque and, whether the use of a postdated cheque would provide grounds for termination as though it was a breach of an essential term?

In MA and Another v Adams [2015] NSWSC 1452, the plaintiffs had purchased land by auction. However, upon handing over the cheque, the purchasers requested that the agent wait a few days before the cheque was banked. The cheque was also postdated, which the agent did not realise. Before the cheque was deposited and honoured the vendor terminated the contract.

The purchasers commenced proceedings on the basis that the vendor had no cause to terminate the contract. The vendor argued that the postdated cheque was a breach of an essential term and would provide grounds for termination.

The Court ruled in favour of the vendor finding that under the definitions within the standard form contract for sale of land that a “cheque” is not a cheque if it is postdated or stale. Under clause 2.5 of the standard form contract the Court held that because no cheque was provided and deposit never received the postdated cheque, not being a legal form of a deposit, was a breach of an essential term and therefore, grounds to terminate. Furthermore, the arguments for the defendant were strengthened by the fact that the agent had no authority to accept a postdated cheque there was no acceptance by the vendor.

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