The recent case of Blanco v Wan  NSWSC 273 involved a contract for the sale of land where the purchaser agreed to pay $205 000 (10% of the price) by instalments as a deposit. The purchaser paid $80 000 soon after exchange, and the remaining 125 000 was payable ‘on or before settlement’ or ‘upon default.’
The purchaser failed to complete the contract, so the vendor terminated it and sought to recover the $80 000 paid as well as the unpaid $125 000. The court held that the initial $80 000 was a deposit, and hence the principles concerning penalty provisions did not apply. The $125 000 was not a deposit because it was not payable at a time when it would be an earnest of performance, and that in substance it was a penalty. The amount was held to be extravagant and disproportionate to the interest of the vendor sought to be protected.
Separately, the purchaser claimed that the contract should be set aside as being unjust under the Contracts Review Act 1980 (NSW). However, this claim failed because there was no material inequality of bargaining power and because the purchaser had an adequate appreciation of the contract’s terms, and it did not operate in an unconscionable, harsh, or oppressive manner.