What is the legal effect of a side agreement whereby the Seller agrees to accept an amount lower than the purchase price on the Contract?
If there is a condition in the contract itself and it can not be removed from the Contract, which is given to the Buyers financier there should not normally be an issue. If, however, such a condition was in a separate agreement or if it was capable of being removed from the Contract (eg. because it was written on a separate page) then there is likely to be an issue.
The problem is that the Buyers intending financier may not be made aware of this condition. If that is the case there is likely to be fraud committed against the Buyers financier.
The reason is that the Buyers financier thinks that the purchase price is as stated in the Contract and lend on that basis (and probably do a valuation based around that price) but in reality the purchase price will be different (lower). This act constitutes a fraud against the Buyers financier.
TIP: Unless you are certain that the Buyers financier has been told the full story these agreements should be avoided.
Learn more about the Contracts with Side Agreements to Accept a Rebate Off Purchase Price today, contact Ownit Conveyancing today!