Hi all
I have an ethical dilemma that I wouldn't mind some opinions on.
I have recently signed contracts to buy a large number of blocks of land. The contracts have been signed by both parties and are now unconditional. I am now wanting to onsell them and the RE Agent who I bought them off has pointed out to me that the contract price on two of the blocks is substantially less than the original agreed price, to the tune of nearly $20,000.
The vendor is quite a big developer and the contracts have been prepared by solicitors. It appears that there has been an oversight and a cheaper price than we agreed to pay was inadvertantly entered as the contract price. At the time I signed the contracts I was not aware of this. It has only been brought to my attention today when I spoke to the RE Agent about onselling them and he was checking the price we paid against what he thinks they are now worth.
What would you do? Would you tell the vendor that they have made a mistake or would you just proceed on the price set out in the contract?
Cheers
K
Linar,
I would go with the intent. What was the intended price you were to pay. Maybe if you are still stuck, put the shoe on the other foot and see how it fits, maybe this will give you the answer.
JLMate keep the money and wait till he says something about it.The price has come from somewere and i would say that it is the intended price that he wanted to sell in the first place.They will still make a profit on it.Maybe it was your mistake,if something is said later on and you feel guilty ,then offer him half back.How many times have you been told of your mistakes?
Keep it mate .
CheersDo you reckon some one else would refund the $20k to you? I think not
I would check what price they intended. Don't say what you thought the agreed price was, perhaps; go back and say that you thought you'd agreed on a different price and see what they come back with, just to make sure that you didn't make a mistake yourself. If they come back immediately and say "oh yes, we intended xxxx" (the figure that's $20K more), then I think that morally you should honour what you'd agreed to.
If someone was buying your aging parents' PPR, and had agreed to pay $600,000, but a clerical error at the real estate agent meant that $60,000 was inserted by mistake, and your parents didn't notice and signed the contract – how would you feel if the buyer held them to it?
I don't think the fact that a) the magnitude of the error is smaller, b) the developer may be making a profit anyway, or c) the developer's much wealthier than you, make any difference to the morality of the situation.
trakka wrote:I would check what price they intended. Don't say what you thought the agreed price was, perhaps; go back and say that you thought you'd agreed on a different price and see what they come back with, just to make sure that you didn't make a mistake yourself. If they come back immediately and say "oh yes, we intended xxxx" (the figure that's $20K more), then I think that morally you should honour what you'd agreed to.I totally agree with Tracey. I think a clear conscience is much more valuable than any amount of money. Treat others the way you would like to be treated. This will make the world a better place.
Hi Ian and trakka
You make very valid points and I am inclined to agree with you. However, I do think there is a difference between a small property investor and a large scale developer. One is clearly a business dealing by an experienced person who knows the world of business and the other (elderly parents) are just people who don't have the experience that a developer would be expected to have.
If I were the vendor I would just suck it up and accept that it was my lack of diligence that cost me the money. I would be gobsmacked if a purchaser pointed out the error to me and offered to rectify it. I don't know whether I would take them up on it, to be honest. And I would also fire my solicitor quick smart!
I already know what I am going to do about it. I just thought it would be interesting to see what other people thought.
Cheers
K
I think that the term ethical and 'agreement' are what matters. If you knowingly stick to the contract price but agreed otherwise, it is an ethical decision that only you can make. Different people have different ethics, where do yours sit?
My view, agreement is agreement regardless and the paperwork is merely a means to record the agreement and bind it by law. If you don't pipe up and come clean you are going against the agreement which questions your integrity and honesty as a dealmaker. If you can live with that then keep the money.
aussieinvestor | Digital Revenue Pty Ltd
http://appliancewhiz.com
Email MeKeep it
Hello Linar
Just thought I would warn you not to start counting your profit yet. If the vendor has not yet noticed the mistake they probably will at settlement. Be ready for problems specially if you have by then sold either of the blocks in question and have a buyer waiting to settle as well.
Would be interested to hear the end of this story. When do you settle on the blocks?Cheers
Elka
Linar wrote:I do think there is a difference between a small property investor and a large scale developer. One is clearly a business dealing by an experienced person who knows the world of business and the other (elderly parents) are just people who don't have the experience that a developer would be expected to have.That's relevant to negotiating and due diligence etc, but how is it relevant to what appears to be a clerical oversight?
I thinkk what goes around comes around.
For me It wouldn't matter whether it's a big develpeper or a mum and dad investor so I would struggle sleeping. The fact you posted your situation tells me you know what the right thing to do is…….
Best wishes with what ever you decide to do,
Swany
i may be wrong here but if there is a mistake in the contract isnt the vendors solicitor liable
I am concerned that you signed contracts without reading them carefully – what if the error had been in the vendor's favou?.
Having said that, by law a contract is an agreement which is legally binding on both parties.
You are under no obligation to do any more than is in the contract.
We sold a unit last year. I assumed that the dryer would be included in the contract. When we were presented with the contract already signed by the purchaser, the dryer was not mentioned. I questioned the RE agent and he said he had told the purchaser he was not sure if it was working as he did not know how old it was, so it was ignored and not included in the contract.
The agent was quite amazed that we even read the contract!!
The dryer was only 6 months old. On RE advice that it was not part of the contract, we kept it.
MargLinar wrote:Hi all
I have an ethical dilemma that I wouldn't mind some opinions on.
I have recently signed contracts to buy a large number of blocks of land. The contracts have been signed by both parties and are now unconditional. I am now wanting to onsell them and the RE Agent who I bought them off has pointed out to me that the contract price on two of the blocks is substantially less than the original agreed price, to the tune of nearly $20,000.
The vendor is quite a big developer and the contracts have been prepared by solicitors. It appears that there has been an oversight and a cheaper price than we agreed to pay was inadvertantly entered as the contract price. At the time I signed the contracts I was not aware of this. It has only been brought to my attention today when I spoke to the RE Agent about onselling them and he was checking the price we paid against what he thinks they are now worth.
What would you do? Would you tell the vendor that they have made a mistake or would you just proceed on the price set out in the contract?
Cheers
K
Developers are the first to charge penalty interest if buyers dont settle on time when purchasing from them and majority of the time its not the buyers fault or maybe an oversight from the buyer and you would be lucky to get any sympathy from them. Obviously the developers making way too much money doesnt have time to read the contracts they sign. I would question why they signed a contract with the wrong price on and see their response. If I was in your situation I would personally probably pay half the difference between the intended price and your actual contract price. I bet the developer reads their contracts in the future.
Linar wrote:Hi Ian and trakka
You make very valid points and I am inclined to agree with you. However, I do think there is a difference between a small property investor and a large scale developer. One is clearly a business dealing by an experienced person who knows the world of business and the other (elderly parents) are just people who don't have the experience that a developer would be expected to have.
This may be the case Linar. However don't you think that the Developer may have children and elderly parents and also may be a decent person making a living to support others? They also may be charitable people who contribute to society in many ways. It would be wrong to assume that this person deserves to be treated in a different way owing to his business being "large scale".
Regards, Ian
Hi Ian and trakka
A developer buys and sells property as a business. It is something that he would have done thousands of times before. The fact that he didn't check the contracts before he signed them (but instead relied upon the fact that his solicitor would have looked over them) is a business mistake. He should have known to check the contracts over himself. When a business makes a mistake it costs that business.
On the other hand when an individual sells a property for the only time in his or her life, it is understandable that he or she would trust that the solicitor engaged would have looked over and approved the contract.
I have differentiated between developers and individuals before. A couple of years ago I onsold two blocks of land, one to a developer and another to a first home buyer. I added a clause to the effect that if the purchaser was not able to settle on the specified day of settlement (which was a concurrent settlement) then I would reserve the right to rescind the contract. The developer was not able to settle on the day. I exercised my right to rescind the contract because the value of the land had gone up by about $20,000 in the meantime. I was of the opinion that the developer, who did this for a living, should have been organised enough to get his finance sorted out in time. Had the first home buyer been late, I would not have rescinded because, to my mind, it would be understandable for there to be glitches with someone who had never done this before.
So my differentiation is not based on the fact that the developer is "large scale" but because they have done this often enough to know to look at the contracts and if they don't, then pay the price.Which brings me to Marg's comment. Marg, you are exactly right. I should have looked over the contracts myself when I signed them. The contracts were about 20cm high. I just signed them and trusted that my solicitor had looked them over. If the error had been in the vendor's favour it would have been ABSOLUTELY my fault and I would have just taken it on the chin as a very expensive lesson. I am one of those people who should have enough experience to look over things myself and not just rely on someone's sayso. I would expect no sympathy had the error been in the vendor's favour.
And finally, Duane, the vendor's solicitor is not liable. They have been negligent, but it is certainly up to the person signing the contract to look over everything themselves. The only consequence the solicitor will suffer will be losing the client.
I have found it interesting how the responses in this post have been so polarised – people either firmly believe one way or the other.
Cheers
K
As the topic of the thread says, it’s a question of ethics. It’s not about the other party, it’s about you. My word is my word, regardless of who it is and what the paperwork says. If the paperwork is wrong and I know but do nothing, I have gone against my word.
Those that do otherwise and end up with a windfall are hardly investors but greedy thieves.
Reverse the situation and see how content they would be. The term ‘squealing like a pig’ comes to mind.
These may be strong words but I feel strongly about ethics.
aussieinvestor | Digital Revenue Pty Ltd
http://appliancewhiz.com
Email MeThis is a great thread. Couple of Qs before I put my 2c worth in.
Who were the solicitors who drew the contracts up?
Who is the developer involved ( or at least confirm their small/med/large status)
What sort of price range are we talking?
"do unto those as you would have done to yourself"
Linar, it seems you are going to do this as if the shoe was on the other foot you would cop the mistake. HOWEVER, why wait until settlement for them to find out? If you want to be completely fair about the situation, why not point the amount out to them and tell them that is what you are going to be paying??? Then you haven't been sneeky or in any way dishonest by withholding information they may not be aware of. Wouldn't you feel better doing that? That way there are no surprises and misconceptions come settlement day and you give them a chance to voice their concerns, if any.
That is simply the way i would do it and i WOULD be prepared to pay the agreed price. I also believe in what goes around comes around. Ripping someone off to the tune of $20k just because there was a 'clerical' error is neither ethical or moral in my books and i personally wouldn't want to do it regardless of their status as a developer. They are still people at the end of the business chain and it is impossible for you to know their financial and personal situation, don't always assume that it is a small amount to them that wont effect their livelihood. Food for thought?
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