Can a Vendor Back Out After Exchange?

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In Victoria, a signed contract is legally binding on both parties. A vendor cannot simply “change their mind” after signing. There must be a valid reason for termination, such as:

  • A special condition is not being satisfied

  • The buyer failing to meet obligations (such as paying the deposit or settling on time)

  • The contract is being declared void or unenforceable

But despite these limits, some vendors attempt to exit anyway, often out of regret, personal pressure, or because they have received a higher offer after signing.

What Are the Legal Grounds for Vendor Termination?

  1. Unmet Special Conditions

Some contracts include vendor-side conditions, such as:

  • Subject to the vendor purchasing another property

  • Subject to plan of subdivision registration

  • Subject to mortgagee approval (for mortgagee-in-possession sales)

If these conditions are not met, the vendor may be legally entitled to rescind.

  1. Buyer Default

If the purchaser:

  • Fails to pay the deposit by the due date

  • Misses settlement

  • Breaches a contractual obligation

…the vendor may issue a Notice of Default. If the default is not fixed within 14 days, the vendor can terminate and keep the deposit (or sue for damages if not already paid).

  1. Fraud or Misrepresentation

If the purchaser has misrepresented something material, or if there is fraud involved, the vendor may seek to terminate. This is extremely rare and must be proven.

What If the Vendor Simply Refuses to Settle?

If the vendor refuses to attend the settlement, ignores communication, or attempts to cancel without lawful grounds, the purchaser has powerful options, including:

  • Specific performance: Asking the Supreme Court to force the vendor to complete the contract

  • Caveat: Lodging a caveat to prevent the vendor from selling to someone else

  • Damages: Claiming compensation for losses caused by the vendor’s breach

Real Example

A purchaser buys a property in outer Melbourne for $780,000. Ten days later, the vendor receives a verbal offer of $840,000 and tries to cancel the original deal.

There are no vendor-side special conditions. The purchaser has paid the deposit and done nothing wrong.

The vendor refuses to sign for the settlement. Victorian Property Settlements lodges a caveat on the title and prepares a Supreme Court application for specific performance. Faced with this, the vendor relents and proceeds with the settlement, albeit begrudgingly.

Can You Prevent This From Happening?

✅ Always check that the vendor is the registered owner, or legally authorised to sell
✅ Avoid vague special conditions that allow for vendor discretion
✅ Ask your conveyancer to confirm whether the contract includes any “subject to” clauses
✅ Set realistic timelines so that vendors cannot claim your delay as default
✅ Lodge a caveat immediately after signing, especially for long settlements

Conclusion

While most vendors honour their contracts, there are times when a seller tries to back out, sometimes for emotional reasons, sometimes to chase a better price.

As a purchaser, your rights are strong under Victorian law. But you must act quickly and firmly if the vendor attempts to breach their obligations.

At Victorian Property Settlements, we know how to protect your rights—whether that means preparing a Notice to Complete, lodging a caveat, or initiating court proceedings.