Put and Call Options – Have you strictly complied with the terms of your agreement?
In JFL Corporation P/L v Matos, the Court of Appeal overturned the decision of the Supreme Court and held that a seller of property invalidly exercised the put option by delivering copies of the tenth edition of the REIQ/Queensland Law Society Houses and Residential Land contract instead of the eighth edition as specified in the terms and annexed to the agreement. This case serves as an important reminder for buyers and sellers to strictly observe the terms of the agreement.
The buyer entered into a put option agreement to purchase property in Goodna in 2012. The agreement provided that on the seller validly exercising the put option, a binding contract would come into existence and the buyer would be required to complete the purchase the property. Commercial terms previously agreed were not in dispute.
The agreement provided that the seller was to sign and deliver a notice exercising the option together with 2 copies of the 8th edition REIQ contract to the buyer.
The seller exercised the put option in 2014, by which time the current industry version was the 10th edition of the REIQ contract. When exercising the put option, the seller delivered the 10th edition contract to the buyer.
In the first instance, the Supreme Court of that notwithstanding the seller had delivered to the buyer the 10th edition contract as stated in the put option agreement, the seller had validly exercised the option, and that the buyer was order to complete the purchase.
However, the buyer appealed to the Court of Appeal original decision was overturned . The Court of Appealed held that the seller had not validly exercised the put option because:
- the agreement clearly required use of the 8th edition contract;
- delivery of the 8th edition contract was an essential requirement for exercise of the put option; and
- the seller’s purported exercise of the put option did not comply with the contractually agreed requirements for effective exercise of the put option