Grantee seeks to avoid liability to acquire property
The vendor, Delorain, sought to put to the grantee (or recipient
of a put and call option) one of the properties which had not been
taken up by a nominee of the grantee under the option. The grantee
sought to avoid liability to acquire this lot on the basis that the
consumer protection provisions under the Act were not complied
The contention of the purchaser, Vale, was that the provisions
of that Act applied because the put and call option arrangements,
together, constituted a "relevant contract". It should be
noted that "relevant contract" is defined by
s 364 of the Act as "a contract for the sale of
residential property in Queensland other than a contract formed on
a sale by auction."
Initial finding that put and call options not a "relevant
The Supreme Court of Queensland held that even though the
relevant agreements included put options which, if exercised, bound
both the grantor and the grantee with respect to the sale and
transfer of the relevant properties, the arrangements were not the
same as a contract for sale because the option agreements
facilitated the marketing of residential lots to third party
The Court held that its decision was reinforced by the fact that
the ultimate buyer was not clearly identified in the option
document and the identity of the buyer would not be known until
such time as the buyer's call option expired and it either was
forced to buy the property under the put option or, prior to that
date, it had referred a third party buyer to the vendor who became
the purchaser. Until the purchaser was identified, it was
impossible to conclude that the arrangement was a contract for
Deed ruled to be a contract for sale of residential
The Queensland Court of Appeal held that it is not an undue
restraint of the definition of "relevant contract" in s
364 of the Act to conclude that an agreement that facilitates the
marketing of a lot to a third party purchaser is a "relevant
contract" (at ).
The court held that because "the Deed imposed obligations
upon it [the grantee] that required it to enter a contract to
purchase the unit upon the exercise of options" (at ), the
deed was a contract for the sale of residential property,
notwithstanding the contingency of a sale to a referred buyer under
clause 6 of the contract.
As a result of the deed falling within the definition of
"relevant contract", the grantee was successful in its
claim that certain requirements for residential property sales were
not met. This meant that the grantee was entitled to terminate the
Vendors using put and call otions must comply with all
This decision indicates that a put and call option constitutes a
valid contract for the sale of land. Vendors need to be careful
when issuing put and call options that they comply with all
provisions necessary under any legislation or the law pertaining to
the contract, otherwise the consequent contract may be invalidated
or terminated or rescinded.
Furthermore, recipients of put and call options must be aware
that they are entering into a potentially binding contract.
We discuss whether certain clauses commonly found in ordinary commercial contracts could be considered to be penalties.
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