A recent Court of Appeal decision has highlighted the need for
careful drafting of agreements to anticipate changes to legislative
requirements and industry standard contracts (JLF Corporation
Pty Ltd v Matos  QCA 355).
This decision also confirmed that option agreements, when viewed
within their commercial context, must be exercised with strict
compliance of the terms or else run the risk of adverse
THE OPTION AGREEMENT
A put option agreement ("Agreement")
was entered into between the parties in connection with a contract
made in December 2011 by which Matos purchased a house and land
from JLF Corporation Pty Ltd as an investment property. The
Agreement allowed the option for Matos to sell the property back to
JLF Corporation Pty Ltd using a contract defined in the Agreement
schedule as the eighth edition of the REIQ/Qld Law Society standard
form of contract for houses and residential land.
When the option was exercised in December 2014, the tenth
edition of the standard form of contract had superseded the eighth
edition, which was subsequently executed in place of the eighth
The use of the tenth edition was contested in the Queensland
Supreme Court where it was determined that the eighth edition of
the standard form contract was not a mandatory requirement of the
Agreement in its commercial context.
This determination was appealed to the Court of Appeal where the
terms and construction of the Agreement were heavily
The Court of Appeal held that the use of the eighth edition of
the REIQ/Qld Law Society standard form of contract for houses and
residential land was an essential requirement of the exercise of
the put option for the following reasons:
contrary to opinion of the primary judge, the purchase of the
property was indeed a commercial transaction and as such
demonstrated an unequivocal intention from both parties of strict
compliance with the terms of the Agreement;
he tenth edition of the standard form contract contained
several additional terms that were absent in the eighth edition,
the significance of which could not be classed as commercially
the Agreement expressed in clear and unambiguous language
exactly how the option was to be exercised which could not be
As this essential requirement of the Agreement was not complied
with strictly, the improper exercise of the Agreement invalidated
the resulting contract.
The decision of the Court of Appeal has significant flow on
effects to commercial transactions of a similar nature.
Parties entering into smaller transactions must ensure that
their option agreements are drafted to:
anticipate changes to standard for contracts over time;
clearly define the form of contract that is permitted by the
Parties must also take great care to ensure that the terms of an
option agreement are strictly complied with when exercising their
option, so as to preserve the integrity of the resulting
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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