IN BRIEF - BUYER SUCCESSFULLY APPEALS DECISION ON VALIDITY OF
SELLER'S EXERCISE OF PUT OPTION
The Queensland Court of Appeal has overturned the decision of
the Supreme Court and has 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 of
the agreement. This case is a reminder for buyers and sellers to
strictly observe the terms of the agreement.
HOUSES AND RESIDENTIAL LAND CONTRACT EDITION CHANGES FROM WHEN
BUYER ENTERS PUT OPTION AGREEMENT AND SELLER EXERCISES OPTION
The buyer entered into a put option agreement to purchase
property in Goodna from the seller in February 2012 (the
agreement). The agreement provided that upon the seller validly
exercising the put option, a binding contract would come into
existence between the parties, and that the buyer would be
compelled to purchase the property from the seller on the terms of
the contract. Commercial terms such as the purchase price and
settlement timeframe had been previously agreed and were not in
The agreement required the seller to sign and deliver an option
exercise notice together with two copies of the 8th edition
REIQ/Queensland Law Society Houses and Residential Land contract to
the buyer when exercising the put option.
The seller exercised the put option in December 2014, by which
time the current industry version was the 10th edition of the
REIQ/Queensland Law Society Houses and Residential Land contract.
When exercising the put option, the seller delivered the 10th
edition contract to the buyer.
The 10th edition contract incorporated relatively minor changes
to the standard terms of contract, including a new clause which
suspends time being of the essence in relation to natural disasters
and changes to the clauses in relation to payments and adjustments
of the purchase price.
IN FIRST INSTANCE, SELLER OF PROPERTY HELD TO HAVE VALIDLY
EXERCISED PUT OPTION DESPITE DELIVERING DIFFERENT VERSION OF
The buyer argued that the put option had not been validly
exercised because the contract delivered to the buyer by the seller
was not the same version required to be delivered by the terms of
In the first instance, the Supreme Court of Queensland held in
v JLF Corporation Pty Ltd  QSC 32 that
notwithstanding the seller had delivered to the buyer the 10th
edition contract instead of the 8th edition contract required by
the agreement, the seller had validly exercised the put option, and
that the buyer was compelled to purchase the property.
COURT OF APPEAL HOLDS THAT SELLER HAD NOT VALIDLY EXERCISED PUT
OPTION, BUYER AWARDED COSTS
the agreement clearly required use of the 8th edition
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
The buyer was not compelled to purchase the property from the
seller, and was awarded costs.
COMPLY WITH TERMS OF AGREEMENT WHEN EXERCISING OPTION
It is not uncommon for versions of industry standard contracts
and laws to change during the course of a property transaction. To
ensure that an option is validly exercised, strict compliance with
the terms of the agreement must be observed.
To the extent that strict compliance with the terms of the
agreement is not consistent with laws or industry practices in
place at the time the option is exercised, the parties should
consider formally varying the terms of the agreement to deal with
those matters prior to exercising the option.
Whilst option to purchase clauses are more in commercial properties, they are now being included in residential leases.
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