The Court of Appeal has recently handed down a decision that,
while not a new statement of law, is a re-statement of a principle
that serves as a reminder to parties to an agreement for the sale
of land; the signing of an offer to sell or buy property may be
binding, even if it is subject to the execution of a formal
The plaintiff seller owned 20 acres of rural/residential land on
the Sunshine Coast. Following negotiations between the seller and
the defendant buyer over a 12-month period, in April 2008 there
arose a dispute as to whether, under put and call option
arrangements, the seller had made a binding agreement with respect
to the sale of the land to the buyer. The court at first instance
determined the dispute in the buyer's favour, declaring that a
letter dated 8 April 2008 (the Letter) signed by
both parties constituted a valid and binding agreement. The court
ordered that the agreement be specifically performed and carried
The seller appealed the decision on the basis that the parties
did not intend to be legally bound to a sale and purchase of land
by the Letter, and even if the parties did intend to be legally
bound, the terms of their agreement were not sufficiently certain
to be enforceable.
The Letter contained details of the following terms:
the purchase price;
payment of a non-refundable deposit on execution of the formal
the nature of the contract as unconditional in the form of a
put and call option;
insurance of the property until settlement.
The Letter clearly expressed that the offer was to be
"unconditional", and this term was highlighted and
underlined by the buyer.
What did the Court decide?
The main issue considered by the Court was whether the parties
intended to be legally bound. The buyer contended that the parties
intended for a binding agreement because the parties had completely
agreed upon all the terms of their agreement, intended no departure
from the agreed terms, but performance of the terms was conditional
upon the execution of a formal contract. The seller, on the other
hand, argued that the parties had not intended to make a concluded
agreement at all unless a formal contract was executed.
The Court considered the unconditional nature of the offer and
the seller's unqualified acceptance of the offer by way of her
signature. Importantly, the Court noted that if the signed
acceptance of the offer had no legally binding effect, either side
could immediately shift its ground on any of the significant items
in the further negotiation which would ensue, putting the parties
back to where they were 12 months before the negotiations
commenced. The Court concluded that the intention of the parties at
the time that the agreement was entered into was to be legally
bound and that the lack of formalities necessary to bind a buyer to
a contract was not fatal to the binding nature of the
The Court rejected the seller's argument that the terms of
the agreement were not certain, as there was no material
uncertainty as to the substance of the rights and liabilities
described as a put and call option.
The Court ordered that the appeal be dismissed and the seller
pay the buyer's costs of the appeal.
How is this relevant?
The courts are clearly unwilling to interfere in a commercial
transaction where the intention of the parties is clear at the
outset. This decision highlights the importance of knowing what you
are signing before you sign it; in particular, whether an offer is
conditional or unconditional, as the unconditional nature of the
offer in this case was a significant factor in the Court
determining that the parties did intend to be bound by the
agreement. If the offer contains terms similar to those mentioned
above (particularly with regards to form of the contract) and
requests an acknowledgement of the offer by way of signature, the
agreement may be binding.
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.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
The Council announced planning policies to encourage more inner suburban retirement village and aged care development.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).