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The question in this case was whether the seller could terminate a purchase contract for the sale of commercial land which had been brought about by the exercise of a call option deed. The contract was a standard form Queensland Law Society and REIQ Contract for Commercial Land and Buildings. The seller argued it was entitled to terminate the contract because the purchaser did not pay the deposit until after it had exercised the call option. Justice Bond concluded that it would be commercial nonsense to give primacy to the sale contract over the call option deed, with Morrison JA and Callaghan J agreeing.
Morrison and Bond JJA and Callaghan J
8 April 2022 (delivered ex tempore)
This appeal concerned whether the appellants had a right to terminate a contract for the sale of land. . The sale was brought about by a call option deed and a sale contract, a standard Queensland Law Society Contract for Commercial Land and Buildings, which was annexed to the deed. .
The sale contract did not specify when the deposit was due. . On the sale contract, there was space to nominate two options:
1) That the deposit be payable on the date the buyer signs the contract unless another time specified below; or
2) That the amount of the deposit and a date for which the deposit was due.
Neither was nominated. . The only information that was actually inserted in this section was the numeric amount of the deposit.
The deed provided a Call Option Expiry Date of 30 September 2021. The respondent exercised the call option on that date (Call Option Delivery Date). To exercise the option, the respondent delivered to the appellants: the duly executed call option exercise notice; two copies of the signed sale contract; and a bank cheque for the deposit. . Clause 2.2 of the Call Option Deed provided that “the Contract will be taken to have been entered into on [the Call Option Delivery Date], whether or not the Contract is signed by the Grantor.”
The day after, the appellants sought to terminate on the basis that the deposit was unpaid when due. . They argued the as no other date had been specified the deposit was due on the date the purchaser signed the contract, not when the option was exercised. . The respondent signed the contract weeks beforehand but had not delivered it, or the deposit, until the day the respondent exercised the option.
When was the deposit required to be paid?
To determine the meaning of a commercial contract “it is necessary to ask what a reasonable businessperson would have understood those terms to mean” (Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 per French CJ and Nettle and Gordon JJ, . .
Justice Bond held that a reasonable businessperson would not have intended that the contract be immediately defeasible by virtue of the “historical accident” that the respondent had physically signed the contract on a date prior to the Call Option Delivery Date and not provided the deposit at that earlier date. . A reasonable businessperson would conclude that the parties contemplated giving primacy to the terms of the call option deed rather than the annexed standard form contract. Justice Bond described the appellants’ argument as a “commercial nonsense”. .
The appeal was dismissed. Justice Morrison and Callaghan J agreed with the reasons of Bond JA. –.