Christopher Conolly, Partner, TressCox Lawyers
Mathew Powell, Associate, TressCox Lawyers (Vic)
Stephen Tonge, Consultant, TressCox Lawyers (Qld)
Paul Kordic, Principal, Talbot Olivier Lawyers (WA)
Adam Crittenden, Senior Associate, Cowell Clarke Commercial Lawyers (SA)
Tim Tierney, Principal, Tierney Law (Tas)
Currently updated by Lyn Bennett, Consultant, Minter Ellison (NT)
Originally authored by Leon Loganathan, Managing Partner, Ward Keller Lawyers (NT)
Christine Murray, Partner, Meyer Vandenberg Lawyers (ACT)
Option transactions
This subtopic covers the usual transactions with options being nomination, extension and assignment.
A nomination is the appointment of an alternative purchaser being the “nominee”. Nomination does not transfer or dispose of any interest in property.
By comparison, assignment involves the transfer of rights to a new party, being the “assignee”. This enables the assignee to exercise the rights and benefits of the option.
Another common transaction is to extend the option period. This is in effect a variation to the initial option contract.
Nomination
An option will often include clauses providing for nomination. Commercially, nominee clauses give the grantee flexibility in identifying the purchaser to be named in the contract.
Although common, there are a number of different ways in which a nomination clause can be understood, constructed and operated. This is examined together with practical examples in the guidance note.
See Nomination.
Extension
Not infrequently, the parties to an option agreement may wish to extend the option period. Where this is agreed, it should be confirmed in writing, preferably as a deed clearly identifying the extension and the final date for the exercise of the option. See Option Period Extension Deed [C. Conolly, TressCox Lawyers].
Alternatively, the option deed may include an entitlement for an extension of the option period.
See Extension.
Assignment
An option, as a contract, is capable of assignment unless the exercise of the option requires “personal skills or discretion” or assignment is expressly prohibited in the option deed.
Statutory provisions enable contracts to be assigned where the assignment is absolute, in writing and notices are given to the other parties. In respect of an option, notice must be given to the grantor in accordance with the statutory requirements.
Where the statutory formalities have not been observed, an assignment for valuable consideration will be operative in equity. However, the remedies available are limited to equitable remedies, which may not be sufficient.
See Assignment.