On 1 December 2014, the Motor Dealers and Repairers Act 2013 came into effect. Following a full-scale review of the motor industry legislation, new provisions were introduced to protect consumers when purchasing motor vehicles.

The new disclosure provisions include:

• It is mandatory for motor dealers to disclose to consumers information that might affect a consumer’s decision to buy a car or to buy a car at a certain price. This includes information about any major modifications to a vehicle, past flood or hail damage, whether a vehicle has previously been written-off and whether there is any suspicion of odometer tampering;
• Dealers are required to disclose this information in the dealer notice that must be used in the sale of certain vehicles; and
• There are substantial penalties for a motor dealer who fails to disclose important information to consumers about a vehicle they are looking to purchase.

If you are currently in the process of purchasing a vehicle or believe one of the above provisions had been breached when you purchased a vehicle after the commencement of this legislation, please do not hesitate to contact a member of our staff on (02) 9728 3366.

Put and call options have become increasingly common in today’s market particularly in relation to large developments with significant value. At the same time, there has been an increase in the risks for legal practitioners drafting put and call options.

What are Put and Call Options?
A put and call option is an agreement between a vendor (the grantor) and a prospective purchaser (the grantee) whereby it is agreed:

1. The grantor gives the grantee a call option to buy property from the grantor at a fixed price within a specified period of time; and
2. The grantee gives the grantor a put option to sell the property to the grantee at a fixed price within a specified period of time.

There is no formation of a final contract when a put and call option agreement is entered into because the grantor and grantee are not obliged to sell or purchase the property.

Risks in Drafting Put and Call Option Agreements

There are no prescribed forms and terms vary for put and call option agreements. As such, it is important for solicitors to be cautious when drafting the agreements.

In the case of CTI Joint Venture Company Pty Ltd v Chief Commissioner of State Revenue (2013) 87 ATR 709, the Court had to expend considerable time and effort to determine whether or not an option deed nominating a third party purchaser was an assignment or novation of the option. This was due to ambiguous and unclear drafting of the agreement which did not clearly indicate the nature of the option or the nomination. In the end, the Court found the option deed was not an assignment. If it had been held it was an assignment then it would have resulted in a substantial amount of duty on the $60,500,000.00 nomination fee.

Exercising the Option

Since the case of Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987), the courts have taken a substance over form approach in relation to the exercise of options. The identification of the requirements for the exercise of an option remains a question of construction in each case.

If the agreement specifically and clearly states how the option is to be exercised and strict compliance is required then the exercise of the option is not effective if it does not comply with the procedure set out in the agreement (Comdox No 24 Pty Ltd v Robins [2009] NSWSC 367 at [23]).

There can be serious consequences for a solicitor if a court finds an attempted exercise of an option has failed due to a lack of compliance with the requirements set out in the agreement. A solicitor can face damages for:

1. Lost option fee;
2. Loss of on-sale;
3. Increase purchased price for an alternative property; and
4. Loss of profits for a property intended to be developed.

Concept of Guarantees

A guarantee is a promise made by a party to make payment or meet the obligations owed by another party.

Commonly, directors provide guarantees to a creditor in exchange for the creditor providing goods or services to the director’s company on a running account.

Consideration for providing guarantees can be divisible or entire. An example of a divisible guarantee is the director’s guarantee illustrated above. These can be revoked once notice is given. The guarantor will be liable for debts or obligations up to the date of revocation but has no liability for debts or obligations occurring after that date.

An example of a guarantee when entire consideration is given is where a guarantee is provided in exchange for a loan. Entire guarantees cannot be revoked.

Revocation of Guarantee after Death

If the guarantee is divisible then the guarantee can be revoked. The guarantee is revoked from the date a notice of death is received by the creditor in relation to future transactions.

Continuation of Guarantee after Death

If the guarantee indicates it is to continue and not revoked by death or that it extends to the guarantor’s executors or personal representatives then the guarantee can continue after death. Creditors can claim for distribution from the guarantor’s deceased estate for debts owed to them.