Legal Updates

When an option agreement requires execution of an agreement which was not reached it may sometimes still be enforced

July 18, 2021
Print

A landowner and a purchaser signed an option agreement to purchase the land, which stipulated that a full agreement will be signed. After the negotiation for a full agreement failed, the landowner sought to rescind the option agreement while the purchaser sought to enforce it as a binding agreement.

The Supreme Court held that the option agreement is binding as a full agreement and missing details can be filled in order for it to become a full acquisition agreement. When an option agreement to purchase real estate requires the parties to try and negotiate a full agreement, to the extent that a good faith negotiation failed, either party may demand to enforce the transaction nevertheless. In the case of relatively simple agreement and standard transaction, when the missing details are not material but mainly ancillary issues and when the parties have previously negotiated with no success, unlike a situation where the material transaction details were left for negotiation, one can fill in the missing details in retrospect and enforce the agreement. Here, the conduct of the parties indicates that the option agreement was valid and binding and while the parties did not agree on the wording of the acquisition agreement, it is a standard real estate sale transaction in which the missing details are not material and thus the option agreement is binding as a sale agreement and the Court can fill in the missing details.