Legal Updates

The dispatch of notice of exercising of an option creates a binding agreement even if given without intent to follow

July 31, 2017

A shareholder’s agreement set an option to one shareholder to purchase the other's shares within 3 months and at a set price subject to giving an exercise notice. The shareholder exercise the option but later refused to consummate the purchase arguing that the mere purpose of the exercise was to prove fraudulent acts by the other upon purchase of the company.

The Court accepted the claim and held that when a person is given an option, the mere notice of exercise creates a legal obligation.  The fact that the purpose of the notice was different does not change the fact that an option is exercised by notice and thus the transaction became enforceable even if the purchaser had no real intention to purchase the shares.