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ARTICLE · 27 FEBRUARY 2013

Call Option Nominations - Poor Drafting Can Hurt

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Call options over land are well understood commercially but often the legal effect is not, so clear drafting is crucial.

AustraliaReal Estate and Construction
Gary Chiert
Gary Chiert
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Call options over land are well understood commercially but the legal effect of the documents is the subject of controversy and clear drafting is crucial.

This is not just a theoretical issue. Of particular significance is the flexible mechanism by which a nominee can be appointed to exercise an option. Drafting impacts whether a nominee is duly appointed and in what capacity the nominee acts, namely: as principal or agent.

Unclear drafting can also have adverse stamp duty consequences, as emphasised by the decision of Gzell J in CTI Joint Venture Company Pty Ltd v. Chief Commissioner of State Revenue [2013] NSWSC 20. The case involved the appointment of a nominee under a call option over land in New South Wales.

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