Option Agreement for Australia

Option Agreement Template for Australia

An Option Agreement is a legally binding contract under Australian law that grants one party (the Option Holder) the right, but not the obligation, to enter into a future transaction with another party (the Option Grantor) under specified terms and conditions. This agreement establishes the precise terms of the option, including the option period, exercise price, and exercise mechanics, while complying with Australian federal and state legislation. It provides a flexible mechanism for securing future rights while managing risk and uncertainty in commercial transactions, whether relating to real estate, business assets, shares, or other valuable rights.

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What is a Option Agreement?

The Option Agreement serves as a crucial legal instrument in Australian commercial practice, providing a structured framework for securing future rights while maintaining flexibility in decision-making. This document type is commonly used when parties wish to preserve the opportunity to enter into a future transaction without immediate commitment to its full execution. The Option Agreement typically includes detailed provisions regarding the option period, exercise price, exercise mechanics, and completion obligations, all drafted in compliance with Australian law. It finds application across various scenarios, including property acquisitions, corporate transactions, resource projects, and business sales. The agreement's structure allows parties to balance the option holder's need for future rights against the option grantor's requirement for certainty and compensation, while ensuring compliance with relevant Australian regulatory requirements including corporations law, property law, and where applicable, foreign investment regulations.

What sections should be included in a Option Agreement?

1. Parties: Identifies and defines the parties to the agreement - typically the Option Grantor and Option Holder

2. Background: Sets out the context and purpose of the option agreement, including brief description of the subject matter

3. Definitions and Interpretation: Defines key terms used throughout the agreement and establishes interpretation principles

4. Grant of Option: Explicitly states the grant of the option and its basic terms

5. Option Period: Specifies the duration of the option, including start and end dates

6. Option Fee: Details the amount payable for the option and payment terms

7. Exercise of Option: Specifies the process and requirements for exercising the option

8. Exercise Price: States the price payable upon exercise of the option

9. Completion: Sets out the process and obligations for completion after option exercise

10. Warranties and Representations: Contains warranties given by both parties regarding their capacity and authority

11. Confidentiality: Obligations regarding confidential information

12. Notices: Specifies how formal notices must be given under the agreement

13. General Provisions: Standard boilerplate clauses including governing law, entire agreement, etc.

14. Execution: Formal execution blocks for signing by the parties

What sections are optional to include in a Option Agreement?

1. Due Diligence: Include when the option holder has rights to conduct due diligence during the option period

2. Security: Include when there is any form of security required for the option

3. Assignment: Include when transfer of option rights needs to be specifically addressed

4. Multiple Options: Include when there are multiple tranches or types of options

5. Pre-emptive Rights: Include when there are other stakeholders with pre-emptive rights

6. Maintenance and Operation: Include for options over business assets or property requiring maintenance during the option period

7. GST: Include detailed GST provisions when the option or underlying transaction is subject to GST

8. Foreign Investment: Include when foreign investment approval may be required

9. Competition Law Compliance: Include when the exercise of the option may have competition law implications

What schedules should be included in a Option Agreement?

1. Option Terms Schedule: Detailed description of the option terms including precise pricing mechanisms

2. Property/Asset Description: Detailed description of the property or assets subject to the option

3. Exercise Notice Form: Prescribed form for exercising the option

4. Due Diligence Requirements: List of due diligence materials and processes if applicable

5. Form of Primary Agreement: Draft of the agreement to be entered into upon exercise (e.g., sale agreement)

6. Corporate Information: Corporate details of the parties if the option relates to company shares

7. Encumbrances Schedule: List of any existing encumbrances on the option subject matter

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

Australia

Publisher

Genie AI

Document Type

Agreement Contract

Cost

Free to use
Relevant legal definitions
Clauses
Relevant Industries

Real Estate

Mining and Resources

Financial Services

Technology

Agriculture

Retail

Manufacturing

Private Equity

Venture Capital

Infrastructure

Energy

Healthcare

Relevant Teams

Legal

Corporate Finance

Commercial

Business Development

Real Estate

Mergers and Acquisitions

Investment

Operations

Risk and Compliance

Property

Strategy

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Commercial Director

Business Development Manager

Property Developer

Investment Manager

Legal Counsel

Corporate Lawyer

Real Estate Manager

Project Manager

Acquisitions Manager

Asset Manager

Company Director

Commercial Manager

Risk Manager

Compliance Officer

Industries
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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