In its recent decision in Virgin Gorda Yacht Harbour Limited (VGYH) v Little Dix Hotel (LDH) the BVI High Court considered and affirmed the relevant legal principles governing the interpretation of an option contained in a contract for the purchase of land.
In 2004, VGYH and LDH entered into an agreement for the sale and purchase of freehold property, comprising the Virgin Gorda Yacht Harbor and various associated businesses. The parties then entered into two subsequent agreements varying the terms of the transaction. As part of the first variation agreement, LDH granted VGYH a two-year option over an additional parcel of land but there was no increase in the purchase price. The option clause made it clear that the option had to be exercised in writing within two years. VGYH subsequently purported to exercise the option but outside the two year period.
LDH argued first that VGYH had not provided any additional consideration for the option and it was therefore unenforceable. The court, however, found that there was a practical benefit to LDH in VGYH’s continued commitment to closing the sale with regard to the remainder of the agreement and this therefore constituted sufficient consideration. The court, however, dismissed the claim in any event as it accepted LDH’s second argument that the option was clearly exercised out of time. In this regard although the option clause did not itself contain a start date the court was prepared to find that the two year period commenced on the date of the first variation agreement. The fact that VGYH did not exercise the option within two years of the date of the signed agreement was therefore fatal.
This decision affirms the time-tested principle that time is of the essence when seeking to exercise an option and time limits will be strictly construed.
Harneys acted for the successful party, Little Dix Hotel.