Issue: Under Colorado law, what law governs termination of an option agreement?
|Area of Law:||Business Organizations & Contracts, Litigation & Procedure, Real Estate Law|
|Keywords:||Option agreement; Option to terminate; Specific performance|
|Cited Cases:||96 P. 560; 43 Colo. 482; 413 N.E.2d 1146; 352 P.2d 656; 623 N.E.2d 369; 143 Colo. 162; 384 P.2d 77; 633 P.2d 1081; 480 P.2d 109; 526 P.2d 320; 208 P.2d 922; 187 P.2d 593; 148 Colo. 12; 117 Colo. 327; 406 N.E.2d 399|
Case law from Colorado and elsewhere indicates that option agreements have a unilateral character and notice provisions governing their termination, are strictly construed. Two Colorado cases involving options to purchase land support the contention that strict adherence to notice provisions is required to exercise an option to purchase. In Buckley Brothers Motors, Inc. v. Gran Prix Imports, Inc., 633 P.2d 1081 (Colo. 1981), the Colorado Supreme Court reversed an order granting specific performance of a contract to convey real estate pursuant to a purchase option because, inter alia, the plaintiffs did not strictly follow the notice provision. In 1970, the plaintiffs leased the property for three years and the lease gave them the right to extend the lease twice, for two years and then five years. Id. at 1082. The lease required 90 days written notice of the plaintiffs’ intent to extend the lease for the next agreed-upon term. On the same day they executed the lease, the plaintiffs also executed a ten-year purchase option. The option was conditioned the plaintiffs’ satisfactory performance under the lease. The option would terminate with each lease term, however, if the lease was not extended “as therein provided.” Id. Thus, the continuing validity of the option depended, as a condition precedent, on compliance with the notice provision in the lease.
The plaintiffs failed to give notice of their intention to extend the lease after the initial term. The defendant owner agreed to extend the lease for the next […]