What does a Spice Girl have to do with property options?

In brief - Mel B dispute with Seven Network highlights need to document variations to an option agreement carefully

The NSW Supreme Court decision in the dispute between Seven Network and former Spice Girl Mel B highlights the need to document variations to an option agreement carefully and accurately before a party proceeds to exercise rights under an option.

Mel B seeks to terminate contract with Seven Network and sign up with Channel Nine

Most people would have followed in the media the court dispute in the case Seven Network (Operations) Limited v Melanie Brown [2013] NSWSC 372, involving the Seven Network and the Nine Network's rival claims to the services of former Spice Girl Melanie Brown (known as Mel B).

She was contracted to the Seven Network for a number of its shows, including "Dancing with the Stars" and "X Factor".

The Seven Network purported to exercise its option for a further one year's provision of services to the X Factor show. Mel B, through her husband/manager, sought to walk away from the arrangement with the Seven Network and sign up for a competing show with the Nine Network.

Dispute over variation of agreement after attempt to terminate contract with Seven Network

Before the Seven Network exercised its option, there were significant discussions and email correspondence about variations to the arrangement.

First, due to a perceived personality conflict with one of the other judges on Dancing with the Stars, Mel B indicated that she only wanted to renew her contract as a judge of X Factor.

She then ran into some difficulties with her former spouses over custody matters, due to her desire to bring her children from previous marriages to Australia while she performed her amended duties for the Seven Network.

This led to significant discussions between her husband/manager and executives of the Seven Network, which led him to try to terminate the contract.

Court examines correspondence to ascertain intentions of the parties

Ultimately, the dispute arose due to the rather casual way in which both parties approached recording the variation (and in the case of Mel B, the alleged termination) of the agreement.

The court looked at the correspondence (which constituted exclusively emails, written in a rather casual fashion) and the surrounding facts and circumstances to evidence the intention of the parties. The court also looked at conduct of the parties following the discussions and the language in various emails to cast light on what the intentions of the parties really were.

Parties did not have common understanding that contract was to be terminated

Ultimately the court held that the intention of the parties, when all the facts and circumstances were weighed up and the correspondence was looked at, amounted to a variation of the original agreement and that there was never a common understanding that the agreement was to come to an end and be terminated.

Certainly the conduct of the executives from the Seven Network was held by the court to evidence a presumption of the continuance of the contract.

The Seven Network's search for a replacement judge for Mel B was a pragmatic one in case the immigration matters surrounding her children were unable to be resolved. The Seven Network's conduct was held only (as a matter of commercial reality) to amount to it looking at continuing the involvement of Mel B in its programs in a more limited role, rather than losing her services entirely.

Implications for property transactions of Seven Network v Melanie Brown

You may well ask what this interesting case has to do with property transactions.

Very often, during property transactions where options have been granted, delays with authorities, changed circumstances or the discovery of matters by virtue of the prospective purchaser's due diligence during the option period mean that the parties have discussions about varying the option terms.

In situations where such discussions take place and variations to the option terms are agreed, the case of Mel B and the Seven Network highlights the following:

• The terms must be committed to writing. This is even more so the case where you are dealing with land, as this is a requirement of the Conveyancing Act, as it is a dealing with an interest in land.

• The writing must clearly set out what parts of the original option arrangement continue, which ones no longer apply or are varied and how they are varied.

• Where there is no consideration (payment or other benefit) for the changes, then the changes must be set out in a deed to be legally effective.

• Informal, "chatty" communications by way of email are not really appropriate for documenting changes to a significant legal relationship, if for no other reason than the fact that they lack clarity and precision.