“change of contract” is the date on which the buyer`s and seller`s lawyers agree that there is mandatory contact with the transfer of a property and that the seller is legally required to sell the property, and the buyer will be legally required to purchase it on the agreed date. This is the effect of Section 2 of the Miscellaneous Provision Act 1989, which stipulates that a contract for the sale of land must be written. An oral agreement is not enough. It was a pillar of English law until the Fraud Act of 1677. Indeed, the site is sterilized. For any seller, it is essential that such an agreement be relatively short. A seller does not wish to be bound by a long lockout agreement, especially with a buyer who is not authorized to do so. No seller wants to be in the embarrassing position of having to explain to its shareholders that they are unable to accept a higher bid for the site because they have entered into a long-term lockout agreement (unless the seller himself receives payment for the lockout agreement). Finally, the purpose of a lockout agreement should only be to allow the purchaser to carry out his initial due diligence, while the parties agree on more detailed terms or corresponding legal documents. Until a sales contract is exchanged, a seller may resign without charge or consequence. A lockout or exclusivity agreement that prevents a seller from negotiating with another party during the prohibition period may offer short-term protection to a potential buyer. It gives time to conduct investigations and due diligence and to negotiate documents so that the potential buyer is willing to trade in front of other potential buyers.
Another important duration of lockout agreements concerns the triggers for their termination before the expiry of the exclusivity period. The triggers for termination may be the purchaser`s failure to ask questions or to have approved or amended the draft contract within a specified period of time. If the lockout contract is terminated prematurely, both parties will be stripped of their obligations and the seller can then negotiate with another buyer. The agreement is for a shorter period of time. Otherwise, it can be detrimental to the seller; if z.B. a third party offers the seller a higher amount for a property, the seller wishes to accept this offer, but cannot, since he has already reached an agreement with the buyer on that property. The restrictions should therefore apply for a shorter period of time. If we look at it in practice, these types of agreements are usually in the buyer`s interest. There is very little chance that the seller will get certain benefits, even if the buyer actually buys the property after the prohibition period. It may happen that after a certain period of time, the buyer refuses to conduct the investigation or does not comply with the agreement.
For example, the buyer can enter into a contract with any other seller without informing the seller in advance. In this case, the seller is free to claim damages from the buyer who, in this case, can claim the legal costs incurred during the duration of the contract. In addition, it may expire the down payment given by the buyer. As a general rule, the seller does not face such problems in the event of termination of the contract, since the seller does not guarantee the actual transfer of the goods to the buyer, even after the end of the lock-in period. Some lockout agreements therefore provide for damages expressly agreed at a certain higher level, in order to make the seller think twice before violating the agreement. A seller`s acceptance of such a provision depends on the bargaining power of the parties and the period of exclusivity. The amount of damages predetermined should be a reasonable estimate of the damages. If they are too high, they could be considered a “punishment,” which is unworkable.