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Question 1

Cleo wanted to purchase a lot from Patrick to build a house in Waverley, several kilometres north of Orillia. Cleo lives in Orillia and Patrick lives in Waverley.

In May, Cleo went to Waverley and offered Patrick $150,000.00 for the property. Patrick refused the offer. On July 7 Cleo went again to see Patrick, and this time Patrick offered to sell the property for $175,000.00 and said he would hold the offer open for 14 days at that price. They shook hands and Cleo left.

Late in the evening of July 8, another person offered Patrick $200,000.00 for the property. Patrick accepted. The next morning at about 10:30 a.m., Patrick went to Cleo's home and knocked on the door. No one answered and he left a letter stating, "Please take notice that my offer to you of July 7 has lapsed.

Cleo did not see the letter until he came home for lunch at 12:30 p.m. He was not at home earlier because he had an appointment with his lawyer at 9:30 a.m. At that meeting Cleo had requested that his lawyer write to Patrick as follows: "I am instructed by Cleo to accept your ofier of July 7, to sell at the price of $175,000.00. Kindly have the contract prepared and forwarded to me. This letter was handed to a courier at 10:00 a.m. that morning (July 9) and delivered to Patrick at 2:00 p.m. When Patrick received it, he replied stating that the offer was no longer valid.

Cleo replied that he had a valid option agreement and considered there was now a binding agreement.

Required: Discuss the issues that will be raised by the parties, the applicable legal principles and likely result of the legal action.