Susan negotiates with Fred for the sale of her vacant land to him, on the basis that he will erect a block of home units on the land and will lease the building to her. A draft contract is drawn up covering the sale and lease-backand all other terms of the deal. Susan is aware that Fred wishes to commence construction as soon as she is committed to the deal. Building permission has been obtained.

After the draft contract is prepared but before it is signed and exchanged, Fred proposes some amendments that they write into their respective counterparts of the draft. She says to him, 'That's all fine by me. I'll talk to my solicitor to make sure that she has no problems with it. Unless you hear from me tomorrow, assume that everythingis in order.'

She then does nothing for four weeks. Subsequently she informs Fred that she has changed her mind, that she is not bound to go ahead because contracts have not been exchanged, and that accordingly the deal will not go ahead. By that time Fred has engaged a builder at a contract price of $500,000, and construction the value of $100,000 has occurred on the site.

Advise Fred