Also known as: options · optionee · optionees · optionor · optionors · optioned · optioning · option contract · option agreement
Written by attorneys · grounded in primary & secondary sources — see below
2 senses
A binding promise by an offeror to keep an offer open for a specified period. The promise prevents revocation during that time when supported by consideration or statute.
A binding promise by an offeror to keep an offer open for a specified period. The promise prevents revocation during that time when supported by consideration or statute.
Onyx O'Reilly signed a letter to Odessa Okada expressing interest in leasing land. After negotiations they reached an oral agreement on an eight-year lease that included an option to purchase. The signed memorandum omitted the land description but the letter supplied it. The option gave Onyx the right to buy the parcel during the lease term.
Omar Olson pointed a gun at Olga O'Neill and ordered her to leave the room or be shot. Olga chose to obey and walked out unharmed. The command gave her a clear option to avoid the threatened contact. Olga later sued for assault.
A right to purchase property or shares at a fixed price within a specified time without any obligation to buy. Exercise of the right creates an enforceable contract.
Olympia Steel held a junior mortgage on an office building and obtained appointment of a receiver. The receiver collected net rents after paying taxes and maintenance. Olympia chose to apply the excess only to its own obligation rather than the senior mortgage. The senior mortgagee later sought those rents.
Overland Transport adopted a share option plan for its officers and employees under its corporate powers. The board issued options allowing purchase of company stock at a set price after three years of service. Several employees exercised their options when the stock value rose. The plan rewarded performance without immediate cash outlay.
A right to purchase property or shares at a fixed price within a specified time without any obligation to buy. Exercise of the right creates an enforceable contract.
Each sense below has its own examples, sources, and questions.
Oasis Resorts admitted a new partner who promised to contribute equipment worth fifty thousand dollars. The partner delivered only thirty thousand dollars of equipment. The partnership exercised its option to require a cash payment for the shortfall. The partner paid the remaining twenty thousand dollars in cash.
An option contract arises when an offer invites acceptance by performance and the offeree begins or tenders the invited performance. The beginning of performance makes the offer irrevocable for a reasonable time. This rule prevents the offeror from revoking after the offeree has started to perform.
Signed and unsigned writings may be read together if they clearly relate to the same transaction even without cross-reference. The test is the same as if the documents had been combined into one. An option to purchase included in a lease satisfies the statute when the writings together identify the land and terms.
The partnership may require the partner to pay cash equal to the value of the missing contribution. This election converts the obligation into a monetary debt. The rule ensures the partnership receives equivalent value.
Orla O'Malley leased land from Olivia Owens with an option to purchase after ten years. The lease term and option period together exceeded the perpetuities limit for some class members. The option fell within the lessee exception and remained valid. Orla exercised the option and obtained title.
An option held by a lessee is exempt from the rule against perpetuities under the Restatement. The exemption applies because the option is tied to the leasehold estate. Other options in gross remain subject to the perpetuities period.
…effect of the decision made today must inevitably be to handicap seriously sound efforts at reform, not least by removing options necessary to a just compromise of competing interests. Of course legislative reform is rarely speedy or unanimous, though this Court has been more patient in the past.[^maj-25] But the…