contracts
option contract
An option contract gives a potential buyer, the optionee, the exclusive right to purchase or lease a property at a set price within a set time. The owner, the optionor, must sell if the optionee chooses to exercise the option, but the optionee is not obligated to buy. The optionee pays separate consideration for this right, which is usually kept by the owner if the option is not exercised.
- Exam tip
- An option is unilateral until exercised: only the optionor is bound. Contrast it with a right of first refusal, which only gives the right to match an offer if the owner decides to sell.
- Example
- A developer pays a farmer $10,000 for a one-year option to buy 50 acres at $1 million. If the developer walks away, the farmer keeps the $10,000.
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Last verified: 2026-10-23