Option Contract

A binding promise in which the owner of property agrees that another shall have the privilege of buying the property at a fixed price within a stated period of time. 121 P. 358; 136 A. 379. It is the offeror's acceptance of consideration in exchange for his promise to keep the offer open for a designated period of time, thus rendering the offer irrevocable.

An option must be supported by consideration, often the payment of a small sum of money which may be, though need not be, applied as a down payment if the option is exercised. It exists only when the option holder himself has the right to determine whether he shall require the performance called for by the option. If the agreement states that the option may be exercised only with the consent of the other party, it is not an option even though so-called by the agreement. 307 S.W. 2d 758. Some types of option contracts are formed without consideration: "An offer is binding as an option contract if it is in writing and signed by the offeror, recites a purported consideration for the making of the offer and proposes an exchange on fair terms within a reasonable time . . ." Restatement (Second), Contracts, §87(1); "An offer which the offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice." Id. §87(2). Under the Uniform Commercial Code a seller can offer a buyer an option contract without consideration by making an irrevocable offer and complying with other statutory requirements. U.C.C. §2-205 [firm offer].



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