Option contract

Question 1

What is an option contract?

Answer 1

An agreement to keep open for a specified period of time an offer to sell or lease real property

Question 2

Who is the optioner?

Answer 2

Property owner

The optioner is the individual or entity that owns the property and grants the option to the optionee.

Question 3

Who is the optionee?

Answer 3

Prospective buyer

The optionee is the individual or entity that is interested in purchasing the property.

Question 4

Does the optioner have an obligation to sell or the right to sell?

Answer 4

Obligation

The optioner is obligated to sell if the optionee decides to exercise their right.

Question 5

Does the optionee have the right to buy or an obligation to buy?

Answer 5

The right to buy

The optionee has the choice to purchase, but is not required to do so.

Question 6

Is an option contract a unilateral or bilateral contract? Why?

Answer 6

Unilateral contract

The contract is unilateral because only the optioner is bound to perform the terms if required by the optionee. Meanwhile, the optionee can walk away any time.

Question 7

What binds the optioner in an option contract?

Answer 7

The owner (optioner) is bound to perform the terms of the option if required to do so by the optionee

The optionee can choose not to exercise their right at any time.

Question 8

What is the consideration for an option contract?

Answer 8

The optionee pays a fee for the right to purchase the property

If the optionee does not exercise their purchase right, the fee is retained by the optioner.

Question 9

What terms must an option contract contain to be valid?

Answer 9

It must contain:
* Length of time the option is effective
* Names of contracting parties
* Purchase price
* Legal description
* Terms of the fee paid

Question 10

Are options assignable? (transferable)

Answer 10

Assignable unless prohibited in the terms of the agreement

Question 11

Is a licensee allowed to draw an option contract?

Answer 11

Yes, but they should either use a fill-in-the-blank form or seek legal counsel

This ensures compliance with legal standards and protects all parties involved.

Question 12

Would the licensee who prepares an option contract need to disclose they are a licensee?

Answer 12

Yes

Disclosure is important for transparency and to avoid potential conflicts of interest.