An option contract allows the buyer to purchase assets at a future time, but is one-sided as the seller must sell if the buyer decides to exercise the option. It is often enforceable only with an option consideration. Contracts with option provisions oblige the buyer to perform other aspects of the contract, but the buyer has a choice whether to exercise the option. Option contracts have expiration dates, and if the buyer does not exercise the option, the seller can sell it to another buyer.
An option contract gives the person signing the option the right to acquire real estate, personal property, or other assets during a specified future time period. The option is taken into consideration and, once the option has expired, the buyer of the option no longer has any contractual rights. Most option contracts make the option clearing non-refundable, giving the seller the right to keep the funds if the option contract ends and no purchase is made. It is a one-sided contract, because the seller must sell the property if the option buyer decides to exercise the option. The person buying the option does not have to take any action. What he pays for is the time to make a purchase, if he wishes.
Jurisprudence often requires contracts to be bilateral for their execution. In these two-way deals, the seller promises to sell and the buyer promises to buy. A unilateral contract is often not enforceable because there is no exchange of promises to act or to refrain from acting or an exchange of ownership. An option contract is often enforceable only if an option consideration is included. The seller gets something, although it is up to the option buyer whether or not to proceed with a purchase.
Some contracts include option provisions and are not stand-alone option contracts. These contracts oblige the option buyer to perform other aspects of the contract, but the option buyer has a choice whether to exercise the option. For example, a lease with option to buy is an agreement in which the tenant agrees to lease the property along with an option to purchase the property within a limited time. The tenant would have to pay a separate fee for the option in addition to the rent for the option to be enforceable. The same tenant can enter into an option agreement during the lease and only sign a lease agreement in advance.
Non-option contracts have expiration dates, but an option contract often includes an expiration date. The expiration date is the time frame within which the option buyer must exercise the option. If the buyer does not do so, the seller can sell the option to another buyer and keep the option consideration. Often the seller is not allowed to sell the assets or property covered by the option contract until one day after the expiration date.
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