Also known as: options to purchase · purchase option
Written by attorneys · grounded in primary & secondary sources — see below
An irrevocable offer to sell property or securities at a fixed price during a stated period, supported by separate consideration that binds the offeror to keep the offer open.
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Orlando Okafor signed a letter expressing interest in leasing land from Oasis Resorts. After negotiations the parties reached an oral agreement on an eight-year lease that included an option to purchase the parcel. Neither writing alone identified the land or stated the purchase terms, yet a court read the two documents together and enforced the option against Oasis Resorts.
Omega Energy's board authorized issuance of notes that gave holders the right to convert the debt into shares at a set price. The notes were sold to institutional investors. When the investors later sought to exercise the conversion rights, Omega Energy was required to issue the shares because the corporate statute expressly permits such purchase options in its securities.
Odyssey Logistics obtained a recorded option to buy a warehouse from Orbit Communications for a fixed sum. The agreement stated no expiration date. Because the option was not tied to any lease, a court limited its duration to a reasonable time under the servitudes rule and refused to enforce an attempted exercise fifteen years later.
Symphony Space granted Pergola Properties an option to repurchase the theater property exercisable only in calendar years 1987, 1993, 1998, and 2003. The option period extended well beyond lives in being plus twenty-one years. The court held the option violated the rule against perpetuities and was therefore unenforceable.
The Nollans leased beachfront property with an option to purchase conditioned on replacing the existing bungalow. They applied for a coastal permit to build a larger home. The commission required a public-access easement as a condition of the permit, and the Supreme Court later examined whether that condition unconstitutionally burdened the option right.
Johnson, a joint tenant, leased the property to Boswell for ten years and included an option to purchase. Johnson died three months later. The surviving joint tenant sued to invalidate the lease and option. The court held that the lease did not sever the joint tenancy and that the option therefore expired with Johnson's death.
A paid option contract binds the offeror to keep the offer open for the stated period. Rejection or a counteroffer therefore does not terminate the optionee's power to accept on the original terms.
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Death of the offeror does not end a paid option because the option itself is a binding contract that survives and binds the estate.
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Acceptance of an option is effective only upon receipt by the optionor. The mailbox rule that makes ordinary acceptances effective on dispatch does not apply.
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…After years of rental use, however, the building had fallen into disrepair, and could no longer be rented out. The Nollans' option to purchase was conditioned on their promise to demolish the bungalow and replace it. In order to do so, under Cal. Pub. Res. Code Ann. §§ 30106, 30212, and 30600 (West 1986), they were required to…