Also known as: purchase option · purchase-option · purchase-options · option to purchase
Written by attorneys · grounded in primary & secondary sources — see below
A contractual right granting the holder the power to compel the sale of specified property or securities at a predetermined price within a stated period or reasonable time.
Pedro Pacheco sent a signed letter to Pearl Porter expressing interest in leasing land and later both signed a separate memorandum that omitted the parcel description but referenced an eight-year lease containing a purchase option. When Porter later refused to convey, the two writings were read together to satisfy the statute of frauds and enforce the option.
Progressive Healthcare issued convertible notes that expressly included an option allowing holders to purchase additional shares of the corporation at a fixed price. The board relied on its statutory power to issue such obligations containing purchase options to raise capital without separate shareholder approval.
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Phuong Pham granted Pamela Phillips a recorded option to purchase Blackacre for a fixed sum without specifying any expiration date. When Phillips attempted to exercise the option seven years later, the court held that the option lasted only a reasonable time and had already expired.
Portia Price's will specifically devised her 1,000 shares of MedNova to her son. After execution the company conducted a rights offering. Price voluntarily exercised the rights and paid cash for 200 new shares. At death the personal representative correctly excluded those 200 shares from the specific devise because they were acquired by exercise of a purchase option.
Prime Logistics granted a target company an option to purchase additional shares at a premium if a hostile bidder emerged. The board invoked the option during the takeover contest to dilute the bidder and preserve negotiating leverage for shareholders.
Phoenix Technologies negotiated a merger that included an option allowing the acquirer to purchase treasury shares at a set price if a competing bid appeared. The option functioned as deal protection and was evaluated under enhanced scrutiny for its impact on shareholder value.
An option to purchase property other than one appurtenant to a lease lasts for a reasonable time under the governing servitude rules.
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Securities acquired by exercise of purchase options are expressly excluded from the additional securities that augment a specific devise of shares under the uniform probate accessions rule.
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Two or more documents signed by the party to be charged may be read together even if neither refers to the other, and they constitute a sufficient memorandum if they clearly relate to the same transaction.
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A recorded option to purchase constitutes an encumbrance because it is a nonpossessory interest that burdens title and can force conveyance to a third party.
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…and accept higher offers. Accompanying this press release was a further public announcement that Pritzker had been granted an option to purchase at any time one million shares of Trans Union's capital stock at 75 cents above the then-current price per share. Thus, notwithstanding what several of the outside directors later claimed…