Option Agreement and Conditional Contract | What is the difference?

Option Agreement and Conditional Contract, Defined And Distinguished

An option is a choice available to one party, a conditional contract depends on an external event.

An option is a  right to do or not to do something, such as a right to accept or reject an offer within a specified or reasonable period of time. An option provides a right, but not an obligation, to carry out a specific action upon agreed terms, usually a right to buy at a given (or determinable) price within an agreed period of time.

An option is an agreement by which one party (‘option issuer’ or ‘optionor’) binds himself to transfer property to another (‘option holder’ or ‘optionee’) within a fixed, or reasonable, period of time, at a stipulated price. An agreement to keep an offer open. “A promise which meets the requirements for the formation of a contract and limits the promisor’s power to revoke an offer”, The American Law Institute, Restatement Second, Contracts (St. Paul, MN: 1981), § 25.

Essential features of an option agreement and conditional contract are … [more in real estate defined].

“[A]n option on a proper analysis is no more than an ordinary offer coupled with a promise not to withdraw the offer during the period of the option”, Mountford v Scott [1974] 1 All ER 248, 254, aff’d [1975] Ch 258 (CA).

An option to sell property is a continuing offer whereby the owner agrees with another that the latter shall have the privilege of buying the property, upon certain terms, within a specified time … .

Option Agreement and Conditional ContractAn option is a form of unilateral contract, at least until the holder of the option gives notice of his intention to exercise the right. “So long as it [the option] remains unaccepted it is a unilateral writing lacking the mutual elements of a contract, but when accepted an executory contract arises, mutually binding upon the parties.

The distinguishing characteristic of an option is that it imposes no binding obligation upon the person holding the option, aside from the consideration for the offer; but when the option, i.e. the continuing offer is accepted, it ceases to be an option and becomes a mutually binding agreement of sale. 12 Am. Jur. § 27, p. 525”, Schlein v. Gairoad, 127 NJL 358, 22 A.2d 539, 540 (1941).

An essential feature of an option is that the optionee has sole control over the choice that he is permitted to make and may withdraw therefrom at will.

An option may be considered … [More on option agrrment and conditional contract at realestatedefined.com]

Also called a ‘time bargain’ when the agreement is limited within a specified period of time.

Cf. contract for sale and purchase(US), contract for sale.
See also commission, covenant running with the land, derivative, equitable interest(Eng), estate contract(Eng), hire-purchase agreement(BrE), overriding interest(Eng), ready able and willing, renewal, time, time is of the essence, unilateral contract, writing.

option agreement and conditional contract

A conditional contract is a contract made subject to a ‘condition’, i.e. a contract that is entirely dependent upon the fulfilment of a condition or contingency. “A conditional contract has been defined as ‘ … an executory contract, the performance of which depends on a condition. It is not simply an executory contract, since the latter may be an absolute agreement to do, or nor to do, something, but it is a contract whose very existence and performance depends on a contingency and condition’, 17 C.J.S., Contracts (St. Paul, MN), § 10, p. 329”, Ross v. Bumstead, 65 Ariz 61, 173 P.2d 765, 766–7 (1946). The contract may be subject to a condition precedent

Read the rest of this explanation on option agrement and conditional contract with more references on realestatedefinitions.

A conditional contract may be distinguished from an option or a right of pre-emption, because the latter forms of agreement depend on the wishes of one of the parties, but a conditional contract depends on some outside event.  Cf. escrow.  See also contract of sale, conditional sale, negotiation, subject to contract, subject to finance, subject to survey.

Bibliographical References for Option Agreement and Conditional Contract:

Anno: 15 ALR4th 760: Attorney Approval Clause—Real Estate.
Gregory G. Gosfield. A Primer on Real Estate Options. 35 Real Prop. Prob. & T. J. 129, 163 (2000).
John C. Murray. Options and Related Rights with Respect to Real Estate: An Update.
47 Real Prop., Tr. & Est. L.J. 63 (Spring 2012).
G.S. Nelson & D.A. Whitman. Real Estate Finance Law (4th ed. St. Paul, MN: 2001), § 3.2. 3.
Corbin on Contracts (Rev. ed. Charlottesville, VA: ©1995- ), Ch. 11 ‘Option Contracts and Rights of First Refusal’.
6A Powell on Real Property (Albany, NY: ©1997- ), § 879[2].
77 Am.Jur.2d., Vendor and Purchaser (Rochester, NY), §§ 33–59, 75–82. ‘option agreement and conditional contract’
91 Cor.Jur.Sec., Vendor & Purchaser (St. Paul, MN), §§ 4–19. 22.
1 Williston on Contracts (4th ed. St. Paul, MN: ©1990- ), §§ 4:18—4:27.

Halsbury’s Laws of Australia, Real Property, Sec. 5 ‘Options’.

C. Rossiter. Principles of Land Contracts and Options in Australia (Sydney: 2003).

A. Rosental et al. Barnsley’s Land Options (4th ed. London: 2004).
42 Halsbury’s Laws of England, Sale of Land (4th ed. Reissue), §§ 27–8.

J. Paterson et al. Contract: Cases and Materials (11th ed. Pyrmont, NSW: 2009), Part VIII ‘Termination – Failure of a Contingent Contract’.

K. Lewison. Interpretation of Contracts (4th ed. London: 2007), Ch. 15 ‘Conditions and Conditional Obligations’.
9(1) Halsbury’s Laws of England, Contract (4th ed. Reissue), § 670.
42 Halsbury’s Laws of England, Sale of Land (4th ed. Reissue), §§ 26, 80, 121. ‘option agreement and conditional contract’.

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Terms in bold including contract for sale estate contract(Eng)overriding interest(Eng)ready able and willingtime is of the essenceunilateral contract and writing are defined and explained in Real Estate Definitions Online.

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(Option Agreement and Conditional Contract – Real Property Law)

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