What is an option to purchase agreement?

An option to purchase is an agreement that gives a potential buyer (“optionee”) the right, but not the obligation, to buy property in the future. The optionee must decide by a certain time whether to “exercise” the option and thereafter by bound under the contract to purchase. How is an option different from a purchase agreement?

What is an option contract?

The definition of an option contract is a type of contract that gives the holder the right, but not the obligation, to buy or sell an underlying asset at a specified price on or before a certain date. The underlying asset can be many things such as a stock, commodity, currency, interest rate, or piece of real estate.

Are option agreements legally enforceable?

For example, an option may provide a party the right to renew the contract. An option may also involve the right to purchase property. Option agreements are governed by contract law. They are legally enforceable as long as they follow the requirements for a valid contract. Details of contract laws vary by state and subject matter of the contract.