Option (law)
Encyclopedia
In law
Law
Law is a system of rules and guidelines which are enforced through social institutions to govern behavior, wherever possible. It shapes politics, economics and society in numerous ways and serves as a social mediator of relations between people. Contract law regulates everything from buying a bus...

, an option is the right to convey a piece of property
Property
Property is any physical or intangible entity that is owned by a person or jointly by a group of people or a legal entity like a corporation...

. The person granting the option is called the optionor (or more usually, the grantor) and the person who has the benefit of the option is called the optionee (or more usually, the beneficiary).

Options characteristically exist in one of two forms:
  • Call option
    Call option
    A call option, often simply labeled a "call", is a financial contract between two parties, the buyer and the seller of this type of option. The buyer of the call option has the right, but not the obligation to buy an agreed quantity of a particular commodity or financial instrument from the seller...

    s
    , which give the beneficiary the right to require the grantor to sell or convey the property to them at the agreed price on exercise
  • Put option
    Put option
    A put or put option is a contract between two parties to exchange an asset, the underlying, at a specified price, the strike, by a predetermined date, the expiry or maturity...

    s
    , which give the beneficiary the right to require the grantor to buy or receive the property at the agreed price on exercise.


Because options amount to dispositions of future property, in common law
Common law
Common law is law developed by judges through decisions of courts and similar tribunals rather than through legislative statutes or executive branch action...

 countries they are normally subject to the rule against perpetuities
Rule against perpetuities
The common law rule against perpetuities forbids some future interests that may not vest within the time permitted; the rule "limit[s] the testator's power to earmark gifts for remote descendants"...

 and must be exercised within the time limits prescribed by law.

In relation to certain types of asset (principally land
Real property
In English Common Law, real property, real estate, realty, or immovable property is any subset of land that has been legally defined and the improvements to it made by human efforts: any buildings, machinery, wells, dams, ponds, mines, canals, roads, various property rights, and so forth...

), in many countries an option must be registered in order to be binding on a third party.
The source of this article is wikipedia, the free encyclopedia.  The text of this article is licensed under the GFDL.
 
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