Option and Purchase Agreements
Objectives
- Understand option agreements
- Read conditions and deposit clauses
- Advise on refundable deposits
Explanation
An option agreement (contrato de opción de compra) gives the buyer the exclusive right to buy within a period. Key elements: price, option period, deposit, conditions precedent (e.g., satisfactory due diligence) and consequences if the buyer does not exercise the option. Specify whether the deposit is refundable and under which conditions.
option period
The time during which the buyer may exercise the option.
“The option period is 60 days.”
condition precedent
An event that must occur before an obligation becomes effective.
“Financing approval is a condition precedent.”
to exercise an option
To decide to buy under the option.
“The buyer exercised the option on day 45.”
refundable
Able to be returned.
“The deposit is refundable if due diligence fails.”
to forfeit
To lose a right or money as a consequence.
“The buyer forfeits the deposit if he withdraws.”