Which of the following is true of an option contract?
A)If the offeree chooses not to buy the property,the consideration paid must be returned.
B)The consideration paid for the option cannot be applied to the sale price.
C)The death or incompetency of either party terminates an option contract.
D)The offer cannot be revoked during the option period.

Question

Quizplus · Accepted Answer

Option contracts are unique in that they provide the holder the right, but not the obligation, to buy or sell an asset at a predetermined price within a specified timeframe. The key feature of an option contract is that once the option fee is paid, the offeror cannot revoke the offer during the option period, ensuring the offeree has the exclusive right to exercise the option within that timeframe. Choices A, B, and C are incorrect as they misrepresent the nature of option contracts: consideration paid for an option is typically non-refundable, can be applied to the sale price if agreed upon, and the contract is not automatically terminated by death or incompetency unless specified in the contract terms.

Which of the Following Is True of an Option Contract